The 360 Record Deal Decoded

jess April 16, 2013 0

(1.1) The Essentials

–          Physical records sales have been conclusively shrinking for a long time, and are becoming less and less central to the revenue of record labels, or at least those that are trying to adapt. (CNET 2008)

–          New trends in the industry include all-encompassing or ‘360’ deals with artists, increased focus on digital music sales, and the possible death of the superstar

(1.2) Introduction

The music industry has long run on a model that places major record labels in an integral role that comprises artist recruitment, music production and physical distribution of the finished product.  However, the industry has been changing for a quite a while, and the roles of the various key players, including labels has changed permanently.  By looking at several examples of change, we can get a better picture of where popular music is headed, and how we can keep up with it.

(1.3) The 360 Deal

360 deal is one in which an a label provides an artist advance money for things such as recording, marketing, touring and promotion, with the stipulation that they will also gain a percentage of the artists earning from all revenue streams they invest in.  The fact of the matter is that these deals came about primarily due to the fact that the traditional profit that a record company would make from simply selling CDs doesn’t exist anymore.  Artists have increasing come to rely on other forms of income to thrive, and the record companies now want to profit in the same way from these outside ventures.  The claim is that the labels have been instrumental in helping build the brands that the individual artists can then use as leverage in other business deals, yet they have not seen any of the profit from doing this, until now.

Kendall Minter on 360 Deals:

(1.4) The New Artist-Label Relationship

Traditionally labels have always invested money in artists, and created the brands that they now want to profit off of.  It used to be the case that the extra revenue streams were available, but only for the more ambitious and admittedly more popular artists.  However, with the widespread adoption of the 360 model, artists will more routinely try, or be forced to, endeavour in markets and forms of income that ultimately only serve the labels bottom line.  Before, an artist’s brand was something they could use as their own bargaining tool in determining their financial future, but the label has attempted to take control of this in an attempt to remain viable, and keep making money in music-related fields.  The end result will be that artists that are already established will be able to negotiate contracts that continue to allow them to profit off of additional revenue outside of music, while new artists with no real leverage, will end up being locked into deals that not only limit their musical future, but also their ability to remain autonomous from the label in other aspects of their business lives.

It is important to keep in mind that 360 deals may not be exclusively restrictive for artists.  It is true that most of the animosity towards this new type of deal comes from the fear that labels will merely put up the same money they always have, yet simply expect more money that was previously destined for the artist’s wallet.  This may be the case, but if it is, the record industry is just investing in another broken idea.  With no real incentive to branch out of music into other forms of business, artists will simply flounder and attempts at attaining additional revenue will be lackluster.  Record labels need to not only claim additional revenue for themselves, but also work closer with the artist in aspects of their business.  For example, rather than simply providing an advance to artists for touring, labels should attempt to set up their own tours in order to gain exposure for multiple artists on their roster.  Ventures like these will legitimize the undoubtedly large percentages they’ll be demanding of new artists, while also giving those up-and-comers more of a chance to become profitable with strong label backing.

 

(1.5) A Late Welcome For The Digital Age

 

When looking at the new attempts at making money the music industry is trying to succeed with, we are brought back to the missed opportunities that have put them in the position they are in today.  It is common knowledge that record labels didn’t really know how to deal with the internet when it first started crouching on their sales, but it’s important to understand that even know, the web is a major untapped resource.  In fact, iTunes now sells 25% of all music in the United States.  Along with other digital vendors such as Amazon and Wal-Mart’s online service, digital sales of music are on pace to surpass physical CD sales in the near future. (NPD Group 2009)

Artists and labels often complain about the epidemic of illegal downloading.  While major artists have more of a case, newer artists should not be focused on trying to get people to pay money for a product they have no connection with.  Instead, new artists should be focused on getting people to listen to as much of their music as possible, which is where the internet comes in handy.  Rather than getting people to pay for your first mix tape, they should be able to listen to an ample amount of your quality material for free, through sources you’ve sanctioned, with the opportunity to explore more of the endeavours you’re involved with (whether it be a updated video blog or a video of your outstanding live show).

 

(1.6) The Intertwined Fate of Major Labels and Major Artists

 

The major labels are directly responsible for the rise of the superstar music performer.  In the new industry, where record labels are becoming less and less concerned with creating material and brands, and more focused on gaining revenue from all aspects of an artists business life, we will begin to a see a decline in the overwhelmingly successful artists we know of today.  We are seeing an industry that is more focused on cutting expenses rather than finding ways to increase profit.  It is a direct result of labels shelling out the large budgets they have on promotion that they now have these brand name artists that they can profit off of.  By slashing budgets and still expecting to profit off of brands that need to be maintained, we are seeing an increased reliance of faulty business practises.  It may be difficult to imagine, but the end may be near for record labels as we know them.  While this will definitely change the scene, the results are obviously unpredictable and not necessarily for the better or worse.

 

(1.7) Redirecting Resources: The Aftermath of the Death of Records

 

Regardless of any ideals that may come into play, when envisioning an industry without the presence of powerhouse record labels, we shouldn’t mistake it with an absence of corporate interests.  The parent companies that own the labels will still be invested in making a profit from the billion dollar industry that music is, just in different ways.  The big gaps that need to be filled are promotion and distribution.  Labels have the money and staff that artists need in order to be even remotely popular.  It would be easy to think that the internet could fill the void and digital music labels will reign supreme, but people who advocate such a future fail to realize that the web is only an extension of the real world.  Tours still need to be set up, television appearances still need to be arranged, and physical distribution of merchandise gives an artist legitimacy that an iTunes download just can’t recreate.

(1.8) What Does It All Mean For The Artist?

Artists should try and negotiate a larger cut from outside revenue, while letting the label get a bigger bite out of record sales.  The reason being that the label will be more motivated to push a record they are making more money off of.  While they do this, the artists will be getting money off of radio spins, touring and all the other possible revenue streams.  On the label’s side, pushing an artist’s music still remains the most effective method of creating a brand that you can use to gain outside revenue.  Artists can also try to stretch musically to a certain degree.  When dabbling in other genres and forms of performance, talent can create a new fan base and remain relevant in modern discourse.  However, its important to remember that you’re never going to be the only artist on someone’s iPod, so experimentation should be a limited process.

(1.9) Closing Note and Further Reading

When evaluating the music industry’s performance over the past decade, the results are not positive from a strictly financial standpoint.  While music as an art form is something that can be granted the status of being somewhat permanent, it is imperative that we not make the same assumptions about the industry concerned with making money off of it.  As the past has shown, the music industry is prone to sudden change, and we must remain keen listeners to try and make sense of this new world.

 

 

 

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