Should I Sign A 360 Deal?
- February 19, 2017
- Ayeni Law
- Comments Off on Should I Sign A 360 Deal?
A “360 deal”, also known as a multiple rights deal, is an agreement in which an artist agrees to give up a percentage of multiple streams of revenue to a record label, management company, touring company, or any other entertainment industry related company. For example, in a 360 record deal, an artist would give up anywhere between 10% – 50% of their publishing, touring, merchandise, and/or endorsement revenue to a record label. This is in addition to the percentages of their musical royalties that they have already given up. These 360 deals have become infamous due to the rise in use by record labels seeking to supplement lost revenue. This lost revenue has mainly come from a decrease in album sales. This decrease in album sales can be blamed on many things: the digital revolution, lack of artist development, lack of quality, or the oversaturation of artists and music; but whatever the reason, entertainment companies have sought to mitigate their investment risk by acquiring multiple slices of an artist’s revenue pie. Often these slices have been too much for artists to bear and have caused backlash. At other times, these slices have been a lucrative and strategic option for artists. There are many ways to look at a 360 deal. A 360 deal can often be a means of unjust enrichment by companies who seek to profit from artists. Often, however, 360 deals are equitable partnerships between two parties in the entertainment business.
The entertainment business is rapidly changing and the way participants profit is changing as well. As business models change; deals will have to change as well. 360 deals are the first sign of these changing deals, but just as there are many ways to slice a cake – there are also many ways to structure a 360 deal. By gaining an understanding of the 360 deal, in addition to knowing the benefits and disadvantages of these deals, artists and other entertainment professionals will become better equipped to negotiate if one is ever presented to them or their team.
Advantages of a 360 Deal
Advantages for Artists
As with most things, there are advantages and disadvantages to 360 deals. Artists and entertainment business professionals must understand the pros and cons in order to make an educated decision regarding a 360 deal.
- One advantage of a 360 deal for artists is that signing a 360 deal with a company may encourage that company to invest more money into the artist’s overall operation. For example; a label who knows that they are participating in multiple streams of artist revenue may be more incentivized to pump more money into that artist’s career than a label that is just participating in an artist’s musical intellectual properties. A label that is in a 360 relationship with an artist might not be so quick to shelf an artist when one album does not perform as expected simply because they know that there is a possibility of great profit from multiple areas if only that artist can break through.
- Another potential advantage of a 360 deal is that it may multiply an artist’s streams of revenue. In order for this advantage to become a reality instead of just a potential scenario; an artist would need to sign with a label, management company, or touring company that has the ability to help boost the artist’s ancillary operations. For example; an artist who signs a 360 deal with a touring company will want the touring company to be able to either help distribute their records, manufacture and help sell or advertise merchandise, or seek out endorsement opportunities for the artist; otherwise there is no real incentive for an artist to sign a 360 deal and give up percentages of streams of revenue that the company is not helping to increase.
- Lastly, another advantage of a 360 deal for an artist is that there is no standard, one size fits all 360 deal. Talented and shrewd artists with a solid fan base and a skillful lawyer will have room to negotiate and structure any proposed 360 deal in a way that suits the artist’s needs. At the end of the day, it comes down to what makes sense for the artist. Does it make sense to give up 40% of everything when you are barely making a profit now? Probably not. But for the artist who has a well-established, well run, and profitable operation – a 360 deal may make sense because at the end of the day, a 360 deal is simply a profit sharing deal; similar to a joint venture. An artist who needs capital to take their career to the next level and reach fans they cannot reach on their own (i.e. through touring), could profit in the long run by giving up a reasonable percentage of their ancillary rights. The type of artist who will usually benefit the most from a 360 deal is an artist that is generating, or has the real potential of generating, significant income across multiple revenue streams with limited and controlled expenses.
Advantages for Labels and Companies
The 360 deal has been a virtual lifesaver for drowning record labels and entertainment companies. The digital revolution has been talked about and publicized ad infinitum. The impact of the digital revolution was, arguably, felt the most by record labels. The impact of digital was a decrease in cd sales and cd prices. As a result, record labels are signing less artists, releasing less albums, and giving less big paydays. These 360 deals provide a way to soften the impact of decreased record sales for labels. The advantage of 360 deals for labels and other entertainment companies is that 360 deals enable them to participate in the profits of multiple streams of artist revenue. Where labels were only receiving revenue from an artist’s music royalties; they now have access to endorsement, touring, and merchandise monies in addition to music royalties. Entertainment business companies know that artists were never making much money from record sales, if any at all, but were instead making most of their money from these ancillary streams of revenue. These companies are now seeking to hedge their bets and 360 deals provide a beneficial way for them to do so.
Disadvantages of a 360 Deal
Disadvantages for Artists
The disadvantages of 360 deals for artists greatly depends on the artist themselves, the deal itself and the label and/or company with whom the artist signs the deal. For example; an artist whose operation is marginally profitable may lose money in the long run, rather than make money, on a deal where a label or company claims up to 50% of their ancillary rights and where that company does not do enough to increase that artist’s profits. A label or company which has no competency to help increase an artist’s revenue in the area in which they are demanding a percentage does a disservice to that artist by signing them to a 360 deal.
For this reason, it is up to the artist and the artist’s team to carve out a deal that makes sense for the artist. As an artist, manager, writer, or producer you will want to make sure than any 360 deal you sign has language that provides that the entertainment company will only take a percentage of revenue streams that they can actually assist in enlarging. For example; say an artist makes one million dollars a year solely through touring independently. A record label then comes along and offers them a 360 deal and wants to take a percentage of their touring revenue. That artist may want to include language in the contract which stipulates that the artist can keep the one million dollars per year that they were generating on their own without the label, but any profits made through tour revenues, merchandise, etc. is subject to a 30% cut in profits to be forked over to the record company because they “made” the artist more profitable. (Valletutti, 2009). This would enable the artist to benefit from the record label’s services in a manner that still honors the artist’s efforts and contributions.
Disadvantages for Labels and Companies
The only real disadvantage of 360 deals for labels and entertainment companies is the stigma that they possess. Record labels have never really had a favorable reputation in the public eye. Record labels are notorious for being greedy, manipulative, and exploitative and the idea of them taking more money out of an artist’s pockets has only worsened their reputation. Labels who offer 360 deals to artists and are not willing to equitably negotiate will turn off savvy artists who understand their potential and what they are bringing to the table. There will always be those who will sign anything you put in front of them, but artists who understand the business and believe in their potential may be unwilling to settle for a deal where a label, manager, or company is asking for a piece of everything while giving nothing in return.
It is important for you to understand that 360 deals are not monolithic. 360 deals are no different from any other type of contract in the sense that it is up to you to decide whether or not you want to sign it. In life you don’t get what you deserve, you get what you can negotiate. If a 360 deal is presented before you, make sure that you understand what it really says or consult with a lawyer to explain the terms to you. By valuing what you bring to the table, you will be able to decide what kind of a deal, 360 or otherwise, is fitting for you and your team. The music business is still in a state of transformation and there are many questions. I hope that this, long, explanation has helped you see that the answer of whether or not to sign a 360 deal is: it depends on your mindset, situation, and expectation. Be sure to get more advice on this matter, and feel free to contact us for a free consultation.
- Elijah Adefope