What’s good enough for Madonna and U2 is good enough for Jay-Z. Actually, what’s good enough for Jigga is whatever those superstars get and more. According to The New York Times, the hip-hop kingpin is about to close on a deal that would have him leave his longtime record label, Def Jam, and sign with concert-promotions giant Live Nation for $150 million, one of the biggest music contracts ever awarded.
The Times reported that the deal, expected to be finalized next week, would include financing for Jay-Z’s own entertainment venture, as well as the rights to his recordings and tours for the next decade. The deal would provide money for a host of business ventures, which are expected to include a label, music publishing, talent consulting and management services. After months of speculation on what Jay’s next move would be, news of the deal answers the question of what the biggest deal-maker in music has been cooking up. (It’s been a big week for Hova, who also reportedly obtained a marriage license with Beyoncé on Tuesday.)
The pact continues Live Nation’s recent buying spree, which has included $100-million plus deals with Madonna and U2 for their touring, merchandising and, in the case of Madonna, recording rights.
With bands like Paramore signing “360″ deals , which give the major labels a cut of revenues from concerts, merchandise and recordings, Live Nation has begun nosing into the labels’ territory with these superstar deals in an effort to control more elements of artists’ careers. According to the Times, Live Nation is expected to contribute $5 million a year in overhead for five years, plus $25 million to finance Jay-Z’s acquisitions or investments on behalf of the new company, Roc Nation, which will split profits with Live Nation. The rapper will also reportedly get an upfront payment of $25 million, an advance of $25 million that includes fees for his current tour and advances of $10 million per album for a minimum of three albums during the deal’s 10-year term. Another $20 million is included in the package in exchange for some publishing, licensing and other rights.
But, as the Times noted, though Jay-Z (born Shawn Carter) is one of a handful of major rap stars who consistently, and successfully, tour the country and the world, his record sales have been on the decline since his return in 2006 from a brief retirement. Both his comeback album, Kingdom Come, (2.4 million copies) and his recent American Gangster (1 million) have rung up less-robust sales than previous hits like 2003′s The Black Album, which sold more than 3 million copies.
But in Jay-Z, 38, Live Nation is getting an entrepreneur who has successfully launched not only record labels (Roc-A-Fella), but clothing lines (Rocawear) and a chain of nightclubs (40/40). Jay, who stepped down from his gig as Def Jam president in December and who owes the label one more studio album, kicked off his relationship with Live Nation last month when he launched a 28-date tour with Mary J. Blige , his biggest outing in more than three years. He said he expects to release his final Def Jam album later this year.
After the tour, Live Nation plans to integrate the marketing of all of Jay’s entertainment ventures under one roof, including his albums, tours and endorsements. The rapper told the paper, “I’ve turned into the Rolling Stones of hip-hop.”
The enormity of the deal is somewhat surprising, considering that traditional album sales have continued their almost decade-long slide, and live performance has often been a hit-or-miss proposition for even the biggest hip-hop acts, who tend to tour less than their rock and pop counterparts, if at all. But Jay-Z told the Times that despite his worldwide fame and strong touring history, he feels like he’s on a truly different level.
“In a way, I want to operate like an indie band,” he said. “Play the music on tour instead of relying on radio. Hopefully we’ll get some hits out of there and radio will pick it up, but we won’t make it with that in mind.”
The Times reported that critics of the deal said given the decline in record sales and the sometimes iffy results of artist-run ventures, it could be difficult to turn a profit on the Jay-Z deal. The company’s chairman, Michael Cohl, dismissed those worries, saying the Jay-Z pact would not require an increase in record sales to be profitable. “He could be doing more tours and doing great,” Cohl told the paper, noting that the rapper’s forays into other businesses is already in line with the Live Nation model. “There could be endorsements and sponsorships. … The whole is what’s important. … What he’s done has kind of mirrored what we want to do and where we think we’re going.”
A spokesperson for Live Nation confirmed that the company is in talks with Jay-Z and said the company would have more to say once a final deal is done. A spokesperson for Def Jam could not be reached for comment at press time.