The ghosts of Albemarle Coun-ty’s agricultural and industrial past haunt the Crozet headquarters of Musictoday. The company is housed in the ConAgra building, a hulking structure built in 1953 to house the packaging operations of Morton’s Frozen Foods. Later, Morton’s became Del Monte Frozen Foods and, finally, ConAgra Frozen Foods, a packaged-foods powerhouse based in Omaha that distributes brands like Healthy Choice and Kid Cuisine. But economies changed. Like many American industries, processed food production has gradually moved offshore, where lower-wage labor can do the work for less than workers in Crozet. Six hundred people were left without jobs when the plant closed in 2000.
A much different type of production happens now at the site. Musictoday is an e-commerce company that represents the cutting edge of the music industry. With over 500 artists as clients, the company runs band merchandise websites and fan clubs, shipping out t-shirts, cds, wristbands and tickets to music patrons across the nation. Instead of packaging frozen foods, Musictoday boxes up and delivers bits of plastic and fabric and computer bytes—all of the various emblems and pieces that make up an artist’s mystique.
But leaders at Musictoday, a privately held company with 200 employees founded by local mogul Coran Capshaw, are not content to continue on such a relatively small scale. Recently, the company reached a deal with music industry juggernaut Live Nation; on July 31, Live Nation announced that it would be buying a majority stake in Musictoday for an undisclosed price.
“Live Nation wanted a major stake as a condition of the deal,” Capshaw told Billboard.biz (Capshaw declined an interview for this story). “And given what they offered in additional resources for the business, it was worth it to me to accommodate their request. But I wasn’t looking to sell a major stake. I am looking at this as a joining of forces and abilities, not as a sale.” Capshaw has said that he will continue to run the company he started.
“It was very clear who the right partner was for us,” says Nathan Hubbard, Musictoday chief of staff. “We certainly did a lot of work to figure out who that was, and for us there really wasn’t [another] partner who had the combination of online and offline assets and data and marketing power.”
So what does it mean that Live Nation—the largest live entertainment company in the United States, which was spun off from radio and advertising monster Clear Channel only last De-cember—has taken an interest in helping Capshaw tend his flourishing, if comparatively diminutive, musical garden in Crozet? Why has this sapling caught the eye of the behemoth Live Nation?
Thank the Dead
To the world outside of Char-lottesville—where no one knows about Starr Hill, or Mas, or the Pavilion, or any of the other local establishments he’s partnered in—Coran Capshaw is often identified simply as the manager of the Dave Matthews Band. True, locally the developer/promoter/restaurateur has become a mightier force than the phrase “band manager” might suggest, but it was his work with DMB that provided the model for Musictoday.
Musictoday started as a small offshoot of what Cap-shaw, taking a page from the Grateful Dead playbook, found to be a very lucrative enterprise—hooking the Dave Matthews Band more directly to their fans. Inside newly purchased DMB cds, fans began to find advertisements for a fan club, The Warehouse, along with merchandise fliers—the same merchandise they saw when they went to DMB’s concerts. Soon, you couldn’t drive a highway in America without seeing the DMB “Fire Dancer” decal in some passing car window. It’s that sort of DMB branding—getting shirts and hats and bumper stickers out in the wider world—that showed the potential market for those kinds of services for all bands. It also taught Capshaw & Co. a powerful lesson: namely, that rabid fans were willing to shell out for whatever the band could offer.
Thus Musictoday was born, in 2000, with a singular purpose in mind: to do for other bands what Capshaw had already done with DMB.
Since then, the company has expanded like kudzu. Musictoday has gone from simply running The Warehouse to hosting 20 artist fan clubs and roughly 500 artists’ merchandise stores. Another crucial feature: They offer diehard fans pre-sale tickets for live shows—assuring loyal fans that they’ll get priority seating when they go to see their favorite artist. Musictoday now generates $100 million a year in revenue, according to figures released by Live Nation.
Capshaw described Musictoday’s mission in a recent Wall Street Journal article as “connecting the artist and the fan and, in a friendly way, monetizing those connections.”
“We believe that direct-to-fan relationship is stronger, more loyal, more long lasting,” says Hubbard. “Coran had the vision to say, ‘Passionate music fans want to interact directly with the artist, both at the show, but also online,’ and so built the infrastructure to help not just the Dave Matthews Band fans, but ultimately fans of all kinds of artists.”
