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Saturday, April 5, 2008

JAY-Z'S BAD RAP


April 4, 2008 -- Rapper Jay-Z's refrain, "to hell with the price, cause money ain't a thang," appears to be the new credo of big-spending touring giant Live Nation.

Morgan Joseph analyst David Kestenbaum yesterday blasted the proposed $150 million mega-deal between the hip-hop legend and the concert promoter as "excessive," and warned that the company would likely have to go deeper into debt to finance any other multi-million dollar artist ventures.

The deal one-ups the $120 million the company forked over last year for the rights to Madonna, and comes just days after it locked up the touring rights to superstar rockers U2 for the next 12 years for a reported $70 million.

"We question the reasoning behind Live Nation's reported deal with Jay-Z, and remain wary of management's willingness to spend such substantial amounts of money on developing its Artist Nation segment," Kestenbaum said in a note to investors.

He added, "We cannot figure out why Live Nation would pay $30 million more for Jay-Z, particularly given his relative touring underperformance and lower-profile status vs. the other two."

The proposed Jay-Z deal is said to be a wide-reaching arrangement covering albums, touring, publishing, merchandizing and more.

The pact reportedly includes a $25 million upfront payment, as well as a $25 million advance, another $25 million for touring, $30 million for three albums over the next decade, $20 million for publishing, licensing and other rights, and $25 million for other entrepreneurial ventures.

However critics of the deal point out that Live Nation will have to wait to start making money from much of its investment.

Jay-Z still owes another album to his current label, Universal Music Group, which isn't expected until at least the end of this year, and the rights to his back catalog of hits do not revert to him for another two years, a source familiar with the situation said.

Meanwhile, his publishing rights are still administered by EMI Music Publishing, which means there's limited upside for Live Nation in sharing the revenues to those rights near term.

What's more, Jay-Z's entrepreneurial ventures like the 40/40 Club chain and his stake in Armadale Vodka are not owned outright by the rapper. Sources point out that he has other investors in those deals - leaving limited participation for Live Nation in those revenue streams.

Natixis Bleischroeder analyst Alan Gould warned that the company will have to "work hard" to generate high margins and convince skeptics that they didn't overpay.

Gould said that while Live Nation claimed $339 million of cash and equivalents on Dec. 31, its adjusted cash position is closer to $85 million once working capital items are backed out.

http://www.nypost.com


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