The Anti 360 Deal

The 360 Deal isn’t a new concept.  Also referred to as multiple right deals, collateral entertainment activity agreements or collective agreements – these beasts have been taking advantage of musicians for decades but recently became adopted as “the norm” in artist label relations.   What’s fascinating about the unique music ecosystem of today is that one label’s stupidity equates to opportunity for someone else.  Now more than ever, opportunity lurks around every corner for emerging groups.  In today’s market if you don’t want to sign a 360, DON’T, because many emerging prospects exist who have created an “anti-360 Deal” formula.

To understand the anti-360 landscape you must first understand the totality of what a 360 deal entails.  The concept/conversation is simple –

Because we (the label) feel so strong about you (the group) we are willing to invest in your career.  In order to do that, we must assist with several aspects of your career to assure success.  This is a massive financial risk therefore we want to enter into a partnership with you.  In order for us to properly invest in the group we will issue a multiple rights deal.  These are standard. Due to the fact we will become so deeply involved assisting your career, we must receive a percentage of career based income.”  You see where this pitch  is going.

Career based income includes a percentage of fan club revenue, merch, publishing, tour revenue, endorsements, or if it so applies – acting fees, book deals, movie contracts, appearance dollars and so forth.  The worst part about the 360 situation is rarely does a label allow for an artist to deduct expenses prior to distributing the label’s cut.  For example, Artist X may gross $25,000 from a self-booked tour but accumulate $5,000 in gas expenses, $2,000 in hotel accommodations, $1,000 insurance cost, $3,000 in rental fees, $2,000 food expenses and $2,000 paid out to the booking agent, just to name a few.  Essentially Artist X actual nets $10,000 (not $25,000), but the label will take their Multi Rights cut from the $25,000.  Did the label do anything to deserve this?  Do I need to answer that question? The somewhat skewed logic on behalf of the label is they absolutely deserve a percentage.  Because the label invested in sound recordings and marketing to drive sales of the sound recordings, Artist X only acquired popularity due to the labels involvement.  Additionally, because music sales only represent a small percentage of Artist X’s total worth, the label feels a sense of entitlement to the derivative works spawned from the music.  Like magic, the 360 deal spreads. Is this the aspiration – sign with a label but fall victim to the 360 system?  Doubtful.  Step aside and let the anti-360 take over.

Majors labels have a civil war on their hands if they aspire to remain meaningful and profitable.  The battle isn’t with piracy, streaming or file sharing, it’s with the new players of today.  The Jimmy Iovine, Gary Gersh, Antonio Reed, and the Harve Pierre’s of the world must now go toe to toe with the Geoff Cottrill’s, Meredith Chinn’s, Cartoon Network’s Adult Swim television program, clothing brand Levis, restaurant bar HardRock or Mountain Dew.  These people and organization have silently, and affectively, changed the landscape of the music industry all in various ways; but the list continues to grow.  Bluntly speaking, I like the business model and chances of the later because they care more about their business.  Odd statement?  No.  The aforementioned examples care more about enhancing an image, a product or a lifestyle brand more so than selling 1 million records.  The profits generated via music sales either become a second level afterthought or totally irrelevant.  Certain brands are willing to take artists with them on this ride, using artist for marketing benefit or niche penetration but allowing the artist to profit as much as possible.  For example, would a label tell an artist – “we’ll pay for the production of your album but we want you to retain control over all the copyrights, trademarks, images and album sales.  Additionally, we’ll give you distribution for free and give you guaranteed performance/tours every year at your regular tour rate.  On top of that, we’ll pay for the tour, hotels, meals, etc.” Would this happen at the label level? No. Labels want everything (360), lifestyle labels want to provide artists everything (anit-360) and make them happy, which results in a strengthening of the brand.  Not clear? What makes better marketing sense, spending hundreds of thousands on a billboard ad or having thousands of happy customers engaging in positive conversation about your product? Where you see this happen as at the level of hybrid record labels (ie. – more concerned about enhancing artists, because the artists will enhance their brand).  The situation identified above is real (I read the contract), and I can assure that from a contractual standpoint, these anti-360 labels prove to be fantastic, no tricks, no gimmicks, just straight forward language.  If you add into the mix, many of these anti-360 deals offer visibility and opportunities (for free) which major labels could only generate after $10 million of investments – anti-360 labels are changing the industry landscape right in front of our eyes.  How can major labels, which rely heavily upon a business model structured around “taking” compete with a label whose business formula is rooted in “giving.”  They can’t, and I don’t see this changing.

Need additional information?  Check out my MIDEM post concerning 4 critical components when evaluating anti 360 deals.  Additionally, if you want to learn about attracting anti-360 offers, locating the appropriate non-traditional label and how to organize partnerships, attend my session at MIDEM 2013. 

Want more? Stay connected:

@frascognamusic or mff@frascognalaw.com

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