Part of what appeals to artists in this deal is Musictoday’s discretion: Rarely is it obvious that some company in Crozet is running the online store. Look carefully on the official Internet stores for artists as diverse as Bob Dylan, Eminem, Christina Aguilera or Le Tigre—scroll to the bottom and you’ll find an unobtrusive tag, “Powered by Musictoday.” That’s it, though. There’s no other evidence that the poster, the t-shirt, the cd you bought will be shipped to your door from the humble ConAgra building.
Del Wood, Musictoday’s chief operating officer, says that from 2000 to 2004, the company had revenue growth greater than 50 percent annually. Since then, growth has slowed to a more sane—but still impressive—rate, with the percentage remaining “well into the double digits,” as Wood says. He’s speaking by cell phone, pulled off to the side of the road while on vacation. “We’ve been growing much more carefully and deliberately, and we’ve really been honing our processes and the way we do business.”
With such impressive numbers, it is no wonder that another company would eventually express interest in Musictoday.
Going live
By no means are Live Nation and Music-today equals.
Musictoday has 200 employees; Live Na-tion employs 3,000 full-time and as many as 15,900 part-time. Musictoday brought in $100 million in revenue last year; Live Nation took in almost $3 billion. Musictoday works with over 500 artists; Live Nation produced 29,500 events in 2005. Musictoday is serving a niche market of online shoppers and überfans; the largest live entertainment company in the country (and some say the world), Live Nation is serving virtually every market in North America, and much of Europe. Live Nation announced in early July that it would buy its closest domestic competitor, House of Blues Entertainment, for $350 million. As for the next closest rival, AEG Entertainment? Live Nation made five times more from ticket sales last year.
Did you see The Counting Crows at Nissan Pavilion? That was Live Nation. You went to a touring version of the musical The Producers last year? Live Nation. You checked out the monster truck show in Portugal? Live Nation. You were in Belgium for the Werchter festival? Live Nation. You bought a Harley-Davidson t-shirt from Trunk Ltd.? Live Nation.
Locally, Live Nation’s website already offers you tickets to shows at Char-lottesville’s Outback Lodge, Satellite Ball-room, Starr Hill Music Hall and John Paul Jones Arena.
“Live Nation is a promoter on [some] events,” says Wood of the John Paul Jones Arena shows. Because Musictoday is already contracted to sell tickets for John Paul Jones Arena shows, “that provides an interesting synergy where you can see where the missions may align.” Two companies, already working on the same show, now have every reason to work together to sell the event.
Live Nation has evolved since it was born as SFX Entertainment in 1997. Most recently—and significantly—it was called Clear Channel Entertainment, the live entertainment branch of the country’s largest radio and outdoor advertising company (the company had annual revenue of $9.4 billion in 2004). In North America alone, parent company Clear Channel Communications has 41 television stations, 1,182 radio stations and 165,000 outdoor advertising displays.
In December 2005, Clear Channel spun off all the live entertainment aspects of its business, which were rolled into the financially distinct Live Nation.
The reasons Clear Channel cleansed itself of its live events business all lead back to the financial bottom line. Not unexpectedly, a single huge company handling concert venues, concert promotion, and radio play raised questions of unfair, monopolistic practices—namely, of forcing artists to sign up for Clear Channel concert promotion in exchange for Clear Channel radio play. In 2003, the U.S. Department of Justice pursued an antitrust inquiry centered on that exact issue. Once Live Nation separated, the investigation was closed.
Additionally, profit margins afforded by the seasonal and unpredictable world of live entertainment weren’t quite gigantic enough. Profits fluctuate widely depending on how many people show up to concerts, and how much they’re willing to shell out. For 2004, income from Clear Channel radio totaled $1.4 billion, while live entertainment brought in a mere $95 million (a number which already represented a steep decrease from 2003). In spinning off Live Nation, Clear Channel unloaded its least profitable branch.
But Live Nation, while perhaps a wounded giant when it was spun off in December, remains a giant nonetheless. And they are taking several steps—steps that have almost doubled their stock price since the separation—to ensure that the new company’s profit potential can become giant as well.
