Kind. Over two different negotiations (the first during this Island crisis in August of '86, and the second six months later) U2 got two things that meant more than the cash they were owed.

First was the eventual reverting of all masters of their recordings to U2. This meant that Island was now just leasing the rights to release U2's albums for a fixed number of years, but that if U2 someday left the label, their albums would go with them. This is the sort of deal the Rolling Stones have had since 1971, which is why every seven or eight years the Stones post-1971 catalog is reissued on a new label. It's also why the Stones are still able to get gigantic advances in their old age; when a label signs the Rolling Stones it doesn't just get the albums the band will make in the years to come; it gets "Brown Sugar," Exile on Main Street, and another twenty years worth of hits too. U2 would never again be in the position of worrying that their life's work might be sold out from under them.

The other provision they got for saving Island, though, was the real reason that McGuinness would not have discouraged Polygram from paying a fortune for the label: U2 got a sizable chunk of equity in Island. The amount usually reported was 10 per cent, although it was probably a bit more. Ossie Kilkenny says that a tenth was what Black-well thought U2 had coming if he owed them five million dollars, 'cause Blackwell figured the company was worth $50 million. Ossie and Paul thought Island was probably worth something closer to $34 million (which would have entitled U2 to a seventh of the company). Whatever figure they settled on in 1987, it became the bargain of the century when Polygram bought Island for more than $300 million less than two years later. It was one more time (like choosing to go with the artsy Eno to produce The Unforgettable Fire) when U2 elected to do something financially suspect for personal reasons, and ended up breaking the bank anyway.

So when McGuinness drops Zooropa on Island/Polygram's coffee table, he comes from a position of supreme power. There is no question that Polygram will cough up a fortune to keep the jewel in their crown. The only debate is over how much. McGuinness did entertain a pitch from his old pal Jimmy lovine to sign U2 to lovine's successful new Interscope label for the USA, but never seriously considered doing it. That discussion may have been simply a courtesy to one of U2's closest allies in the business, the man who produced Rattle and Hum, but I'd bet

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That McGuinness wanted to cause Polygram to sweat a little by making it look as if U2 were shopping around.

As was the case in the renegotiation with Island seven years ago, the provisions of this deal may mean more to U2 than the money. Because although virtually no one outside the music business understands it in the spring of '93, the rapid changes going on in technology will, within the next decade, completely redefine how music is delivered to the public and what record companies do.

The end of the old world is as apparent in the entertainment indus­try as it is on the map of Europe. The technology for delivering music —and indeed television, films, computer information, mail, and tele­phone services—is all coalescing into a single home delivery system that will revolutionize the information industries, and perhaps a big chunk of the international economy along with them.

Articles being written in popular magazines about the coming "In­formation Superhighway" focus on what it will be like from a consumer standpoint to have all sorts of home entertainment options at your fingertips. But no one is talking about how such a revolution will shake the companies that are now in the business of delivering information and entertainment the old-fashioned ways. The record labels are scared that the effect on them of the new methods of home delivery will be like the effect the rise of the automobile had on the buggy business.

Record stores could become obsolete as music is delivered over cable, telephone wires, or satellite transmission directly into consumers' homes. This raises amazing possibilities. One is that in the next century top acts such as U2 will no longer need record companies; they will be able to make their albums and sell them directly to their audience by direct transmission. Both Bellcore (the Bell Telephone research company in Livingston, New Jersey) and Philips (the company that owns Polygram, U2's label) have set up crude working prototypes of home music delivery systems by hooking up recordable CD players to fiber-optic telephone lines. Imagine a future in which U2 finishes making an album at the Factory, and then just walks over to the computer, puts it on-line, and waits for their fans to punch in credit-card numbers and download it into their homes. No record store, no record company, no one to grab that other 80 percent of the profit.

This is why there is suddenly a rash of mergers between entertain­ment companies and delivery systems (such as telephone, cable TV, and

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satellite) companies. As in Bosnia, no one's sure who is going to eventu­ally control this landscape, so everybody's grabbing as much property as they can. Unless governments decide to step in and limit access to the cable, phone, and satellite systems (which could place all the power in the hands of the hardware-makers) it seems likely that, as Bono says, this new contract will be the last record deal U2 ever has to make.

