Tagged: 360 Deals
What is a One Stop Shop in the Music Business?
Lately we’ve noticed a growing trend in the independent music scene. Specifically in the businesses that work with independent musicians. Many companies and individuals who used to have a job or a business that covered one specific element of the music scene are now presenting themselves as the “one stop shop” for musicians. As you know, we like to dissect things around here, especially when catch phrases or “industry” speak is thrown around as if it has one universal meaning.
To me, a one stop shop conjures up images of a major highway gas station where you can get gas for your car, a slim jim, bait for your fishing trip, a slice of pie and possibly take a shower (I would not recommend the last one). Basically a one stop shop should give a consumer an option to purchase all that he or she needs in one location. Transfer the phrase to the music industry and it is not quite as clear what a one stop shop is or should be.
We know that in the past a label was supposed to be a one stop shop, with a massive amount of employees handling everything from A&R to press to accounting for its signed musicians. With the decline of the label system the number of employees at labels feel as dramatically as the number of records sold at Tower Records. Thus, the services once offered by a label were no longer present. The displaced label personnel did not simply bury their heads in the sand. Rather, they started showing up as specialty boutiques offering the specific services they once provided to labels direct to the musicians or independent labels. Because the music industry is still based on who you knew, these boutiques served a pretty powerful purpose for quite some time. For example a boutique full of ex-Warner Brothers PR experts could utilize all of the same contacts it once had at a label directly to musicians for a discounted price (lower overhead).
Still, as the economy worsened, the boutiques had a difficult road ahead of them. Boutique employees were cast off too. So now you have a bunch of skilled and connected music industry folks milling about and looking for a new way of doing what they used to get paid to do by the labels and the speciality boutiques. A PR executive befriends a merchandising expert who then befriends a music web designer and so on and so on. The displaced experts then form a “one stop shop” for musicians. Essentially becoming a lean-mean label which, ideally, avoids the red-tape and bureaucracy of the traditional label system.
However, each one of these self-proclaimed one stop shops must be examined a bit more closely prior to agreeing to work with them. Here are some questions you should ask: Do you have distribution (usually digital is enough, but physical, think vinyl, is still important)? Do you have press contacts and the ability to do an actual push to garner the attention you need (in the markets that make sense) for the release of your music? Do they have connections with booking agents? Do they have connections to a legal team that understands music and corporate law? Have they managed a band before or do they have a management team in place? What type of connections do they have to other musicians, producers and studios?
All of these questions are important when choosing to work with any business out there purporting to be a one stop shop. Oh yes, there is also that little issue of money. All the connections in the world don’t matter if you don’t have the money to fund the project. Typically, a one stop shop is not going to operate with the budgets of the labels or the indie boutiques. The shop will be more of a facilitator, a connector of the dots, rather than a bank roll. As a musician, you will want to make sure you have your music production ready to roll (whether it’s an EP or an album) before agreeing to work with a one stop shop. Otherwise, you may be stuck at their shop without the cash to buy the goods.
The model for these shops is similar to the license arrangements indie labels used to enter into (some still do) back in the day. You bring your finished product to the shop, they market it and sell it to the masses. But the shops go one step farther by attempting to manage your band, book you shows, protect you legally and sometimes keep your corporate books and records. That is why it is so important to know what you are getting into before signing anything.
The one stop shop idea can work. Due your diligence, ask the right questions, demand everything in writing (and have it reviewed in writing) and continue to do your own job as a musician: make great music.
THE L4M MODEL GETS SOME LOVE: Band plus budget (The Deal Magazine)
Band plus budget (The Deal Magazine). CLICK LINK FOR STORY
It is good to know that certain labels and certain industry experts understand the new model for musicians. “The 360 deal” does not have to have a negative connotation. Finding the right partners and the right team for your project has been our focus from the jump.
Special thanks to Townie Records , Hey Champ and the author of the article Matt Miller from The Deal.com.
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)
Hot Topics in Music and Film
The hangover from SXSW has subsided and deals are actually getting done in the world of both music and film. There are several hot topics which are been written, blogged, tweeted and plain old talked about in the music and film industry. Over the next several entries we will try to explore several of those topics.
A new contributor to L4M, Mr. Eric Malnar will update everyone on the public performance royalties debate that is garnering attention from the House, Senate, White House and musicians all over the world. We will also explore what is a standard 360 deal these days and continue to share our experience of working with musicians (both label musicians and independents) in the ever changing industry.
On the film front; just when I thought it was safe to celebrate the passage of Section 181…President Obama seems to have lost the legislation somewhere between health care reform and his next pack of Camels. We are still waiting for his signature on H.R. 4213 and eager film makers are anticipating the one year extension that should have come on January 1, 2010. In other film news, state tax incentives are ever changing so we will try to keep you up to date on the best places to film. Plus, we will walk the newbie film maker through the process of raising funds for an independent movie by explaining all of the paper work (stupid lawyers) that is necessary before you can even accept a check from your mom.