Band as brand
At the start of this year, the hard-rock band Korn entered into a unique partnership with Live Nation and their record label, EMI. Normally, promoters (like Live Nation) and labels (like EMI), do their own thing—promoters get a cut from the box-office, labels get a cut from record sales. But Korn’s arrangement shares the pot: Live Nation bought a 6 percent stake in the gamut of box office, licensing, publishing, merchandise and CD revenue.
Though critics charged Live Nation at the time with attempting to monopolize the live entertainment industry, Korn thought the deal would help them.
“We’ve taken the biggest promoter and one of the biggest record labels and incentivized them to think long term and to think career about our band,” Jeff Kwatinetz, founder of Korn’s management company, told The New York Times in January.
Similar “synergies” are possible for a joined Live Nation and Musictoday, coupled with the myriad other assets that Live Nation controls. For bands are no longer (if they ever were) just a fun thing to listen to. Investors see bands as franchises, like blockbuster films. Hollywood movies don’t want to just break the bank at the box office—they also want kids to buy the action figure Happy Meals and teens to buy the t-shirts and everyone to buy the DVD with bonus footage. Music execs facing declining concert attendance and decreased album sales aren’t content for you to just listen to their artists. They need you to buy the band t-shirt and baseball cap and car decal from Musictoday. They need you to shell out for the special-release albums, and they’d love it if you joined the Musictoday-powered fan clubs and buy concert tickets early, to guarantee at least some revenue for the live shows.
Thanks to the Internet and wireless, you now have even more options to get extra touch time with your favorite bands—and both Musictoday and Live Nation want to be sure you take advantage.
“Live Nation is really well technology connected and, right now, cell phones and PDAs are hot,” says Wood. “So there’s no telling what may happen in the future as far as being able to access fans at the venue through all of these new technologies—particularly as Internet and cell phone usage increases and also consolidates towards these interesting little devices.”
Company town?
So what does this all mean to you?
In some ways, you get many more options as a music consumer. You can buy everything conceivable with the logo of your favorite band proudly embossed—clothing yourself from head to toe in musical-preference-advertising attire. You can join a fan club, purchase tickets in advance for shows at local venues like the Pavilion or the John Paul Jones Arena—or you can watch a London show on your cell phone in Charlottesville.
Does it matter that, in every aspect mentioned above, a cut will go to a single business, Live Nation? Is it simply the music world’s version of a company town that controls everything, from the clothes you buy to the food you eat to the house you live in?
Several critics say yes—this is basically what it means for artists.
“If you [as artist] have no options, then you have to deal with one buyer—and whatever they decide to pay you,” said Jon Stoll, a Florida-based live-event promoter, to The New York Times.
“Live Nation will force artists into exclusive deals that will steal musicians’ abilities to direct their own careers,” claims Randy Phillips, CEO of the second largest live entertainment group (and Live Nation’s much smaller competitor), AEG Live. “This marks the end of all of the small, independent promoters who have been the entrepreneurs of this industry,” he said in a newspaper report.
Locally, those who run small-sized venues didn’t seem as concerned.
“I don’t see where it’s really going to affect me, because I’m not that big,” says Terry Martin, co-owner of The Outback Lodge on Preston Avenue. “I’m just a 150-seater.”
“For us, immediately, it doesn’t have that much impact,” echoes Jason An-drews, who books acts for the Twisted Branch Tea Bazaar. “We are kind of under the radar, as far as the entertainment that we bring here.”
Andrews does see key differences in the outlook toward music, however. “We’re concerned about the artist, and the integrity of the entertainment they’re going to bring, as opposed to the product or the marketability of something. I kind of feel like, with Musictoday and Clear Channel, they’re more concerned with dollar bills, basically, and a product that they’re pushing. They’re trying to sell volume, but they’re not necessarily concerned with the integrity of the music or the originality of it all.”
Albemarle’s future
Del Wood insists that monopoly is not what the Live Nation deal is about. “To do business for the long run, you really have to take care of your customers and your clients, your stakeholders, and getting into a role of gouging them is not taking care of them.”
Will joining with the behemoth force compromises? Hubbard doesn’t think so. “Our incentives are very much aligned. I think it’s very clear that in order for Live Nation to succeed,” he says, “they’re going to have to connect more directly with the fan, and have to provide a broader suite of services to the artists. That’s just straight business strategy, and I think that’s in the interest of Live Nation shareholders.”
