360 Deals – The Basics
This is the first part of a series of articles looking at 360 deals. Part 2 will look at the issues an artist should consider when offered a 360 deal. Part 3 provides a summary of the range of commercial terms that are available. Part 4 examines some of the alternatives.
Under a traditional recording agreement, the record label would pay you a royalty (or a share of profits) from sales of your records. With a 360 deal, the record label will additionally want to take a share of your income from all other sources within the entertainment industry. So, typically, this may include a share of all or part of your publishing, live work, merchandising and sponsorship.
What’s The Rationale?
The record labels claim that the traditional form of recording agreement is no longer financially viable. The labels say that their revenues are falling and, at the same time, it is becoming harder, and more expensive, to successfully promote and market artists. On top of this, there is a significant increase in the supply of music onto the market. This means that the ‘hit rate’ of the record labels developing a ‘successful’ artist is falling.
The labels go on to say that because of the above factors, receiving income from record sales alone will simply not pay the bills!
Do I Have To Accept A 360 deal?
It depends! If your record deal is from a US record label then you almost certainly will have to accept a 360 deal. 360 deals have now been used in the US market for several years, and the position of record companies has become entrenched. That doesn’t mean you can’t still negotiate a good deal with your US record label – just that you will have to accept that 360 rights will form part of the deal is some way, shape or form.
In the UK, my experience is that many record labels simply do not ask for 360 deals. Those record labels that do ask for these rights will readily give them up if pushed hard enough. There are some exceptions – with a relatively small number of labels insisting on 360 rights on a ‘deal or no-deal’ basis. Even then, most UK record labels will not insist that your songwriting income (or publishing rights) be part of the deal.
What Are These Deals Worth To The Labels?
The BPI recently reported that almost £76m was generated in 2011 from 360 deals with artists – an increase of 14% on the previous year. By comparison, the retail value of record sales (physical and digital) reduced by 0.5% between 2012 and 2013 from £1,048.4m to £1,043m. Income from 360 deals is therefore an attractive growth area for the labels.
There have been a number of high profile railings against 360 deals. Neil Warnock, CEO of The Agency recently described 360 deals as ‘immoral’, stating that “No company should own everything that an artist does.”.
Alan McGee, former Creation Records boss has also stated in his Guardian music blog that
It was trailblazers such as Peter Grant here in the UK and Shep Gordon in the States who fought for artists, winning them a percentage of the door at gigs. They pulled artists out of the slavery of 1970s deals. Didn’t we all applaud that? Wasn’t it great when the Beatles started their own label?
In a 360-degree deal, this is what the records company is doing: ripping off the door at the gig. Let’s call it like it is. Where is the morality in that? The cops would bust someone for stealing at the door. And everyone would applaud. So what’s going on here?
Because music is free and the traditional record industry model obsolete it doesn’t give the industry the right to move into the business of promoters and merchandisers.
Many new artists will not have the profile or negotiating position to refuse a 360 deal – particularly if it is the only contract on the table. There are alternatives though. These are identified in Part 4. In the meantime, if you are forced to negotiate a 360 deal, then head over to Part 2 to read about how to make a 360 deal work for you.
If you need help negotiating your 360 deal then please call me, Mark Roberts, on 0161 826 9309.