The 360 Degree Artist Deal

Just read this article from the New York Times about the “new model” for record labels, called 360 or multiple rights deals.

“…artists share (with labels) not just revenue from their album sales but concert, merchandise and other earnings in exchange for more comprehensive career support…..In return for that bigger share, labels might give artists more money up front and in many cases touring subsidies that otherwise would not be offered. More important, perhaps, artists might be allowed more time to develop the chops needed to build a long career…”

I know from experience that the 360 deal is very much in fashion in the music industry, and for obvious reasons.  A “developing” act would not be signed to a major or major-affiliated indie today without one of these kinds of deals in place because of the death-throes of the CD as the industry’s cash-cow.

There’s a very simple problem with these deals:-  there’s almost nothing of value in it for the artist.  Let’s look at the items mentioned above that the artist will receive in return for giving up percentages in their until-recently exclusive revenue streams:

• More money up front:  Great!  Get yourself further into debt with the label and deeper in recoupment and further from making a profit or royalties from your record – and since you’re now giving a chunk of change from your merch sales to the CEO, what are you going to live on?  And how is this an answer for already cash-strapped labels?

• Touring subsidies:  This is the same as more money up front.  Whereas a solid touring act could keep 100% or revenues before, now they’ll get more indebted to labels and have label execs pushing them around on everything from who mans the merch table to who designs the t-shirts.

• Artists might be allowed more time to develop:  Excuse me?  Isn’t this supposed to be the point of a label?  A label should have faith in the artist and not base their success on a poorly-received record, a truth sadly destroyed by the hit-driven behemoths the labels turned into in the 90s.  There’s a healthy skepticism among most managers and artists about whether this leopard can so easily change it’s spots - “You can speak to me that you’re going to work a record for 18 months. You’re going to work a record for 18 months when it’s selling 420 copies six months from now? Come on — really?” says one manager in the NYT article.

As always, the devil’s in the details.  The article gives us some numbers to work with

“…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…”

Although there are certain reasonable assertions here, we can’t forget that this is the music industry we’re dealing with. 

If you’ve followed this blog at all, or read some of the prominent music industry books available, you’ll know “creative accounting” is an institutionalized norm in this business.

Reducing the monies paid to artists by “deducting” costs of free-goods given as promotional items, breakage of product in transit (even on digital product!) and the infamous controlled composition clause are just some examples of clearly unfair business practices that are “the norm” at many labels.  What’s to stop similar practices from surfacing when calculating the labels’ cut of tour monies?  Or more stringent deductions reducing the new increased royalty on CD sales to make the increase negligible?  This may sound paranoid, but if we don’t learn from history, we’re doomed to repeat it.

The sad fact is that there’ll always be artists who feel that these deals offer them a better opportunity for success than a direct approach – and indeed some bands like Paramore (mentioned in the article) may not exist at all without these kinds of deals – but I can’t see how this will end well for them.

I’ve seen first hand the damage caused by the combination of a label with an exploitative deal and an artist hungry for validation.  The 360 deal is not the answer, and I’m hoping with Penny Distribution, and other Label 2.0 models, that there can be less of these kinds of casualties in the future.

Update: Bob Lefsetz has some quality vitriol about this article over at the Lefsetz Letter:

"It’s the artists’ move. Want to make a deal with your computer genius buddy down the hall? Someone who will go to every gig? Be my guest. Throw in with the establishment because they WERE the establishment… You’re fucking ignorant."

and

"The sooner young ‘uns reinvent this business, the better it will be for artists and fans."  Couldn't agree more, Bob.