U2 make money from their unique record deal, hugely lucrative live tours, and a range of other commercial interests. SIMON CARSWELL, Finance Correspondent, surveys their empire
In the 2004 book Bono on Bono, the U2 singer said that “U2 were never dumb in business”. Elsewhere, the band have been described as “rock’s last superpower”. Certainly, in money terms, they have remained near the top of the charts for the past decade.
Estimated by The Sunday TimesRich List to have a fortune of €618 million, U2 are likely to add significantly to their cash pile in 2009 with a bumper year of album sales, stadium concerts and merchandise receipts.
The band pays itself a substantial wage from its music publishing and royalties arm. Publicly-filed accounts show that U2 Limited, the company which makes money from selling, reproducing and broadcasting the group’s music, paid the company’s eight employees – thought to include the four band members – €21 million in 2007. The previous year, five staff shared €17.9 million.
The firm’s gross profits were €12.6 million in 2006, when the band were still on the Vertigo world tour, but fell to €3.9 million in 2007, the year after the tour.
MUSIC SALES
U2 have sold more than 140 million albums since their 1980 debut, Boy. The band shifted more than nine million copies of their most recent album, How To Dismantle An Atomic Bomb.
Much of the band’s commercial success is due to their ownership of the copyright over all their songs, which they gained in 1984 when they signed a new contract with Island Records, now part of Universal Music. Any time a U2 song is played the band receives a hefty royalty income, far in excess of that enjoyed by most bands.
Speaking in 2006, the band’s manager Paul McGuinness said: “Like most people, our early deals were strongly stacked in favour of the record company and the publishing company. We were able to improve those deals over time because we were successful.”
When in 1985 Island Records was unable to pay all of U2's royalties on The Unforgettable Firealbum, the band waived the payments and instead received a 10 per cent stake in the record company, which netted the band about $30 million four years later.
"TAX EFFICIENCY"
The band moved their music publishing tax base from Ireland to The Netherlands in June 2006 following the Irish Government’s decision to the cap artists’ tax-free earnings at €250,000. Previously, Ireland had not taxed any earnings from artistic works – including visual art, fiction, and music – for artists resident in Ireland.
By switching to a Dutch company, the group pay about 5 per cent tax, less than half the rate they would have been charged at home.
Speaking on Newstalk radio later that year, The Edge defended the action, saying that the band earned 90 per cent of its income outside Ireland. “Our business is a very complex business. Of course we’re trying to be tax efficient. Who doesn’t want to be tax efficient?”
The band members still pay income tax in Ireland and their companies are taxed on any profits made.
TOURING
In March 2008, U2 signed a 12-year deal with US concert promoter Live Nation in what is described in the industry as a “360 degree deal” as it combines their merchandising and touring revenues, and administration of their website, www.U2.com.
It followed similar deals with between Live Nation and Madonna, rapper Jay-Z and Shakira. The windfall for the Dublin group was never revealed. Madonna’s 10-year deal is reported to be worth €75 million. As part of the deal, U2 received $25 million through a Live Nation share transaction.
Live Nation will begin to recoup its investment when the band starts touring this year following the release of No Line on the Horizon. Lucrative past tours by U2 explain why Live Nation would want to lock them into a contract for more than a decade. The Vertigotour, which followed the band's last album, made $389 million in gross ticket sales (about €275 million at the time), making it the second-most lucrative tour of all time. Only The Rolling Stones have scored higher.
COMPANIES
A network of 15 private companies and partnerships, mostly registered in Dublin, surrounds U2’s finances. Publishing abridged accounts (a perfectly normal practice), the band avoids disclosing details about cash flow in their businesses. The companies give little away about the true extent of the group’s wealth. The band’s main holding company, Not Us Limited, had retained losses of €3.6 million in 2007.
PROPERTY
The Dublin Docklands Development Authority forced U2 to sell its old riverfront studio on Hanover Quay in 2002 for an undisclosed price at the time but promised the band the top two floors of the 32-storey tower it is planning to build on an adjacent quay. This project has been postponed.
The five-star Clarence hotel in Dublin is the best known property associated with the band. Owned equally by Bono, The Edge, financier Derek Quinlan and developer Paddy McKillen, the Clarence has received planning permission for a €150 million overhaul that will see an elliptical, flying saucer-like roof built on top of the enlarged hotel.
More rooms are needed - the company behind the hotel, Brushfield Limited, lost €237,000 in 2007 on a turnover of €6 million. It made a profit of €12 million the previous year but only after the hotel’s investors wrote off €9 million in loans and made €3.5 million on asset sales.
OTHER INVESTMENTS
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U2 invested $2 million (€1.3 million) in a technology company called Burst.com in the 1990s. The firm provided the technical know-how to broadcast the 1997 PopMart concert online.
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Bono has also dabbled in private equity buying into the Californian company Elevation Partners which has taken stakes in two computer games companies.
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Bono has an undisclosed stake in the chain of Nude cafes founded by his older brother, Norman. The singer and his wife, Ali, founded a fashion label called Edun aimed at increasing trade and employment in developing countries.
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Bono has lent his name to - but does not have a commercial relationship with - the RED marketing venture whereby large companies donate 40 per cent of profits on specially-branded RED items to a fund. The money goes to African governments to buy medicines to fight HIV and Aids.
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Apple has produced a RED iPod and, outside of that campaign, the company has also sold a Special Edition U2 iPod, whose profits are not donated to charity. It has never been disclosed how much the band has made from the venture with Apple.