There is an intellectual landgrab on as real as any past gold rush. U2 knows that this race will be won by the hardware that plays the software consumers want most. And U2 is, in this game, precious software.

"We think," McGuinness says of U2's new contract negotiations, "we've provided for a future in which the sound carrier has disap­peared."

How close is this revolution? Pete Townshend is rumored to be negotiating a new deal—with the British phone company. Prince has announced that he will no longer make records—from now on all his work will be audiovisual. (Of course, Prince makes apocalyptic an­nouncements regularly and rarely sticks to them.) U2 played with the notion of making Zooropa an interactive audiovideo presentation, skip­ping CD and audiocassette altogether, but the impending deadline im­posed by the tour led them to abandon that ambition and release it as an album in the traditional sense.

Kilkenny sees the future of entertainment as an audiovisual environ­ment, in which music is less likely to be a work complete in itself as it is to be half of a sound-and-picture presentation or even a minor compo­nent in the background of a video game or a virtual reality display. After all, if one unit in your living room can play either music with pictures or music without pictures, how many people will choose "without"? So in their new contract U2 is offering the record company the right to sell the sounds they make, but reserving to themselves the right to sell any pictures that go with them. This, the band figures, will give them ultimate control over any evolution of their work into future media—as well as a huge chunk of the money any such future media (passive or interactive) might generate.

What Kilkenny thinks is very unlikely to be won in these negotia­tions is a concession from the record company that would limit Polygram's right to sell U2 albums to hard copies (CDs, cassettes, records, minidiscs) only—leaving U2 free to sell their music through cable or satellite transmission. Kilkenny says that there is not a major

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Record company in the world that would agree to sign U2 for anything less than the total right to sell their musical product through any means available—because to limit themselves to hard copies in the face of this coming revolution would be to conspire in their own extinction.

I tell Kilkenny that if I were he, negotiating for U2,1 would offer the record company the right to manufacture CDs, tapes, and other hard copies of U2's music—but reserve to the band the right to transmit and market that same music by direct electronic delivery. He shoots back, "If I were in the record business I would say, 'I won't do a deal with you! Because I am in the audio business and I believe I will always be in the audio business.' You can't deny people in the record business the right to promote that which they've got rights for in any new audio medium. Then you would have two competing operations marketing the same product! It wouldn't make any sense. And those companies—the Polygrams, Sonys, Virgins, Warners—that's the business they're going to be in. They're going to be in the exploitation of audio rights in whatever form.

"If you want to be businesslike," Kilkenny continues, "you can't deny a person the right to market your records. If records are an audio means, then you must give that person the right to audio use in whatever form audio use is available. We're used to formats—whether it's discs or tape —that are physical. The great uncertainty out there is, what are the new technologies? Will it be cable? Satellite? Your phone? We don't know whether it will be transaction-based or pay-for-play. So in that uncer­tainty all you can say to a person is, 'Okay, we grant you the audio rights, so you must have the right to sell records or their replacement in audio form.' What we don't know is, what should we get paid?"

What U2 has done in this new deal with Island/Polygram is to leave the division of profits from future transmissions systems flexible, to say in effect, here's the split on a U2 compact disc, but we agree to leave the split on satellite transmission of U2's music unresolved until such time as both parties can assess the fair market value of such delivery systems.

By thus postponing the division of monies earned by systems that do not yet exist, U2 hopes to avoid the sort of kick in the teeth that they and almost every other artist took when CDs replaced vinyl, and the bands discovered that a "new technology" clause standard in recording contracts gave artists only half royalties on new "experimental" formats. For a few years in the 1980s the labels really raked it in, charging the

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consumers twice as much for a compact disc as they had for records while paying the artists only half as much. Every artist and manager in the world cried, "Never again!"

While all this record negotiation and technological speculation is going on, McGuinness is also trying to prepare the ground for the Brave New World by waging war on the European performance rights organi­zations, an old and archaic network of agencies charged with collecting performance royalties on songs played on TV, radio, and in concert and distributing the monies to the songwriters.

See, every time anyone performs a song for money—whether it's U2 in a football stadium or a hit record played on the radio or a lounge singer crooning "Tie a Yellow Ribbon" at the bowling alley bar—the promoter or bar owner or station is supposed to pay a small royalty to the author of that song. Performing rights societies collect fees from stations, clubs, and concert halls and then pay the appropriate music publishers, who pay the writers. No one pretends that the system is remotely accurate, but at least in America the fact that there is competi­tion between two private collection agencies has kept them somewhat responsible. ASCAP and BMI put all the money they bring in into a hat and, using a formula based on record sales, radio play, and spot-check­ing of venues, compute an approximation of how often different writers' songs are being played and pay them accordingly.

