Now that Billy Joel has inked a deal with Madison Square Garden, the music legend will be making millions of fans in the New York area very happy. He will also be netting millions once his well-received concert series begins.
Joel will be headlining monthly concerts at the garden, starting in January 2014, indefinitely. The first few performances have already sold out, and according to Forbes tickets are currently selling for upwards of $500 a pop in the secondary market, which reportedly is the only place you can scoop up tickets for Joel..
The partnership with the Piano Man is the first of its kind for The Madison Square Garden Co. (MSGN). But it's not the first deal of its kind in the industry.
Britney Spears launches her two-year residency at the Planet Hollywood Resort & Casino in Las Vegas on Dec. 27, and will perform nearly 100 shows during the stretch. And then there's Celine Dion, who has taken up residency in Las Vegas for years. Dion, who performs at The Colosseum at Caesars Palace, earns more in a year ($33 million) than Spears will earn as a result of her two-year contract (close to $30 million), according to E! Online.
So what do these types of residency deals say for the performers and, perhaps more importantly, for the music industry?
Turned on its head
The music industry was no doubt turned on its head with the emergence of the Internet, watching helplessly as revenue was slashed by more than 50% in the decade leading up to 2009, according to Forrester Research cited in The Wall Street Journal.
The bleeding has apparently stopped, as global music industry sales have begun to climb again, rising a modest 0.3% in 2012 to $16.5 billion, according to The New York Times.
Nonetheless, the music industry loses as much as $20 million each year in pirated downloads, according to a 2012 CBS report. Meanwhile, as revenue reached a new, lower base, a rise in live entertainment has softened the blow. In the music festival scene alone, concert ticket sales more than tripled to $4.6 billion in that same 10-year period. For its part, live music company Live Nation Entertainment (LYV -0.49%) has been adding electronic dance music festival performances in light of its recent partnership with Insomniac.
Concert revenue more broadly has also risen sharply since about the turn of the century. According to Pollstar, cited in the Recording Industry Association of America, U.S. concert ticket revenue grew from $1.8 billion in 2001 to $4.3 billion in 2012. Not surprisingly, concert attendance hit a lull during the recession, and that hit, which in 2010 resulted in cancelled tour dates and lost income, was compounded by falling recording sales. But the industry seems to have turned a corner.
The turnaround
Live Nation, which in 2010 combined with Ticketmaster, had a blockbuster summer concert series, with record attendance and higher-than-expected ticket sales. In Live Nation's third quarter, there was a 27% jump in global concert attendance versus the year-ago period to 21.2 million concert-goers and a 15% increase in sales to $2.3 billion. Live Nation President and CEO Michael Rapino said in a press release:
Consumer demand has come back strong for us this year, as we have had attendance growth across concerts globally, from new artists to the legends and everyone in between.
Indeed, the pipeline for live concerts is at the strongest levels it has been at for years, and analyst firm Stifel projects a 15% jump in concert attendance for 2013. The rise in attendance also has a lot to do with the star power of the touring lineup, and customers have been shelling out $200 to $400 per ticket for concerts and festivals, according to Forbes.
Live concerts comprised nearly 70% of revenue for Billboard magazine's top 40 money makers of 2012. Excluding two of the top artists, Adele and Taylor Swift, both of whom didn't tour, that percentage rises to nearly 73% up from 68% in 2011. In 2012, the stars on Billboard's top 40 earner's list netted $373 million from live performances, up from $329 million in 2011 but below 2010 levels.
As for Joel, worth a reported $160 million, according to TMZ, and Spears a cool $200 mil, according to ABC, , the added beauty of their deals is that there won't be additional touring costs associated with their performances, which means more profit for them.
The venues
Caesars Entertainment Operating Co., a Caesars Entertainment (CZR) subsidiary, owns the Las Vegas Planet Hollywood Resort & Casino via its acquisition of PHW Las Vegas in 2010. According to Caesar's most recent 10-Q filing, Caesars subsidiary PHW has at least $64 million tied up in the partnership with Spears.
The performance agreement with Ms. Spears contains customary representations, warranties, covenants and agreements and exclusivity and non-compete provisions for similar transactions. Aggregate commitments under the lease termination agreement, amounts committed to refurbishing the theatre and commitments under the performance agreement aggregate approximately $64.0 million through Dec. 31, 2015.
MSG hasn't yet disclosed any of the financial details of its pact with Joel, but Joel's media rep tells me that the New York State of Mind singer will be performing many of his classics in addition to some album cuts, which will give the shows a unique element.
As for MSG, it reported a 6% increase in its fiscal first quarter revenue to $215.6 million, but experienced a 7% decline to $28.6 million in MSG Entertainment revenue. A call to MSG inquiring about the way that the music franchise revenue would be reported hasn't yet been returned.
Who's next?
So who's next? Which of yesterday's musical icons will be the next to clinch a residence deal with either the Las Vegas Strip or New York? My bet is Garth Brooks; he reached a milestone when he attracted somewhere around 700,000 concert goers to his free concert in Central Park back in 2007. Whoever it might be, one thing appears clear...live performances seem to have hit a stride.
