What Does Your 360 Deal Really Mean?
We at L4M have written quite a bit about 360 deals. The 360 deal has become the standard recording agreement. Gone are the days of multiple album deals. (Who records and releases full length albums these days anyway?) Artists today must be multi-faceted. Income has to be generated from a bunch of sources. The old system of paying back advances via record sales has gone the way of the DoDo bird and Eagle Eye Cherry.
The origin of the 360 stems from the steady decline in album sales over the last decade. Labels were funding artists with advances and would recoup based on record sales and royalties. All other income would go straight to the artist or her affiliate. While record sales have plummeted, concert ticket sales and merchandise sales have stayed fairly strong. The result was strong earnings for artists and pissed off labels who were not able to recoup their initial advances. Not surprisingly, the labels dropped a lot of artists and repositioned themselves (slowly) to adapt to the changing music economy. Savvy investors also came on board, sometimes replacing labels, and presented more mainstream, non-music industry, proposals that work more as a partnership rather than a label/artist venture.
While each 360 deal is different, you can pretty much bet that each will contain the following core elements: The label/investor who funds a band, either with an advance or an investment, will receive a percentage of income from:
1. Royalties (publishing/sometimes writer’s share)
2. Record Sales (all formats)
3. Tour Income
4. Merchandise Sales
5. Licensing Income
Some 360’s go even further and give the label/investor a share of personal appearance income, solo (if it is a band) performance income, dj income, book/tv/movie income etc. Basically income from anything that a band or an individual in a band may earn while under contract could theoretically be collected by a label/investor in a 360 deal. If there is any hope of a 360 deal working, you must negotiate certain removals or certain untouchable categories as well as negotiate the percentages of income shared.
As I have written before, a 360 deal is not the worst thing in the world if it is drafted and enforced in a fair manner. This may come as a surprise to my readers as I tend to be a bit slanted toward artists, but if you think about it, a 360 may just work for some bands. If you get a label or investor who is looking to share in all streams of revenue, then you must have an agreement that certain benchmarks or obligations of the label must be met. If the label plans on sharing in your tour income, they should also be spending money on tour support and promotion. If a label wants income from your personal appearances, the label should help secure such events. The principle behind the 360 is that without the investment made by the label/investor, the band would not succeed. Typical of many labels, they will sign a band to a 360, supply them with a small advance and then disappear. Then the band works its collective ass off to get gigs and sell gear and the label still collects its share. That just plain old sucks.
If however, you have a fair label that wants to share in a 360 deal, they will expect to help you earn more money by promoting all aspects of your career. Whether it is hiring a PR company, street teams, securing world wide distribution, etc., a label that works with and for the band has a much better claim that sharing in all of their artists income is fair.
So do your research, advocate for yourself and your band and make sure that if a label or an investor wants a piece of everything you do, they are helping you achieve everything you want to achieve. (FYI: 360 deals are beasts and should always be negotiated by an attorney)