{"id":1360,"date":"2013-08-20T09:10:11","date_gmt":"2013-08-20T16:10:11","guid":{"rendered":"http:\/\/vakseen.com\/site\/?p=1360"},"modified":"2013-08-20T09:10:11","modified_gmt":"2013-08-20T16:10:11","slug":"how-to-avoid-getting-completely-screwed-by-a-360-deal","status":"publish","type":"post","link":"https:\/\/vakseen.com\/site\/how-to-avoid-getting-completely-screwed-by-a-360-deal\/","title":{"rendered":"How to Avoid Getting Completely Screwed by a 360 Deal"},"content":{"rendered":"

360 degree deals present\u00a0<\/span>major disadvantages<\/strong>\u00a0for artists, but faced with a choice of the 360 versus no deal, the\u00a0360 may be worth accepting – but\u00a0<\/span>only<\/strong>\u00a0if properly negotiated and\u00a0<\/span>only<\/strong>\u00a0if the major pitfalls\u00a0touched upon in this article are avoided.<\/span><\/p>\n

First, let me give every artist and manager a quick primer on what a 360 degree deal is. \u00a0Basically, the 360 is an exclusive recording contract between a record company and an artist in\u00a0which, in addition to monies from sales of the artist’s recorded music, the label shares in other\u00a0income streams such as touring and live performance, merchandise, endorsements, appearances\u00a0in movies and TV, and if the artist also writes songs, publishing.<\/p>\n

 <\/p>\n

In fact, most 360 deals have\u00a0catch-all phases giving the label a financial interest in everything else that the artist does in the\u00a0entertainment business.<\/h2>\n

 <\/p>\n

A traditional recording agreement only provides an income stream for\u00a0the label from record sales. \u00a0But similar to the traditional recording agreement, under the 360 deal\u00a0the label acquires the copyrights in the artist’s recordings and options for multiple albums. \u00a0The\u00a0360 deal also usually includes all the same deductions from record royalties as the traditional\u00a0deal, including producer royalties and reductions for packaging, “net sales,” foreign sales, midprice and budget records, and even “new technology.” (originally applied to CD royalties and\u00a0now to digital sales).<\/p>\n

 <\/p>\n

The traditional recording agreement had a lot of bad stuff in it for the artist.\u00a0The 360 deal usually has all of that, and a lot more.<\/h2>\n

 <\/p>\n

Origins & Reason D’Etra<\/h2>\n

 <\/p>\n

The 360 deal is not new. \u00a0The first reported one was English recording star Robbie Williams’ deal\u00a0with EMI in 2002. \u00a0But in the last few years 360 deals have become common place. \u00a0New artists\u00a0signing with a major label or their affiliates can expect it as a matter of course.\u00a0 The reason for\u00a0the prevalence of the 360 deal is the dramatic decline in income from sales of recorded music.<\/p>\n

Income from sales of pre-recorded music reached its peak in 1999 at approximately 14.5 billion\u00a0dollars. \u00a0By 2012 that amount had shrunk to only approximately $7 billion —\u00a0 a decline of more\u00a0than 50% not accounting for inflation.<\/p>\n

 <\/p>\n

This is the reason that labels began to pursue income from\u00a0sources that would have once been sacrosanct to the artist.<\/h2>\n

 <\/p>\n

Under the traditional paradigm, the label would pay the artist a small royalty which was even\u00a0smaller after all the deductions. \u00a0The artist could expect to receive no recording royalty at\u00a0all unless his album was a major commercial success.\u00a0\u00a0But he got to keep everything else:<\/strong>\u00a0publishing, merch, touring, endorsements, etc.<\/p>\n

However, these days artists often generate more\u00a0money from other activities than record sales. \u00a0For instance, Lady Gaga’s Monster Ball Tour\u00a0grossed over $227 million dollars, and 50 Cent’s deal with Vitamin Water turned golden when\u00a0he accepted shares in the company in exchange for authorizing the use of his professional name\u00a0in “Formula 50”.<\/p>\n

 <\/p>\n

It is reported that his shares were worth over $100 million after Coca-Cola purchased Vitamin Water’s parent, Glac\u00e9au, for $4.1 billion.<\/h2>\n

 <\/p>\n

These developments have spurred the labels to seek to participate in all the possible revenue\u00a0streams generated by an artist.\u00a0 In my own practice, I have seen small labels also known as\u00a0production companies get in on the act and insist that new artists sign 360 deals with them even\u00a0if they put little or no money into recording and make no promises in regard to marketing or\u00a0promotion. \u00a0These companies expect the artist to provide fully mastered recordings for little or\u00a0no money upfront, and they demand income from all sources of revenue.<\/p>\n