In Europe, by contrast, a network of national collection societies has a functional monopoly. And McGuinness contends that while that may have been a sad necessity in the old world, in this new post-Cold War, post-Treaty of Rome, post-Maastricht Europe of unified economies, U2 should have the right to collect their own money for their own performances of their own damn songs. In February McGuinness and U2 issued a writ in the High Court in London declaring that the British Performing Rights Society's rules are unenforceable under the laws of the European Union.

"There's an appalling system of collections through organizations like the Performing Rights Society and its national equivalents in each European country," McGuinness says. "Those organizations, sometimes commercial, sometimes statutory, collect on behalf of rights owners, producers, performers, and writers from television, radio, concert pro­moters, and so on. The whole system is incredibly haphazard and inconsistent country by country, and the European community is not

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Making any serious effort to tackle the issue. We're in the middle of a lawsuit against the Performing Rights Society in Britain where we're basically saying to them, 'You claimed you could collect money on our behalf. It now seems that you are utterly incapable of collecting it but did not admit that.' We expect to make a lot of money from the Performing Rights Society because of that.

"Underlying that case is as well a British attitude which is that the PRS exercises some sort of benevolent function by collecting and dis­tributing a lot of money to songwriters who otherwise wouldn't get any money. Now, sadly, if you have written a song and no one is performing it or listening to it, you're not entitled to any money.' And on my clients' behalf I'm not prepared to accept a situation where the PRS appears to collect on our behalf inefficiently and then distributes our money to a load of losers and no-hopers! If they need money they should be getting it from a genuine benevolent society or the state or somewhere else. I don't see why they should be taking it out of our pockets."

McGuinness may be chasing the PRS through the European courts for a long time, but in the end he will probably help to shatter an outmoded system—and clear the way for U2 to track and collect their own money (or hand that Job over to their record company—who will have to do something if they aren't going to physically make and ship albums anymore). The middlemen are finding their power bases disap­pearing in the new world. This must be how it felt a hundred years ago, when no one was sure if the future was going to be with the internal combustion engine, electric motors, or steam—but it was clear that horses were in trouble.

While U2 is starting their European tour McGuinness, Keryn Kaplan, head of Principle's New York office, and Anne-Louise Kelly, head of the Dublin office, fly to the Polygram's managing director's confer­ence in Miami, Florida, to tell the assembled record company that they have two happy announcements for them: U2 has resigned to Island/ Polygram for a long-term, six-album deal, and U2 has just delivered a new studio album, Zooropa, which the label can release immediately.

The Polygram executives cheer the news, which probably means their Christmas bonuses are in the bag. Business and music trade publications around the world jump on the story. The New York Post estimates that the deal is worth $200 million for U2.

Newsweek runs a photo of Bono onstage as Macphisto and reports:

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"There's yet another hyper-deal in the music biz, this time between Irish rockers U2 and Island Records. In what may be the priciest handshake since Michael Jackson's with Sony in 1991 U2 is guaranteed $10 million a record and a sky-high 25 percent royalty rate. 'U2 has sold more than 50 million records for us,' says a company spokesperson. 'I think that speaks for itself True enough, but will it drown out the voices of smaller bands? Achtung, baby."

McGuinness won't confirm the figures, on the grounds that it is bad taste for people who have a lot of money to brag about it in a world where so many people have none. The thing to bear in mind, though, is that all the big figures that record companies love to throw out when they sign superstars are baloney, 'cause all the deals are based on perfor­mance and most advances are recoupable. It's great hype to say that Virgin paid $50 million for Janet Jackson or Elektra paid $25 million for Motley Crue (no one's that stupid, are they?), but it doesn't mean those artists ever banked that money. The height of such nonsense was when Michael Jackson resigned with Sony a few years ago and Sony Music chief Tommy Mottola said the deal could be worth a billion dollars, and the press ran out and printed it! They missed the key word: could. That would be like my saying I got a deal worth a billion dollars for this book. I did ... if it sells 500 million copies.

Dada's a Comfort

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