LEGAL BEAT: Should You Sign A 360 Deal?

From the December 2016 issue of DRUM!  |  By Kurt Dahl

Everybody knows that people aren’t buying

records like they used to. The bottom has fallen out

of the recording industry, but the music industry

is still thriving. For this reason, record label execs

came up with a novel idea: if we aren’t making

money on record sales, let’s start taking some of

the nonrecord revenue too!

This is known as a 360 deal, where a label

is entitled to a percentage of multiple revenue

streams from an artist (which can include touring,

merchandise, publishing, endorsements, and more).

Sometimes they are referred to as “multiple rights

deals,” “ancillary rights deals,” or my favorite,

“entertainment income agreements.”

The 360 deal isn’t new. Some early Motown artists

signed deals that were 360 in nature, and UK recording

star Robbie Williams signed a highly publicized 360

deal with EMI in 2002. But in the last few years, such

deals have become quite common. New artists signing

with a major label can now expect some sort of

ancillary rights participation as a matter of course.

The reason for their prevalence is the dramatic

decline in income from the sale of recorded music.

In 2006, record labels still earned $9.4 billion from

CD sales in the United States. This number dropped

to $1.5 billion in 2015, a decrease of 84 percent

in a decade. Digital downloads, once viewed as

the industry’s savior, have been falling for three

consecutive years with no sign of recovery.

On one hand, 360 deals make sense: most

record labels are not able to stay afloat on record

sales alone, so if you expect a label to invest a

significant amount of money in your career, that

money has to come from somewhere.

On the other hand, what does a record label

know about touring and publishing, and why should

you give them access to these revenues? Remember

that most artists end up paying 15–20 percent of

all revenues to a manager, 10 percent of touring

revenues to a booking agent, and another 5 percent

to a financial manager. If a large percentage is also

going to a label, that doesn’t leave much of the pie

for you as an artist.

So, are 360 deals a shameless money grab by

record companies who have failed to react properly

to the changing music industry, or are they the

new reality and path to success based on trust and

mutual gain? It really depends on the deal you sign.

For example, Lady Gaga was relatively

unknown before Interscope spent a significant

amount of money putting her on tour as an

opening act for the New Kids On The Block, paying

for marketing, hiring wardrobe and makeup, and

paying all her other expenses for over a year,

while using their clout to get her invited as a guest

on almost every important radio station in the

country. But in exchange, she gave up a substantial

part of her touring, merch, and publishing

revenues upon signing.

So it comes down to finding the label and the

deal that’s right for you. You need a label that

understands your brand and vision, and how to

break you to the next level. If they will participate

in touring, merch, and publishing, you need to ask

what experience and connections they have in

each area, and how they justify taking hard-earned

revenue that would otherwise be yours.

The more bargaining power you have, the

less you will need to give up in terms of ancillary

revenues. And yes, non-360 deals still exist. But

just like your favorite CD, they are becoming

harder and harder to find.