Bottom line: these are\u00a0horrible deals.<\/h2>\n

 <\/p>\n

The label’s argument<\/h2>\n

 <\/p>\n

Record labels argue (and majors who pay big advances have more credibility in making these\u00a0arguments) that they make significant investments in an artist’s career by, among other things,\u00a0putting up considerable sums for recording including paying advances to A-level producers,\u00a0getting the artist’s music on commercial radio, securing invitations for the artists to perform\u00a0on popular television shows, paying for one or more top quality videos for YouTube and other\u00a0outlets, and providing tour support before the artist is popular enough to demand significant\u00a0sums for live performances.<\/p>\n

For emerging artists, a major label deal may be the path to becoming\u00a0famous and rich. \u00a0For instance, Lady Gaga was a virtual unknown before Interscope spent a vast\u00a0sum putting her on tour as an opening act for the New Kids on the Block, paying for marketing\u00a0(particularly to the gay community), hiring wardrobe and makeup, and paying all her other\u00a0expenses for over a year, not to mention using their clout to get her invited as a guest on almost\u00a0every important radio station in the country.<\/p>\n

 <\/p>\n

The labels argue that 360 deals are fair because\u00a0monies generated from touring, merch, endorsements, and other streams would not exist at all\u00a0without their efforts.<\/h2>\n

 <\/p>\n

Many artists and their representatives would contend that it isn\u2019t their fault that the labels are\u00a0making less money from their records. \u00a0360 deals, they would maintain, are just a cynical money\u00a0grab by record companies who are facing dwindling income from recorded music because they\u00a0have failed to react appropriately to the changing industry. \u00a0Asking artists to foot the bill hardly\u00a0seems fair. \u00a0But the reality is that since all the major labels and affiliates usually demand 360\u00a0terms,\u00a0the artist may not have much choice<\/strong>. Given that reality, let\u2019s discuss how the artist’s\u00a0attorney can improve the deal.<\/p>\n

 <\/p>\n

How to improve the deal.<\/h2>\n

 <\/p>\n

The ability of the artist\u2019s attorney to improve a 360 depends on the artist’s leverage as much as\u00a0the lawyer’s knowledge and negotiating skills. For instance, if there is a bidding war among two\u00a0or more labels, the lawyer’s ability to improve the deal increases immensely.\u00a0 If the artist is\u00a0already making significant income from live shows, if not from record sales, this can also aid the\u00a0lawyer in negotiating better terms or at least carving out those areas where the artist is already\u00a0earning money from the 360 deal.<\/p>\n

 <\/p>\n

Carve-outs<\/h2>\n

 <\/p>\n

If an artist is already earning revenues from a particular source, the lawyer should try to carve\u00a0that stream out of the 360 deal. For instance, certain EDM artists are earning tens to hundreds\u00a0of thousands of dollars playing large venues and festivals. If a label wants this kind of artist, it\u00a0should be prepared to forego tapping into live performance income as they had\u00a0nothing to do\u00a0with creating it<\/strong>.<\/p>\n

 <\/p>\n

Get the label to work for the money or at least pay advances for each stream.<\/h2>\n

 <\/p>\n

In an interview about 360 deals with entertainment attorney Elliot Resnick (on Youtube,\u00a0here<\/a>) we referred to the splits in a form agreement that he supplied. The contract\u00a0provided that the label\u2019s take for various streams was as follows:<\/p>\n

\u2022 50% Merch<\/p>\n

\u2022 25% Touring and live performance<\/p>\n

\u2022 25% of “digital products” such as ringtones and sales from the artist\u2019s fan site<\/p>\n

\u2022 25% Publishing<\/p>\n

\u2022 25% of Endorsements<\/p>\n

\u2022 25% of any other income from the entertainment business including appearances on TV\u00a0and movies, theatre, book publishing, etc.<\/p>\n

 <\/p>\n

These above percentages are typical but the actual amounts vary from deal to deal. Whatever the\u00a0splits are, the artist’s attorney should try to get the label to commit to\u00a0doing something to deserve\u00a0a share of each income stream<\/strong>. For instance, in return for its 25% the label should commit to\u00a0manufacture merch and sell it at retail, via the Internet and supply the artist with merch for sales\u00a0on tour.<\/p>\n

 <\/p>\n

Points about publishing.<\/h2>\n

 <\/p>\n

In regard to publishing, a 360 deal may include a “co-publishing” agreement in which\u00a0the label has exclusive control of any songs that the artist writes during the term, and the label\u00a0retains 25% of any monies generated from the songs. \u00a0Or, the label may demand 100% of the “publisher’s share” or 50% of all income generated by the artist\u2019s songs. \u00a0In exchange for either\u00a0of these arrangements, which are major gives, the label should have a\u00a0dedicated staff<\/strong>\u00a0committed\u00a0to collecting monies generated by the artists songs, and that can\u00a0pitch the songs<\/strong>\u00a0to other artists\u00a0for covers and music supervisors for placements in movies, television, video games, etc.<\/p>\n

