360 degree deals present major disadvantages for artists, but faced with a choice of the 360 versus no deal, the 360 may be worth accepting – but only if properly negotiated and only if the major pitfalls touched upon in this article are avoided.
First, let me give every artist and manager a quick primer on what a 360 degree deal is. Basically, the 360 is an exclusive recording contract between a record company and an artist in which, in addition to monies from sales of the artist’s recorded music, the label shares in other income streams such as touring and live performance, merchandise, endorsements, appearances in movies and TV, and if the artist also writes songs, publishing.
In fact, most 360 deals have catch-all phases giving the label a financial interest in everything else that the artist does in the entertainment business.
A traditional recording agreement only provides an income stream for the label from record sales. But similar to the traditional recording agreement, under the 360 deal the label acquires the copyrights in the artist’s recordings and options for multiple albums. The 360 deal also usually includes all the same deductions from record royalties as the traditional deal, including producer royalties and reductions for packaging, “net sales,” foreign sales, midprice and budget records, and even “new technology.” (originally applied to CD royalties and now to digital sales).
The traditional recording agreement had a lot of bad stuff in it for the artist. The 360 deal usually has all of that, and a lot more.
Origins & Reason D’Etra
The 360 deal is not new. The first reported one was English recording star Robbie Williams’ deal with EMI in 2002. But in the last few years 360 deals have become common place. New artists signing with a major label or their affiliates can expect it as a matter of course. The reason for the prevalence of the 360 deal is the dramatic decline in income from sales of recorded music.
Income from sales of pre-recorded music reached its peak in 1999 at approximately 14.5 billion dollars. By 2012 that amount had shrunk to only approximately $7 billion — a decline of more than 50% not accounting for inflation.
Read more on Steve Gordon’s blog!
The Future of the Music Business – Third Edition provides a legal and business road map for success in today’s music business by setting forth a comprehensive summary of the rules pertaining to the traditional music business, including music licensing, as well as the laws governing online distribution of music and video.