As for Musictoday itself becoming beholden to their own public shareholders, Wood says there are no plans to go public, which would bring in capital at the cost of control. “I think that going public, you would lose significant control, and that’s probably not part of something that’s going to happen any time soon. Coran is very committed to the local community in a number of different ways, and one of the big ways is really through employment.”
If Musictoday is successful, it could mean many more jobs for the area—an area looking for decent salaries to support the 2,000 people who move here every year. According to Wood, the company is already hiring new employees, though he doesn’t say they have a target number.
“This move is a great move for the community, and I wouldn’t be so excited about it if it wasn’t,” says Wood. “It’s a good move for all the stakeholders that we have, plus our employees, and consequently for Albemarle County.
“You can see what’s happening out [in Crozet] from a growth perspective, and it’s great because it’s clean growth—it’s not ugly or dirty or outrageous. It’s the kind of thing that’s good for the county and for the city. So I think that from that standpoint, it’s super.”
Wood, 43, grew up in the county, and graduated in the very first Western Albemarle High School class, but then left the state—going to college, working for IBM and earning an MBA. After 20 years away, however, he returned with his family, and now works in the ConAgra building that he still remembers from his elementary school years as Morton’s.
Will the e-commerce service provider Musictoday remain in Crozet longer than its agriculturally industrial forbears? At its height in the late ’70s, Morton’s Frozen Foods employed nearly 1,400 people, and had its national headquarters in Charlottesville. Knowing that, one can’t help but wonder: How long will it be before today’s schoolchildren, long grown, distantly recall that the big building down the street used to be Musictoday?
One Live Nation, under God…
Mammoth holdings for new local player
What does Live Nation control? A whole lot. With the purchase of House of Blues, the company will own, manage or book at least 170 venues around the world. In 2005, they promoted, produced or hosted over 29,500 live events—which included music concerts, plays and motor sports.—W.G.
Venues Live Nation has booking rights, through ownership or arrangements, with 153 venues across the world—mostly in North America and Europe—including amphitheaters (37), arenas (4), theaters (61), clubs (15) and festival sites (2). In Virginia, they own or operate the Nissan Pavilion in Bristow and the Verizon Wireless Virginia Beach Amphitheater. Live Nation also does big business selling sponsorships for these venues and their concert series.
Promotion Though the least profitable branch of Live Nation’s operations (with a loss of $22 million in the second quarter of this year), Live Nation is the largest concert promoter in the world. They’re promoting acts from Madonna to Toby Keith—though they also have a huge stake in “specialized motor sports events,” which include motorcycle road racing, freestyle motocross and monster truck shows (Live Nation owns trademarks on “Grave Digger” and “Blue Thunder”).
Theater Production Their touring subscription series, Broadway Across America, had 278,000 subscribers in the 2005-06 season. Live Nation is also invested in The Producers, Spamalot and Fiddler on the Roof, among others. Incidentally, they owned a 50 percent stake in Cirque du Soleil’s “Delirum,” performed recently at the John Paul Jones Arena.
Digital Distribution Live Nation is also a virtual nation. According to their press contact, their “Instant Live” division has sold more than 250,000 “live” concerts on cd or digital download. They’re also wiring 120 of their 153 venues—presumably so that they can broadcast those concerts to fans through the Internet or to their cell phones. One of Live Nation’s most profitable divisions, digital brought in $17 million in operating income during the second quarter.
House of Blues For $350 million, Live Nation bought up its closest rival, House of Blues, giving it more on both the promotion and venue side of the music business. House of Blues has 10 nightclubs and eight amphitheaters in cities from Atlanta to Vancouver.
Trunk Ltd. Live Nation recently announced that they’ve bought a majority stake in Trunk Ltd., an “authentic lifestyle merchandise” company that does clothing for AC/DC, Pink Floyd and Harley-Davidson, among many others. Trunk CEO Brad Becerkman calls music “the language of emotion,” and his company supposedly “connects to consumers’ souls through its products,” according to its press material.
Sports Representation Though they’ve recently unloaded many of their sports agencies to focus on the live concerts, Live Nation still has baseball and basketball divisions that represent stars like David Ortiz and Kobe Bryant.
