360 Deals vs. Anti-360 Deals

The fundamental differences between traditional 360 contracts and non-traditional anti-360 agreements are so obvious it’s like comparing apples to oranges.  From a contractual perspective the disparities are so interesting and potentially industry changing that it’s my duty to present the information to the general music public.   Instead of simply addressing the differences between deals from a basic viewpoint, the purpose of this article is to dissect the deals from a contractual perspective in order to showcase the practical application.

Non-traditional deals are fairly new to the industry so not many are in existence.  Luckily, the firm I’m with has seen its share (we’re the only to see deals from two key labels), so in order to present this unpublished information, this article will break down every component of a major label offer against components of a non-traditional offer.  The major label offer analyzed in this article is recent (2012).  The non-traditional deal(s) evaluated are also recent (2012), but due to the lack of non-traditional offers in existence, this article explores a combination of clauses spread across three key offers.  What the article will not address is the negative aspects of non-traditional deals and the positives aspects behind some major label offers (they do exist).

Sixteen contractual differences will be presented.  In all cases the specific language in non-traditional deals (NTD), or lack of language, will be referenced and; when necessary for comparison, the conflicting language in major label deals (MLD) will be examined.   If you don’t want to read the article in its entirety (I won’t be offended), scan over to find the top five differences, indicated with (*).  These five areas were addressed in my 2013 MIDEM lecture titled: “The Anti-360 Deal – Viable Business Alternatives For Artists.”  Feel free to watch the entire presentation here:

*1.       “Label X shall provide or arrange for, at its own costs and expense, the provisions of a recording facility, recording equipment and personnel, including but not limited to producers and engineers.  Such cost will not be recoupable.”

Differences:  MLD typical classifies recording expenses as a recoupable cost as NTD does not pass the expense along to the Artist.

*2.       “Artists retains all rights to the compositions and receives 100% of all record royalties.”

Differences:  MLD will start at 10%-12% record royalty to the Artist, NTD will hover around 50% – 100%.  Yes, 50% – 100%.

3.       “All recorded material shall be mutually agreed upon, but in the event of dispute, Artist’s opinion shall prevail.”

Differences:  MLD will always dictate the final decision and in many cases      rarely allow for “mutual” creative input.

4.       “If Artist wishes to record a composition not composed by an individual within the definition of ‘Artist’, Artist shall inform Label X in writing and Label X, in its reasonable discretion, approve the proposal.”

Differences:  MLD discourages any additional recordings by the Artist.

5.       “If the Artist has, prior to signing this Agreement, recorded original musical compositions (“Prerecorded Compositions”) that the Parties mutually agree to utilize as any of the at least twelve (12) required Recorded Compositions, the Parties shall work together to establish the licensing terms of such Prerecorded Compositions for the purpose of fulfilling Artist’s obligations under this Agreement.”

Differences:  MLD will first demand that all prerecorded material be given to the label.  If negotiated properly, the label may purchase the prerecorded material at a reduced rate but acquire the copyrights.  NTD will not demand the copyrights, rather ask for a proper license – meaning the Artist retains the intellectual property and the label can use the track(s) for a specific amount of time.

6.       “Label X may make ‘making of’ or ‘behind the scenes’ Documentary regarding the recording of the Recorded Composition.  Artist also agrees to provide at least sixty (60) minutes of interview(s) with Label X personnel or designees for potential use by Label X and such interview(s) shall also be within the definition of ‘Document.’

Differences:  As several MLD may generate video product, rarely, if ever, does the label agree to such terms in the initial contract.  With a NTD, they will promise to release such footage as opposed to it being optional at the labels    discretion.

*7.       “Artists shall be required to perform and/or make personal appearances in venues designated by Label X for at least three (3) times during the First Year of this Agreement.  The cost and expenses incurred by Artist in attending and providing Performances shall be the responsibility of Label X, including performances fees at the then going performance rate.”

Differences:  Not only will the label pay for and provide venues for certain performances, NTDs will also pay for the performances itself.  MLD will actually take a percentage of tour revenue, regardless of the expenses incurred by the Artists.

8.       “Label X will not object if Artist allows its fans to record or film Artist’s live performances of the Recorded Composition for free placement on the Internet.”

Differences:  MLD demand that Artist’s monitor, police, and sometimes litigate unauthorized material generated by fans.  NTD view fan footage as a marketing asset.

9.       “During the First Year, Label X may, in its discretion, arrange for, at its own costs and expense, the creation of an audiovisual work or works (individually referred to as a ‘Video’).  In creating the Video, Label X shall arrange for the provision of a script, filming locations and facilities, film equipment and personnel, including but not limited to producers, directors and engineers approved by Label X in its reasonable discretion.”

Differences:  NTD will incur all video cost, unlike MLD which pass music        expenses onto the Artist as recoupable expenses.

10.   “Label X may, in its sole discretion, arrange and pay for a promotional agency, organization or personnel to assist in the promotion of the Artist or any of the results of Artist’s activities under this Agreement or the exploitation of any of Label X’s rights under this Agreement.”

Differences:  Marketing/Promotion expenses are rarely recoupable in NTDs.

11.   “Label X may, in its sole discretion, arrange and pay for a booking agency for the Artist.”

Differences:  Notice NTD incur “booking agency” costs on behalf of Artist, therefore the Artist does not have to pay an agent or booking fee.  Essentially all touring revenue becomes the Artist’s.

12.   “Artist agrees that Label X may make arrangements for the rental or leasing company to purchase a tour vehicle at any time.”

Differences:  NTD embrace travel as a form of marketing and will likely incur all travel expenses (even tour buses).

13.  There is no “Grant of Rights” contract in a majority of NTD deals.  Meaning, Artists do not have to give away photos, videos, or albums.  If requested by the label, the label will only license the material and pay a licensing fee.

Differences:  MLD will demand photos, videos, etc. and rarely offer to purchase such material; therefore Artist never recoups their previous expenses.  Additionally the label will acquire the copyrights in their entirety as opposed to licensing.

14.   “During the term of the Agreement, Label X shall have the option to purchase from Artist, at a reasonable cost, pieces of memorabilia used by Artist upon mutual agreement between the Parties as to the pieces selected.”

Differences:  Not a clause typically seen in MLD’s but within NLD, labels offers to “purchases” the referenced material as opposed to demand it for free.

*15.   “In connection with the sale of any Merchandise under this Section, Label X shall pay to Artist a royalty equal to fifty percent (50%) of Label X’s net receipts derived therefrom, after deducting any and all costs and third party payments relating thereto and taxes, reasonable administrative fees and promotional fees (‘Merchandising Royalty’). 

Differences:  MLD pays Artists between 8% – 30% on Merchandise sales only after a laundry list of deductions.  Additionally, MLD does not guarantee merchandise distributors, while NTD will provide guaranteed sales outlets awithout deducting “distribution fees.”

*16.  Within NTD, the labels do not demand Fan Club rights and online revenue.  Additionally, the labels will incur the cost of website development and Fan Clubs.

Differences:  Within a MLD, these referenced elements would be demanded by the label, plus the cost for such development would be classified as recoupable expenses.

 

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