360 deal

While 360 deals have become a staple in the music industry, they remain elusive to the very artists who are signed to them.  Steve Gordon,  an entertainment attorney with more than two decades’ experience as Director of Business Affairs at Sony Music and representing clients such as MTV and Music Choice, has outlined the major dos and don’ts artists must know before entering these agreements.

With the income generated from the music recording industry dropping roughly from $14.5 billion dollars in 1999 to $7 billion in 2012, record labels — in an attempt to recoup some revenue — have adopted the 360 degree deal instead traditional recording contracts when signing new artists.  While it has similar components — such as ownership of artist recordings, multi-album options and standard royalty deductions — the 360 deal also allows labels to share in all their artists’ entertainment revenue streams, besides record sales.  These  streams include music publishing, merchandising, touring and endorsements; these once were the sole province for the creatives.

The pros and cons to the 360 deal?  For the label, it’s a way to better guarantee the return of its investment in developing artists’ careers.  Before your favorites became household names, the labels they signed with  fronted sums to pay for producers, promotions, music videos and more. The labels, with tough times prevailing in the industry, argue that they build celebrity so they should share in the potential millions of dollars an artist can earn from it.

For artists, the 360 deal can bring the financial backing and clout of a major record label that’s critical to their career success; it also can take its toll on their income. Gordon underscores that for artists, the 360 deal may be a necessary evil; it must be negotiated well so it isn’t lopsided in which parties it benefits. If artists have the clout, for example, they can ensure their particular deal carves out revenue streams where they already were profiting. They may be able to detail better their labels’ obligations in publishing. They can extract advances for each revenue stream and avoid cross collateralization and gross-profit deals.

Gordon, in his Future of the Music Business podcast, recently turned to the topic of the 360 deal in his talk with Elliot A Resnick, a New York entertainment lawyer: