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
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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.