MAJOR PAPERS:

• The stock is up 150% over the last year but with its move into the consumer marker BlackBerry maker Research in Motion Limited (NASDAQ: RIMM) is entering the fickle world of consumer trendiness, reported the Wall Street Journal's "Heard on the Street". Analysts are concerned about how big the consumer market can be for them, and then there's Apple Inc (NASDAQ: AAPL) and Nokia Corporation (NYSE: NOK) beating down the consumer path. Smart products will help, but price is an issue, and the shares could face a hard fall.
• The Wall Street Journal reported that Wachovia Corporation (NYSE: WB) acknowledged it has hired The Goldman Sachs Group Inc (NYSE: GS) to study its troubled portfolios of mortgages, a move which many believe indicates the bank is gauging the market value of the loans in order to eventually sell them.

OTHER PAPERS:

• Lazard Ltd (NYSE: LAZ) was hired by UBS AG (NYSE: UBS) to undertake a strategic review of the Swiss bank's businesses, the New York Post learned.
• The New York Post also reported some reported turmoil at Live Nation Inc (NYSE: LYV), following the abrupt departure of the concert promoter's chairman, Michael Cohl. Employees in the unit that was led by Cohl fear that the company will lay some of them off, and CEO Michael Rapino is accused of not being strongly committed to the company's mega-deal strategy.
• The Boston Herald reported that its unions were told the newspaper will lay off 130 to 160 workers, under its new plan to outsource printing operations elsewhere in the state.

MAJOR PAPERS:

• Last November, Google Inc (NASDAQ: GOOG) and 30 partners were said be developing a new type of handset using Android that was expected to revolutionize the industry. The first new phones were expected to be available in this year's second half but are now slated for the fourth quarter the Wall Street Journal reported.
• According to people familiar with the situation, the Wall Street Journal reported that Citigroup Incorporated (NYSE: C) will make sharp cuts in its investment banking division this week.
• The Wall Street Journal reported that Live Nation Inc's (NYSE: LYV) Chairman, Michael Cohl, stepped down down as a director and executive to end the strategy feud with CEO Michael Rapino. over how to pursue the "360 deals" with music superstars.
• The Financial Times reported that there are worries that investment banks will accelerate the pace of their layoffs this summer, after it became known that The Goldman Sachs Group Inc (NYSE: GS) gave pink slips to workers in its investment banking division last week. Goldman is now expected to lay off up to 10% of the workers at the division.

OTHER PAPERS:

• New Jersey put its $150M center for stem cell research on hold, the Star Ledger reported, eight months after ground was broken on the project.

MAJOR PAPERS:

• The Wall Street Journal reported that, in an attempt to move past its takeover battle with Microsoft Corporation (NASDAQ: MSFT), Yahoo! Inc (NASDAQ: YHOO) is planning a reorganization. People familiar with the matter said executives are discussing a plan to centralize numerous product groups into a global-product organization. Details may be announced next week.
• The Wall Street Journal also reported that an internal feud at Live Nation Inc (NYSE: LYV) over strategy may soon be resolved, as the concert promoter is reportedly negotiating the exit of chairman Michael Cohl.

OTHER PAPERS:

• A recommendation by an Australian commission to open Rio Tinto Group's (NYSE: RTP) Pilbara railway to third parties could cost $30B if the idea is implemented, Rio contended and the Australian reported. The National Competition Commission, which advises Australian governments on infrastructure issues, has suggested that Fortescue Metals Group be given access to certain rail lines operated by Rio Tinto.

WEB SITES:

• A joint investigation by CBC News and the Canadian Press found one-third of people shot by Taser International Inc's (NASDAQ: TASR) Tasers reportedly required some medical attention, Engadget reported.
• TechCrunch confirmed that Joshua Schachter, the founder of delicious, will resign from Yahoo!. Sources believe the near-stalled development of the new version of delicious may have played a part in his resignation.

Following the groundbreaking signings with Madonna, U2, and Jay-Z, Live Nation (NYSE: LYV) is rumored to be courting The Rolling Stones away from privately held EMI Group, according to British music newspaper NME. The newspaper quotes a report from the print edition of The Observer, that the band is going to sign a deal with Live Nation that would allow the live music events company to "take over the marketing of the group's back catalogue, worth over £3 million (roughly $6 million) a year," in addition to typical touring and merchandising rights.

The Rolling Stones have been with EMI in the UK since the band started its own label in 1970, although initially only in a distribution agreement before the band shifted to EMI's Virgin Records by 1976. The band's contract with EMI expired earlier this year and they signed a one album deal with Universal Music Group to release the soundtrack to the Martin Scorsese-helmed live film Shine A Light. In late 2005, the band also released a special compilation through Starbucks (NASDAQ: SBUX).

