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Record contracts soar

Record contracts soar — Are music labels paying too much for the likes of Madonna and Mick Jagger?

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For many of rock’s superstars, Christmas came early this year: Record companies committed hundreds of millions of dollars to long-term contracts for Madonna, Prince, and ZZ Top, while Elton John and Bernie Taupin raked in nearly $40 million between them in an eye-popping publishing deal. (Janet Jackson’s pact started the trend last year, with big contracts for brother Michael, Aerosmith, Motley Crue, and the Rolling Stones following on its heels.) But now record labels have to be anxious about what Santa may have in store for them: Taking a look back, 1992 was not a great year for the megastar signers of massive new contracts. In fact, with the exception of U2 and their 4 million-selling Achtung Baby, there wasn’t any superstar who sold like a superstar.

*Michael Jackson still thinks of himself as the King of Pop, but his 1992 sales figures lag well behind those of Michael Bolton and Garth Brooks. Yes, Michael’s Dangerous rang the cash registers 4 million times, as often as U2, but that’s less than the 6 million albums Jackson sold with 1987’s Bad, which itself sold less than a third of what 1982’s Thriller did. And those are the kinds of numbers that form the heart of his contract with Sony Music’s Epic Records. The reported terms of Jackson’s deal — widely valued at more than $60 million — suggest an astronomic royalty rate and video and promotion budget, making it hard for Sony to make money without a blockbuster hit.

*Madonna, who received backing for her own production and talent company, Maverick, as part of her $60 million deal with Warner Bros., didn’t set off any shock waves in the music world this year. Although sources say Warner pulled out all the promotional stops to get her album Erotica a No. 1 debut on the Billboard chart, it only reached No. 2. ”One can never underestimate Madonna,” cautions an A&R executive at Warner Records. ”She’s a force of nature. Any project she’s involved with is potentially lucrative.” Well, maybe not any. While her $50 book, Sex, was shipping 500,000 copies, Erotica had modest first-week sales of 160,000 copies. That means consumers were willing to spend $25 million to see the Material Girl naked, but only $2 million to hear her sing.

*Prince was also able to wrangle new music publishing and recording deals with Warner that, while apparently worth nowhere near the $100 million he claimed, kept him among pop’s top earners. But his new album, [Prince], has so far made an unimpressive chart showing, climbing only to No. 5. This portends an unhappy holiday for both Warner and Prince. Under the terms of his contract, Prince reportedly gets a $10 million advance for every album, as long as the previous one sells more than 5 million copies. But [Prince] has sold less than a million copies and might not hit the jackpot figure anytime soon.

All this puts performance pressure on albums due next year from Mick Jagger and the Stones (who signed a $40 million, three-album deal with Virgin) and ZZ Top (who received a $30 million contract with RCA). ”If down the road some of these artists fail to perform, labels will think harder about these big-money deals,” says John Branca, an attorney who helped draft the Stones’ and ZZ Top’s contracts.

Even the A&R exec at big-spending Warner, who maintains that ”you’d lose the artists if you don’t make the deals,” sees the marketplace evolving. ”I don’t think a lot of money (will be) changing hands at the beginning anymore,” he says. ”There seem to be some checks and balances developing” — which translates as fewer checks before the balance is tallied.