Is The 360 Deal Just A Money Grab By The Record Labels?

This blog is a follow-up piece to my introductory blog on the 360 Deal.

When it comes to the 360 deal’s monetary appeal to labels and music artists, a common phenomenon is driving opposing forces. With album revenues declining owing to falling sales and prices, both parties are increasingly looking to other revenue sources. Labels have been especially impacted because their revenue base has traditionally been heavily reliant on record sales. Their inability to effectively control consumer access to free digitized music certainly has only accentuated their problem. Most of the other sources, like merchandise and touring, have typically been the domain of the artist, so it is no surprise that many in the industry see the 360 deal as a money grab by labels.

The 360 deal inherently reduces the record’s customary pivotal role in the money picture. The bigger labels argue that it frees them from the imperative of the blockbuster hit, allowing them more financial room to develop the artist and his music, so that they can focus on building the fan base over time rather than just blitz-marketing the CD. Others in the industry, however, question whether they have the manpower and financial resources to follow through on such an agenda in this prolonged era of cutbacks and downsizing, or even the ability to do it right. Indeed, some major artists who took the bait have come to question their record company’s ability or desire to hold up their end of the deal, in some cases feeling compelled to take steps to hold the label to its commitments and even pushing to reacquire rights.

Allowing the record album to take the proverbial back seat does open the door for certain types of acts to get signed when they otherwise might not have been. The hard-touring jam band, for example, used to be an anathema to big labels because their popularity generally didn’t extend to getting much mainstream radio play or blockbuster hit singles. Yet, their loyal fans eat up the merchandise and pay good money to see them perform. A downside is that labels may be forced to reduce their rosters in order to devote the resources needed to help develop all these extra revenue streams. That could mean a furthering of the trend toward shorter term deals (and short leashes) for artists who aren’t signed to a 360 deal.

Additionally, an act without a solid fan base or sufficiently honed skills might be prematurely force-fed to the market through something like a tie-in with a product brand or a TV show. Instant fame (or infamy, in the case of a derided product or a flop TV show that’s widely panned) can play both ways–the act could just as easily fall flat on its face with its potential audience as break big and, in this business, there is rarely a second chance with the public. Then, lots of buzz in the blogosphere would not be a good thing.

Signing a record deal with other than a bona fide label brings with it an additional level of uncertainty. What does a film company know about tour management, a concert promoter about music publishing or a management company about running a successful label?

Label or no, the party may not be very savvy to and experienced in all such things. In fact, they may be intending to job out some or most activities to third parties. If that is the case, you might well ask why an artist wouldn’t be better off signing activity-specific agreements with such parties himself. Good question. That certainly is a real option unless he doesn’t have the wherewithal or inclination to want to seek out appropriate parties to fill all those roles. But, then again, that’s what a manager is for and if he doesn’t have one he’s probably not doing himself a service by considering anything like a 360 deal in the first place if he’s got no one by his side to hold their feet to the fire.

I say this because there is no shortage of opportunists out there looking to acquire revenue streams without expending much effort or even the intention or ability to fulfill promises made. It’s one thing for legitimate labels to try to make a case as to why they might need many of these sources of revenue; parties whose primary business is not label-related should be held to an even higher standard of proof.

In a future blog I’ll talk about some ways to improve your position in a 360-type deal with any party.

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