Assuming the band does not return to EMI, as this report indicates and the band has strongly denied, the band follows Paul McCartney and Radiohead, among others, on their way out of the troubled music company. However, though EMI is troubled, Live Nation has lured artists from other music companies as well. For The Rolling Stones, signing with Live Nation would be natural since the band consistently has long and successful tours, with and without the release of albums with new material. The soundtrack to Shine A Light has also sold well, with more copies sold than previous live albums from the band.

In a keynote presentation at the Music Matter conference in Hong Kong today, Billboard reports U2's longtime manager Paul McGuinness called for Internet service providers to stop "clinging to the past and preventing the music industry's future growth." He feels that ISPs and the music business should have "a real commercial partnership" where revenues and profits are "fairly shared" and actively prevent copyright infringement together. This is not the first time McGuinness has called out ISPs for detrimental actions toward the music industry. He used another keynote speech in January for this same theme: that ISPs work against the music industry by providing safe harbors for users who share music illegally.

In McGuinness's opinion, the music industry is charting a "way to the future" but the kind of future he describes is not too different from the music industry that caused piracy to become such a problem. Instead, he calls "Internet free-thinkers" today's business "dinosaurs" because they hold an apparently appalling view of copyright management. Above the lofty goal of eliminating piracy, these words still sound greedy and money-based before anything else.

It's the same old problem for the music industry and the managers of the artists in that business. The average consumer just wants an easy way to obtain and enjoy the product. Unfortunately, piracy has provided that method and only recently has the music industry started to understand and rethink business methods to combat the issue. McGuinness is at least correct in stating that artists should not be simple employees, but if their product is better managed by other methods, then why not leave the music industry behind? Touring promoter Live Nation (NYSE: LYV) is obviously charting a path outside the industry that is very lucrative for artists and their management. U2 recently signed a deal with the company for this very reason.

Live Nation (NYSE: LYV) has secured a deal with Facebook and created an application for the social-networking site to sell concert tickets and promote concerts that may interest users. In addition, according to Variety, the application brings the "My Live Nation" global concert search engine into Facebook and allows users to sync the new application with their music library to receive concert updates automatically. Wired reports that the Live Nation application does not, however, link directly with your Apple Inc. (NASDAQ: AAPL) iTunes library or another third-party program, instead giving the user the option of pointing toward a library or not.

It's no surprise that one of the largest concert promoters has moved in with one of the top social-networking sites. Given that Live Nation is no stranger to wide exposure, the number of users on Facebook who may already be familiar with the promoter is likely to be significant. Instead, the aspects of Live Nation's application that allow users to share upcoming concerts and shows they are either attending or would like to attend should increase awareness of local and regional concerts -- at least on Facebook.

Not a bad idea in the end, even if it is some form of viral marketing like the cited Wired and Variety articles claim. It's not like Facebook is not already being used to market and sell music in other forms; the TuneSocial program basically advertises albums users are listening to, and iLike streams tracks that users enjoy. Live Nation offers the next logical step with concerts but directly connects users with the ability to purchase tickets and boast or share with friends.

The deal could be worth $150 million. Live Nation (NYSE:LYV), which is normally in the concert business, is close to a 10-year deal that would give that company a piece of every aspect of the business dealings of rapper Jay-Z. The arrangement could hardly be more broad. According to The Wall Street Journal: "Live Nation would underwrite other of Mr. Carter's (Jay-Z) business ventures in areas such as clothing, out of a fund of $25 million; in the past, Mr. Carter has been involved in clothing and nightclub businesses."

The contract is a huge risk for Live Nation, and one that it probably should not take. Shares in the company have fallen from a 52-week high of $24.09 to $12.70. The firm's profits have been unusually modest. In the final quarter of 2007, LYV had operating income of $4 million on revenue of just of $1 billion. Debt service cost the company $16.6 million. The company has long-term debt of just under $1 billion.

While signing up huge stars for long contracts may seem to be attractive, a lot can go wrong over ten years, especially if the star in question loses much of his popularity. Live Nation has a similar deal with Madonna. Perhaps that is why the company's shares have done so poorly

Douglas A. McIntyre is an editor at 247wallst.com.

MOST NOTEWORTHY: Novartis, AIG, Diageo, and BEA Systems were today's noteworthy downgrades:

• HSBC downgraded Novartis (NYSE: NVS) to Underweight from Neutral, as they believe the company's mid-single digit pharma sales growth is not sustainable.
  
• AIG (NYSE: AIG) was downgraded to Market Perform from Outperform by Keefe Bruyette due to their concerns about the company's deteriorating profit trends.
  