SHAMELESS SELF PROMOTION OF THE WEEK:
One thing I take a lot of pride in is introducing talented people to other talented people. As a lawyer for creative people, I am able to make introductions to some gifted artists which then results in some pretty cool stuff. I always tell my clients to view us as a resource; whether it is introducing managers to artists, labels to artists, licensing companies to advertisers or musicians to other musicians, our clients end up with the same contacts and connections as we have.
Possibly the best example is this song. Our clients, Database, French Horn Rebellion and Hey Champ collaborated to bring you a Remix of Beaches and Friends. The song is doing great on a worldwide level. Enjoy:
A New Type of 360 Deal or Old School Meets New School.
Recently I was asked to write an article about anything currently happening in the new music industry. Not really an exciting proposition for most, but for me, my heart went a flutter. Should I write about fair use, the death of the CD (again), the exploitation of copyrights (again) or current trends in the indie scene? I decided to write about something that is current and personal to me and my clients. A new model (which is not so new) for a band/label contract.
Using a combination of the current 360 deals and traditional investments into start-up companies, a fair, equitable and potentially lucrative partnership can be formed. Realizing that the industry is not what it used to be and that the old model is “old” for a reason, there is a potential to do something new that will benefit the artist as much as the investor or label.
The playing field has leveled to a certain degree. If a band has done much of the hard work to start out and has a competent management team and lawyer on its side, the need for the old school label is not as necessary as it once was. Using the same model that many start-up companies use, a band can attract investors and forge a partnership that will allow the band to reach new heights and the investor to realize attractive financial returns.
Please check out my article by clicking here. Also, please support my friends at the new NYU School of Law IP and Entertainment Ledger by adding their publication to your bookmarks or favorites.
SHAMELESS SELF PROMOTION(S) OF THE WEEK
Check out my favorite jewelry designer at her exclusive Steven Alan Trunk Show by clicking here.
After you are done shopping for jewels, check out the latest offerings from one of Chicago’s top indie bands: Empires by checking out their latest plans by clicking here: Bang PR
You Spin Me Right Round: Like a 360 Record Deal
There is a new standard in record deals. For better or worse, the 360 deal is here to stay. Even though the music industry is as slow as your grandma’s driving, it cannot seem to get away from itself. The slow reacting, one time behemoths of the music industry (the major labels) have only recently come out and publicly stated that its past revenue model is dead.
The way the labels traditionally have made money is to sign a band up for several years and/or several albums. The labels would give the band an advance that would go toward recording costs or possibly tour support but oftentimes toward cars and women. The band, now starting in the hole of owing the label money, would wait until it sells enough records for the label to recoup its advance (and other miscellaneous costs). If the band was successful enough to bring their account back to even, the label would fork over between 10% and 15% of the royalties earned through the sale of the band’s albums.
The problem with this model (from the label’s perspective) is simply that it no longer works. Record sales have plummeted, pirated and web based sharing of music has become the norm. Oh, and the economy doesn’t help either. Labels can no longer depend solely on physical or even digital record sales to turn a profit. During the month of February, the top selling album, Taylor Swift’s Fearless, sold a pitiful 62,000 units. Record sales for the months of January and February of 2009 are down over 28% from just two years ago. These numbers coupled with the ease of distributing music to the masses without the help of a label’s network, has almost run the majors clear out of business.
After years of decline, the labels (albeit unnamed sources) have finally admitted that their business model is not working. An anonymous source from a major label recently admitted that the way majors do business will be extinct by 2013 if not earlier. Check out the full article here. The exec states something that most of us representing musicians have known for a long time, a label cannot survive without forming a partnership with the artist. It has to share in the ups and downs of a band’s career and provide services throughout the entire relationship, not just when the band is hot, to truly do its job. That is why the 360 record deal is the new norm.
I have written about the 360 deal in the past. Click here for the past 360 post. It was a safe prediction that these modified record deals were here to stay. A 360 deal enables a label to share in the revenue a band or artist generates from all sources, not just from the sale of records. That means when Madonna or Jay-Z (both of whom have 360 deals with Live Nation) sell out an arena or sell a new fragrance at Macy’s, some of that money goes to the label. The label shares in all 360 degrees of income of a musician’s career.
While this may not seem fair or just, label execs who push these deals argue that they should share in all income a recording artist makes due to the fact that the label has made the initial investment into the career of that artist. So basically, without the label, the musician would still be selling out Joe’s on Weed Street rather than Madison Square Garden. The label feels that it should earn along with its artist. They argue that their incentive to support and market their artist in all aspects of his career, not just the sale of cd’s, is built into a 360 deal. The label will help an artist land a film deal or write a book or get into acting because they have a cash incentive to do so.
As I have written before, the label’s reasoning behind the 360’s makes sense on the surface. However, just like with everything else in the music business, be cautious. 360 deals come in all shapes and sizes. They still may take complete ownership of all of a bands copyrights without reasonably compensating the artist. Some egregious agreements will have ridiculously long terms allowing the label to continuously benefit from a small investment it made 10 years ago.
