Everyone is talking about the changes in the music industry. Most artists are aware that the possibility to download songs for free is hurting the industry and will hurt them as they become known.
Record labels, on the other hand, have found a way to help themselves. They have come up with a provision in contracts that will ensure them to continue to make profits. That this kind of provision will restrict the rights and earnings of the artist even further is often overlooked by those signing it.
360 Deals
Ever since the possibility arrived to acquire free music on the internet, sales on CD’s flopped and record labels were left to find another source of income. After some pondering and attempts to somehow restrict free music downloads (by imposing fees on illegal downloads, introducing legal sources such as itunes or asking for donations on downloaded songs) the labels came up with the so-called 360 deal.
The 360 deal is a new kind of provision in a contract that enables the record company to receive a major cut in all of the artist’s sources of income, including touring, merchandise and publishing.
A Record Deal
Taken from the New York Times article “The New Deal: Band as Brand” (Jeff Leeds, 2007), a typical contract (by example of this one from Atlantic records) might be based on the following:
“Atlantic’s document offers a conventional cash advance to sign the artist, who would receive a royalty for sales after expenses were recouped. With the release of the artist’s first album, however, the label has an option to pay an additional $200,000 in exchange for 30 percent of the net income from all touring, merchandise, endorsements and fan-club fees.
Atlantic would also have the right to approve the act’s tour schedule, and the salaries of certain tour and merchandise sales employees hired by the artist. But the label also offers the artist a 30 percent cut of the label’s album profits — if any — which represents an improvement from the typical industry royalty of 15 percent.”
There are several problems with this contract:
$200,000 in exchange for 30 percent of all touring, merchandise, etc. is a rather bleak option, since this contract would most likely go on for several years to come. In all likelihood in such contracts there would be a fine print that ensures that the artist pay this back to the company if not making it on a big scale. If the artist does become well-known, a few years down the road $200,000 would not compensate the 30 percent any longer and the artist would have to do with only 70% of his main source of income.
Further on Atlantic has a say in the tour schedule and merchandise, taking away from the artists creative control.
The 30 percent of the album profits that the artist is offered can be largely ignored, since albums hardly sell anymore and will sell even less in the future.
The Future for Music Artists
New artists will almost certainly be offered a 360 deal by the label interested in them. Sadly, deals in the music industry are almost never fair. The exception being that the artist is already established and can choose between lots of offers. But then these offers wouldn’t include 360 deals, as these are mostly used for artists who are new to the business. It’s almost as simple as a blogger on podcomplex.com puts it: "If you have enough on the radar to attract the attention of a major, then you really don’t need them."
(http://www.podcomplex.com/blog/why-360-degree-deals-wont-turn-the-music-industry-around/)
Lena Kolmel - I am currently a writer for the online platform Distributed Campus of the FU University in Berlin, Germany. The platform enables exchange ...
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