The 411 on 360 deals.

For many aspiring artists, the plan is to get a major record label to notice them.  For many record labels, the plan is to make a profit.  The problem, however, is that the record labels are now seeing ever shrinking profit margins and some aspiring artists are seeing even less than before.  Even artists who are considered today’s veterans in the music industry are scrambling to find security and a handsome reward. 

As the music industry entered the new millennium it was introduced to an alternative to the traditional recording contract. This alternative is called a 360 Deal.  The company agrees to provide financial support for the artist, including direct advances as well as funds for marketing, promotion and touring.  In return, the artist agrees to give the company a percentage of all of their income, including sales from recorded music, merchandise, live performances and any other form of income.  If you noticed, I said the “company” and not the “record label”.  These types of deals allow other companies in the entertainment business, who do not consider themselves record labels, to capitalize and take the opportunity to engage in signing acts.  Something that was unheard of just a decade ago.

In 2008, LiveNation made news for their deal with hip-hop mogul Jay-Z.  LiveNation reportedly signed Jay-Z for a $150 million, which is one of the biggest music contracts ever awarded.   LiveNation signs artists as a record label, but predominantly takes the role of a promoter, rather than owner of music, which is their niche and what they do well.  

A 360 deal gives labels a chance to fatten their pockets once again, but as you see the examples of Jay-Z, Madonna, and U2, artists are finding success with these deals as well.  If the advances to artists continue to be generous, then artists definitely have the incentive to jump at these types of deals.  However, critics of these deals feel that the artists are giving up way too much in return for the initial payouts.  Other critics have even said that these types of deals eventually make the artists feel like they are losing control, especially of their creativity.  On the flip-side  companies like LiveNation, who offer these large deals, may have problems even generating any profits.  So who is really winning?  Are 360 deals really the solution?  Moreover, the major record labels will continue to struggle if they are not willing to match the money of similar 360 deals and artists will continue to flock towards companies like LiveNation.  So again I pose the question, “Who is really winning?” 

Please be sure to leave your feedback and comments below about who you believe is getting the real deal.  The company or the artists?

Check out this insightful article titled “Exploring the 360 Deal” for more information about 360 deals.