 <\/p>\n

Aggressively negotiating advances<\/h2>\n

 <\/p>\n

If the label is not equipped to provide support in respect to any income stream, or even if it is, the\u00a0lawyer should try to\u00a0exact advances for each stream<\/strong>. The ideal would be if the lawyer can also\u00a0negotiate that as soon as the label recoups each advance for each income stream the label’s right\u00a0to commission that income stream terminates. \u00a0For instance, if the label advances $25,000 against\u00a0a 25% commission for branding and endorsements and the artist gets an endorsement deal for\u00a0$100,000, the artist would pay $25,000 to the label (25% of $100,000), but thereafter the label\u00a0would not be entitled to any more money from that income stream.<\/p>\n

 <\/p>\n

Avoid Cross-collateralization<\/h2>\n

 <\/p>\n

Just as important as negotiating for the label’s commitment to earn its keep for each stream\u00a0and to pay advances for each stream, the lawyer should make sure that the label\u00a0cannot cross-collateralize each stream<\/strong>. \u00a0This means that the label should not be able to take money from one\u00a0stream to pay for unrecouped balances for another. \u00a0For instance, if the label pays $100,000 for\u00a0recording costs and the artist’s royalty after deductions is 50 cents for an album that sells at\u00a0$12.00, the artist must sell 200,000 albums to break even.<\/p>\n

Now, suppose the artist only sells 100,000\u00a0(still a considerable feat in today\u2019s market), and his income from touring is $50,000, if the\u00a0contract allows the label to cross collateralize the various streams, the $50,000 will be applied to\u00a0the “red balance” in his recording royalty account. \u00a0This means the artist would receive nothing\u00a0from touring \u2014\u00a0the monies would be applied to the unrecouped recording costs.<\/strong><\/p>\n

 <\/p>\n

Net versus Gross<\/h2>\n

 <\/p>\n

If the artist must shell out a percentage of his touring or merch or other income to the labels, her\u00a0lawyer has to insure that the percentage is based on\u00a0net, not gross<\/strong>. \u00a0For instance, if a tour earns\u00a0the artist $25,000 but her expenses added up to $20,000 (for hotels, transportation, booking\u00a0agent fees, sound and lighting, etc.), the label should only commission the $5,000 in profits not\u00a0the entire $25,000. \u00a0Indeed, if the label’s commission was 25% and that was based on gross, the\u00a0amount due to the label would actuallyexceed the artist’s profit<\/strong>.<\/p>\n

 <\/p>\n

In Summary<\/h2>\n

 <\/p>\n

As I mentioned earlier, 360 deals\u00a0generally suck<\/strong>\u00a0for artists. \u00a0But it may be worth accepting – but only if properly negotiated and only if the major pitfalls\u00a0touched on in this article are avoided.\u00a0 Obviously the artist should never enter into any exclusive\u00a0recording contract, let alone a 360 deal, without the assistance of capable counsel.<\/p>\n

Via Digital Music News<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

360 degree deals present\u00a0major disadvantages\u00a0for artists, but faced with a choice of the 360 versus no deal, the\u00a0360 may be worth accepting – but\u00a0only\u00a0if properly negotiated and\u00a0only\u00a0if the major pitfalls\u00a0touched upon in this article are avoided. First, let me give every artist and manager a quick primer on what a 360 degree deal is. \u00a0Basically, the 360 is an exclusive recording contract between a record company and an artist in\u00a0which, […]<\/p>\n","protected":false},"author":2,"featured_media":1361,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"ngg_post_thumbnail":0,"footnotes":""},"categories":[6],"tags":[223],"class_list":["post-1360","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-industry-tips","tag-marketing-tips"],"_links":{"self":[{"href":"https:\/\/vakseen.com\/site\/wp-json\/wp\/v2\/posts\/1360","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vakseen.com\/site\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vakseen.com\/site\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vakseen.com\/site\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/vakseen.com\/site\/wp-json\/wp\/v2\/comments?post=1360"}],"version-history":[{"count":1,"href":"https:\/\/vakseen.com\/site\/wp-json\/wp\/v2\/posts\/1360\/revisions"}],"predecessor-version":[{"id":1362,"href":"https:\/\/vakseen.com\/site\/wp-json\/wp\/v2\/posts\/1360\/revisions\/1362"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vakseen.com\/site\/wp-json\/wp\/v2\/media\/1361"}],"wp:attachment":[{"href":"https:\/\/vakseen.com\/site\/wp-json\/wp\/v2\/media?parent=1360"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vakseen.com\/site\/wp-json\/wp\/v2\/categories?post=1360"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vakseen.com\/site\/wp-json\/wp\/v2\/tags?post=1360"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}