• Diageo (NYSE: DEO) was lowered to Neutral from Buy by Goldman Sachs to reflect a lack of near-term catalysts.
  
• Deutsche Bank downgraded BEA Systems (NASDAQ: BEAS) to Hold from Buy, as they believe it is likely that the acquisition will close in April.

OTHER DOWNGRADES:

• Live Nation (NYSE: LYV) was dropped to Hold from Buy by Morgan Joseph.
• Jackson Hewitt (NYSE: JTX) was dropped to Neutral from Buy at FTN Midwest.
• Roth Capital downgraded Collagenex (NASDAQ: CGPI) to Hold from Buy.
• Credit Suisse lowered MFA Mortgage (NYSE: MFA) to Neutral from Outperform.

Rumors now frequently circulate about massive music acts leaving their long-term record labels. Last spring Paul McCartney defected from EMI after 45 years to join Starbucks' (NASDAQ: SBUX) Hear Music label. Madonna left Warner Music Group (NYSE: WMG) last fall. Other artists have followed suit, while some who are still signed have started speaking out against their labels. In this most recent case, Irish rock band U2 is rumored to be leaving Vivendi's Universal Music Group to sign up with Live Nation (NYSE: LYV).

Although I wouldn't blame the artists for leaving their labels, as long as it is in their best interests and increases fans accessibility to the music, it is certainly going to affect the record industry long-term if the defections continue. At the same time, many critics and bloggers would point out that the acts switching labels are already past their prime -- their big hits and money-making lies with albums that came while they were at the labels. That may be true for acts like McCartney, U2, and Madonna, but the best example of this -- Radiohead -- is hardly through making the huge hits they enjoyed while with a major record label.

Radiohead, if you remember, is that "little" band that caused such a stir last October when it decided to release its new album, In Rainbows, to fans in a pay-what-you-want model. When the album was released on CD earlier this year it hit #1 in numerous charts around the world.

Obviously, none of these acts would have achieved such huge successes without major record labels, and it is impossible to say that the future of the record industry is without music labels. These rumors and the actual occurrences indicate that companies like Live Nation and Starbucks, while not necessarily oriented primarily for music distribution, are making better gains than the labels. This will not be ignored for long so the rumors may cease, and only indicates the movement music acts are making for the time being.

While sagging global music sales may be down, spelling hard times for music labels and the like, the proliferation of cribbed (read, downloaded illegally) music is actually driving concert sales to record levels.

Anyone heard of Live Nation (NYSE: LYV)? It only happens to be a real player in this industry. Live Nation recently announced its global ticketing initiative, which is set to debut next January. Live Nation is partnering with European firm CTS Eventim, which will provide the back-end technology and other related services for LYV's ticketing business.

So, what does this new business mean to a company that is a mover and shaker in the the promotion and production of live music shows, theatrical performances, and specialized motor sports events?

Madonna has been a trend setter for three decades and has built, not just a music empire, but a financial one. She is brash and savvy. The "Material Girl" who popularized wearing undergarments as formal wear and accent pieces has made another splash this year, not with her music or wardrobe, but with her new record contract.

She has abandoned the major record labels to sign on with a concert promotion machine for $120 million. Goodbye long-time record label, hello Live Nation (NYSE: LYV). In October, the iconic and very wealthy 49-year-old Madonna signed her biggest contract to date, and one Warner Music Group (NYSE: WMG) would not match.

Live Nation, the concert promoters, have acquired her touring and recording rights. Her first album was released in 1983, 26 24 years ago, and she has been going strong ever since. According to published reports: "The rights to Madonna's tours, which continue to be highly profitable, will now be owned exclusively by Live Nation. Last year's Confessions tour featured eight sell-out performances at Wembley Arena, which is managed by Live Nation. The tour grossed $260m."

Specifics include an $18 million signing bonus and an additional advance of $17 million in cash and shares for each of the three albums in the ten-year deal. If Madonna goes on tour, she will get up to 90 percent of the profits, with only 10 percent reaching Live Nation.

Warner Music Group Corp. (NYSE: WMG) announced today a $5 million net profit in the last quarter, compared to $12 million at this time last year. Continued growth in digital sales over sales of physical albums (CDs) is cited as the reason for this drop. There is good news out of that growth as digital sales for WMG rose 25% during the quarter, but according to Billboard this could not make up for CD sales. Across the board, the report indicates that album sales in the United States were down 14% in the last year. Fans are using digital stores like Apple Inc. (NASDAQ: AAPL)'s iTunes store to buy tracks in greater quantities than full albums.

