The 360 Deal: Examining the modern record contract
By Brian Gasparek
It is common knowledge that the music industry has changed drastically over the past decade. Everyone knows the story. Thanks to internet downloading and illegal file sharing, record companies are seeing a dramatic decrease in revenue as a result of the decline to the physical CD market. Smaller-selling bands are being kicked to the curb by the major record labels because the marketing spent to develop these artists can’t be justified by the return. But, the business is changing and the record companies are embracing a new record deal that may stop the drought.
Labels are beginning to push a new kind of deal which they feel will allow them to potentially earn big-time revenue from their artists through a variety of different revenue streams while promising to invest more time, effort and money to elevate their newly signed artists.
This modern record deal is a multiple rights contract, or more commonly known in the industry as the "360 Deal." It is becoming increasingly prevalent in the business today, and is being incorporated by every major label.
In essence, when a record label signs an act to a 360 deal, the label and the artist become business partners and the label earns a percentage of the overall revenue generated by the artist. This includes the sale of physical and digital music, touring revenue, merchandise sales, publishing, licensing, mobile products, website subscriptions, corporate gigs, and any additional revenue streams that may arise. In return for this piece of the pie, the label promises to invest more time and energy into developing the artists by taking a larger roll in every aspect of the artist’s career. The label feels their extra investment in marketing and promotion will be the driving force in elevating the value of the artists’ revenue streams.
Paramore
The origin of the 360 deal dates back to the early 2000s when it was first used with UK pop artist Robbie Williams, an artist who can draw large crowds, but can't move many albums in the US. Over the past few years, larger power house acts such as Madonna and the Pussycat Dolls have also signed multi-rights deals. Ultimately however, the 360 deal caters to young, up and coming acts that are looking to get signed and make a name for themselves (acts such as Georgian rockers Cartel, and most famously, Franklin, Tennessee's Paramore.)
Typically, first impressions of the 360 deal lead to negative rebuttal. To many, the 360 deal just sounds like another way for sleazy, cash-starved label reps to take advantage of young and naïve artists in an attempt to keep revenue flowing, and as a way to plug the massive leak that illegal downloading has punctured in the industry ship. When taking a closer look at the 360 deal however, there are two sides that need to be recognized, and it may come as a shock to some that the positive may actually outweigh the negative.
The cynics like to say that the 360 deal screws young bands over worse than a Kiss groupie in the late 70's. When a record label signs a young act to one of these multiple rights deals, it can be like robbery because the label essentially owns the band in every way. It also means that the labels have more control of every little thing the band does creatively and commercially.
In the age of internet hype where any band can create an InDiscover.net account, a MySpace profile, or get their name dropped on a reputable blog, can't anyone build their own following without sacrificing a chunk of their earnings and decision making to a record company? It’s one thing for an established money maker like Madonna to fairly negotiate the record company’s share of non-record profits at a small percentage. But the average young band just beginning, and who may only be offered a multiple right deal, is defenseless to a label’s negotiating power, and may get robbed of a large percentage. The young band also may not get much say in where the label spends the extra money it has promised on non-record marketing, (such as a touring or merchandizing) despite sharing all of the profits with the act. In this light, the deal comes across as a very one-sided “partnership.”
On the flip side, when a young act signs a 360 deal with a record company, the label is no longer just trying to push album sales. They're trying to build a lucrative fan base. In the 360 deal, the label makes a major investment in the act and its future. Because of the major investment in the band, record companies are forced to work harder and market the act in every way possible. The label is obviously hungry to make as much revenue as they can, and by investing more time, effort, calculation and money, they hope to create a band that will be lucrative and prosper for many years to come (something a band may find difficult to do on internet hype alone). This also rewards a young band with a feeling of ease that they never would have had with an old-school record contract, one where the label would crack the whip to have their advance paid back almost immediately. In the 360 world, the label offers patience and understanding to a young band starting out, and will fork out more money to give them a strong push in the right direction in the hope of receiving a nice pay-off over the long term.