October 16, 2007 / 6:35 PM / 10 years ago

UPDATE 2-Madonna drops Warner Music for tour promoter

(Adds details from Live Nation conference call)

By Yinka Adegoke

NEW YORK, Oct 16 (Reuters) - Pop star Madonna has dropped her long-term music label Warner Brothers and signed a multi-album, touring and merchandising global partnership with Live Nation Inc. (LYV.N), the concert touring company said on Tuesday.

Los Angeles-based Live Nation said the deal will see Madonna become a shareholder in the company though financial terms were not released in the statement.

The deal, which has been expected for more than a week, is estimated to be worth $120 million over 10 years including a three-album commitment, a source familiar with the talks told Reuters last week.

On a call with investors on Tuesday, Live Nation executives, criticized by some Wall Street analysts for spending too much to sign the 49-year-old star, said they had been told they were not the highest bidder.

Chief Executive Michael Rapino said the partnership with an artist of Madonna’s caliber validated his company’s strategy to develop longer and deeper relationships with touring artists through its new unit Artist Nation.

“We believe it should help attract additional artists to the new Artist Nation model,” Rapino said.

A spokesman would not say which other stars Live Nation might sign but indicated there would be further announcements.

Warner Music congratulated Madonna, with whom it is parting ways with after 25 years. But the world’s third-largest music company also pointed out that it retains all the recording and publishing rights for all her music.

In addition, Madonna still has a commitment for one more album with Warner, to be released next year.

The company said it expects the first Madonna album through Live Nation is expected within next two to three years and a tour was likely with the next 24 months.

Music companies and artists have been exploring new relationships as traditional music sales drop rapidly. Fans are buying fewer CDs and are not buying enough digital music to make up for the shortfall.

“The paradigm in the music business has shifted and as an artist and a businesswoman, I have to move with that shift,” Madonna said in a statement.

Madonna’s new deal with Live Nation also includes exploitation of her brand, fan club/Web sites, DVDs, music-related businesses, film projects and associated sponsorship agreements.

“For the first time in my career, the way that my music can reach fans is unlimited ... Who knows how my albums will be distributed in the future?” Madonna said.

According to Live Nation, Madonna’s last three worldwide tours generated close to $500 million in the last six years. Live Nation set up a new unit called Artist Nation, which it said will service the Madonna partnership through 80 offices in 18 countries.

Artist Nation is headed by Michael Cohl, who is known in the music industry for the Rolling Stones’ “Steel Wheels” tour in 1989.

Rapino said the new partnership does not tie specific advances to certain products, such as albums. He said Live Nation will recoup its payments to Madonna from a variety of revenue streams that will be cross-collaterized.

Industry watchers had speculated that Madonna would need to sell up to 15 million albums to recoup Live Nation’s advance fees, reported in several papers to be over $50 million.

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