In mid-October, WMG lost a major artist when Madonna opted to sign a new contract with tour promoter Live Nation (NYSE: LYV). For years, WMG had also been mentioned as a possible buyer of London-based EMI Group, but the seven-year rumor ended when Terra Firma bought the music company and took it private. Billboard indicates that WMG is attempting to create new business relationships with the company's roster of artists, much like the other major record companies. This new business model would include "new digital services as well as a share of image rights, advertising, touring and management revenue."

WMG's profit decline is certainly not unexpected, and it is another indication that the digital market is the one these companies should be focusing their attention. As movies and television shows are indicating, the internet and online stores are providing new outlets for material to be tested and offered to fans. It would be prudent to test similar measures and see what the results might be. Clearly, interest would be maintained as fans are already buying more material through online stores versus strolling through retailers looking for CDs.

With the news this morning that Madonna is potentially leaving Warner Music Group (NYSE: WMG) for tour promoter Live Nation (NYSE: LYV), the future of the record industry is again being questioned. In the wake of English band Radiohead's self-release online of its seventh album, any move away from the record industry is demanding notice. A move to a tour promoter with album and merchandise opportunities only gives artists more control over their product, as opposed to making numerous deals with separate entities.

The Wall Street Journal's article cites that "a range of players in the music business -- labels, concert promoters and even managers and ticketing companies -- are eager to make broad deals that give them a larger piece of the pie by participating in revenue streams such as endorsement deals between artists and advertisers, as well as the sales of concert tickets and merchandise." That very sentiment spells doom for the record industry as the "newer" entities that enter the album-making business make offers that are often better than the deals the record labels offer.

The possibility of Madonna moving from Warner Music is only the most recent in a long line this year of successful artists moving from the big labels, but so far the question has revolved around embracing new technologies like the digital market. Paul McCartney shook up everything back in March when he moved from the Terra Firma-held EMI to Starbucks' (NASDAQ: SBUX) Hear Music, seizing on a market that had primarily been used for selling compilation CDs. McCartney's Memory Almost Full sold extremely well and catapulted him into the digital world. Radiohead's In Rainbows is this year's other strong case, though exact sales numbers are not available yet (however, the album's download site did get overloaded yesterday).

But the problems that face label groups like Warner and EMI are not limited to those companies. The entire business model for the music industry is being redrawn and recreated, but not by the labels. As the cases of Madonna, McCartney, and Radiohead illustrate, the artist is taking control of an industry that has long abused its power.

MAJOR PAPERS:

• Madonna, the original material girl, is signing a 10-year $120M deal with concert promoter Live Nation (NYSE: LYV), leaving Warner Music Group (NYSE: WMG) in her wake, reported the Wall Street Journal.
• According to the Wall Street Journal's "Heard on the Street" column, Progressive Corporation (NYSE: PGR) is struggling due to competitors' pricing, safer cars, and a struggling economy, to name a few factors.
• The Financial Times reported that General Electric Company (NYSE: GE) will decide whether to sell its 80% stake in NBC Universal after the Beijing Olympics in August 2008, according to sources.
• Tenaris (NYSE: TS), the maker of steel pipes for oil and gas exploration, has ruled out any possible sale of itself to ArcelorMittal (NYSE: MT) , the world's biggest steel producer, reported the Financial Times.

OTHER PAPERS:

• The New York Post reported that UBS AG (NYSE: UBS) has fired David Martin, its head of interest-rate trading, and James Stehli, the head of its collateralized debt obligation unit, due to the fallout from the mortgage meltdown.
• BP PLC (NYSE: BP) CEO Tony Hayward will today unveil plans to reduce bureaucracy and duplication of management at the oil giant, reported the Telegraph.

Madonna is on her way out the door at Warner Music Group (NYSE: WMG). She is being drawn away by a $120 million, ten year offer from Live Nation (NYSE: LYV), the large concert promoter.

Under the terms of the deal, according to The Wall Street Journal, Madonna will make three albums with the concert promoter. Live Nation will also promote merchandise and the licensing of her name.

Several industry observers say that Live Nation cannot make its money back on album sales. It would require close to 50 million units. But, by making money on other lines of business, like sponsorship of tours, the company may well be able to make a profit.

Warmer Music Group probably decided that the deal did not make economic sense and let Madonna go. But, that would be short-sighted. With CD sales falling and more revenue coming from digital downloads, WMG shares have lost almost two-thirds of their value in a little over a year. The stock now trades just above $11.

Digital sales do not yield music publishers as much per song as CDs do. Warner has to come up with some other way to make money. Taking a chance on Madonna's concert sales and sponsorships would have been a good first step out of a hole for Warner. But, they did not take it.

Douglas A. McIntyre is a partner at 24/7 Wall St.