Musicians who want to avoid or to get themselves out of a “360 Deal” (an agreement to share ancillary revenues with their labels) may find help in a novel legal challenge — asserting that their label violates California’s Talent Agencies Act. As  aspects of these type of deals in the industry also creep in to TV talent development, this challenge,  if successful, also may prove attractive in the lucrative lifestyle-personality area.The Problem: Unhappy artists

Adam Levine is the lead singer of Maroon 5, a top 40 band with staying power for a decade now.  Since 2011, he also has been starred as a coach on NBC’s prime time hit show “The Voice,” and, as such, has became a prime example of a musical talent who generates big money from multiple sources beyond his recordings, He’s the prototype of the multiplatform artist a smart label would want to tie up, legally, in an overall deal.

That’s unlikely, as he recently came out swinging against the labels’ goal to make these deals an industry standard. After winning the inaugural laurels last fall at the American Music Awards on ABC, he demurred from providing the assembled media — including me — the standard, bland sound bite backstage, launching, instead, into a lecture for young artists: “Don’t let (the labels) take your merchandise or touring,” he said emphatically. “It’s called a ‘360 deal’ and it’s bulls–t. Don’t ever sign one if you’re an up and coming band.”

Other talent leaders also have assailed 360 deals, saying they can’t “rock with that.

“Most of these artists already don’t own their masters,” adds super producer Swizz Beatz. “ So now you’re going to get into a 360 deal and not own your life? [shakes head].” Bob Lefsetz, a Southwestern ’79 alum and respected analyst,  warns labels that “sharing in all avenues is the wave of the future…but you’ve got to be fair.”

While many artists have opposed the deals on creative grounds, there also may be a new legal challenge to profit-sharing deals like these, in the claim that they violate California’s strict Talent Agencies Act.

Talent Law, industry practice collide

In reading that benefits talent, California law prohibits anyone other than a talent agency from “procuring … or attempting to procure employment or engagements for an artist.” [Cal. Lab. Code  §§ 1700.4(a); 1700.5]. When labels or networks develop or exploit ancillary revenue opportunities — like touring, endorsements or paid promotion that goes along with such artist activities — aren’t they crossing the line and, under California labor law, effectively “procuring” employment — and without a talent agent license.

Erin M. Jacobson, a music industry lawyer, identifies and analyzes the conflict between the labor law’s proscriptions and the music industry practice in “360 Deals and the California Talent Agencies Act, Are Record Labels Procuring Employment?”  Jacobson’s piece reads with authority on the conflict and offers practical advice for both sides. [Erin M. Jacobson, 360 Deals and the California Talent Agencies Act, Are Record Labels Procuring Employment?, Ent. & Sports Law., Fall 2011 at 9.]

She offers an intriguing strategy for challenging ancillary provisions of 360 Deals and both Michelle Branch (unhappy about touring with the Thermasilk shampoo line) and Dwight Yoakam have wielded the argument with some degree of success.

As Jacobson notes, consequences of violations of the Talent Agencies Act can be severe — voiding all or parts of a services agreement,  requiring reimbursement of all payments the violating party has received on account of the unlawful procurement and forfeiture of  expenses advanced in relation to the unlawful procurement. Labels, thus, could have significant potential exposure, and, if successful, this legal strategy could buttress an unhappy artist’s financial complaint.

While Jacobson limits her analysis to the music industry, where the 360 deal already is common, this blueprint equally could apply to the television industry, which lags in this approach.  As reality stars created on screen strike it rich off screen, networks and production companies now insist on a profit-share of new income from the talent they help make famous. The practice is  evolving.

Let’s call the new TV model “The Reality 360 Deal.” After Bravo, for example, so boosted the career of  Bethenny Frankel — from little known to a “Real Housewives of New York” celebrity who could sell off a line of margarita beverages for $8 million and $120 million — networks started raising eyebrows. Just how juicy was the margarita deal? Mainstream financial reporters from TIME to Forbes have  looked at the revenue, then raced to pen pieces.

Just this month, Forbes also named “Jersey Shore’s” DJ Pauly D one of the top 10 highest paid DJs in the world. Forbes pegged his off-air brand extensions beyond MTV at $11m. Just three years ago, he worked local nightclubs in Providence.

The theory is this: if major media outlets skyrocket unknowns into consumer brands, shouldn’t they share in the financial windfall? If the networks are akin to “Dr. Frankenstein,”  they want, too, to clutch the monsters’ wallet after it wanders out of the network lab after Season 1. And now,those who own or feed the TV channels are making reality wannabes sign up for these type of deals before shows ever get produced.

Networks and labels see touring, publishing, merchandise, online, sponsorships and any other live- or media-based touch-point as indistinguishable to the average fan consumer, earning the “360” moniker, especially as it means revenue.

 Prophylactic practice

What’s the easiest way for a network or label to rebuff a 360-deal challenge arising out of the talent act? Don’t violate the act. A potential offender, for example, must procure employment. Though undefined in the code, Jacobson distills this definition from case law of what’s covered as to nabbing gigs:  “Any attempt, regardless of its success of profit, by a talent seller to bring about, solicit, cause, further, or negotiate employment for or on behalf of an artist with a third-party talent buyer.” [Jacobson, supra  at 9.]

Second, even if a label (0r a TV network) were to procure employment, there are two statutory safe harbors: 1. For soliciting a recording contract — a task already accomplished when a label seeks a 360 deal with an artist 2. when a non-licensed agent works with a licensed talent agent throughout the entire negotiation or procurement process — a situation more likely to occur in both music and TV.

Still, because of the way the talent act is drafted and how it ill-defines these activities, not to mention that facts and circumstances vary case by case, and, well, there’s an open door for Adam Levine, Erin Jacobson and others to invoke this intriguing argument.

Credits: 360 Graphic by HypeBot.com; Axe Wedge by site 491/google sites. Photo illustration by Mikey Glazer. Thank you to Erin M. Jacobson (Southwestern ’09) for her time and consultation on her own article and this post.