I have been working with some forward thinking bands and managers to come up with a justifiable music model that takes the principles of a 360 deal and shapes them into a true business partnership. An investor will form a limited liability company (LLC) and share ownership in the LLC with the artist. The business, that is the artist’s career, will be governed by an operating agreement; just like a normal business (revolutionary, I know). This will allow for flexibility on both sides. An artist could eventually buy out the investor or the LLC could invest in new talent and form a subsidiary. A lot of the things are possible with the right team and the proper paperwork.
If you have questions about 360’s or other business models for musicians, drop me a line. Even better, come to my showcase:
You Are What You Own
Now more than ever being independent in the music business is important. Its importance may be your band’s goal or, conversely, your independence is thrust unwillingly thrust upon you. The key is making that independence work for you in every possible way.
The typical music recording agreements today include a multiple album commitment from the artist with an option for additional albums. Unless you have clout, the form agreements coming out of New York, Memphis and Los Angeles will give ownership of all of your master recordings (your songs) to the label. Ownership transfers even in most 360 deals (the topic of my next post). The real whopper is that even though your band complies with the agreement and the label owns your music, the normal recording agreement will not include what is known as a release commitment.
A release commitment is something that every band should try to get from a label. It gives a date certain for the release of the music that you have turned in for your album. There are horror stories of artists that have turned in music to a label only to see the label sit on the album for months or even years. I believe the rapper Saigon waited over 5 years to release his debut album. Not much of a buzz left after waiting that long. Having language in your agreement which puts the burden on the label to actually release your language or forfeit their rights under the recording agreement is the best way to make sure this doesn’t happen to your band.
Just like every other industry in the U.S. right now, the music business is running on fumes. The Recession is hurting record sales (physical and digital), merchandise and concert tickets. So even if you have signed with a label, there is no guarantee that your label will (a) be able to fulfill its obligations under the agreement or (b) exist next month. What happens if you sign with a label and that label’s distribution company goes belly up? Unless you asked for a release and/or distribution commitment in your agreement, you may be stuck waiting for your label to work out a new deal with another distributor. Either way your music is delayed in getting out (if it does) or you are back to square one: a great album with no means to get a physical copy out to your fans.
So should you just give up? Like our friends from Galaxy Quest: Never Give up! Never Surrender
Do not despair. Remember the title of this post. Don’t rely on anyone else. Especially in these tough economic times, bands have to get creative to make a buck. If you are a band who has a buzz, can pack a 300 person venue, sells out of its merch at its show, etc., traditionally you would look to a label to swoop in and sign, wine and dine you. Like I said, those days are over and even if they, do you really want to sign a recording agreement?
It’s time to get creative. Do everything you can yourself first. Register your copyrights under your own band name. Register your band’s name and logo as a trademark yourself. Use every single contact you can to get your music to the next level . Look to sponsors (RED BULL LOVES TO MUSIC), like minded third party companies (Apple), concert promoters, party planners, management companies, anyone who has the ability to do what you cannot do yourself. Go strictly digital. Contact digital distribution companies (read below) to get your music to websites in other countries. Do what it takes to get your music out and build your band’s brand.
Its not an easy road. You definitely have to treat your band like a business. But just like other small business owners you will directly benefit from your hard work because you, not a label, own your band. You will be able to negotiate your own deals, collect 100% of the royalties, spend money when you think its appropriate and distribute income when you want to rather than waiting for someone else to pay you.
So whether you choose to go the independent route or you went with a label that dropped you or dropped off the face of the earth, you are in a pretty good position. Not easy, but definitely doable.
SHAMELESS SELF-PROMOTION OF THE WEEK
Check out Digital Distribution Company Seed-Ny:
Seed is an awesome digital distribution company that works with labels and artists to get their music out to the public via websites and digital outlets all over the world. They work to license your music to places you definitely have heard of and others you didn’t even knew existed. Check them out: www.seed-ny.com and www.myspace.com/seedny. Tell them lawyer4musician sent you (but only if your music is good ;))
CMJ, Record Deals & A Label’s Checking Account (aka $0.00)
I am heading east next week to take part in the madness that is the CMJ Music Marathon. New York’s music scene is always great, but during this five day stretch there is no better place in the world to see and hear some of today’s best independent music. For us on the business side of the music scene it also a great opportunity to network, schmooze and drop names without trying to hurt one’s toes.
Last year at this time the word was that the major labels were in serious trouble. That obviously played out to be accurate. While the labels are definitely hurting, I have noticed that they are no longer the slow moving mass that they once were. Sure there is still the old guard pulling the stings of the A&R and creative departments at the majors, but I think it has finally registered that making money off of physical record sales is just not going to buy the CEO his 2nd jet anytime soon.
360 deals are being pushed hard by some labels and industry giants (eg. Madonna and Jay-z with Live Nation). Companies are taking a piece of everything an artist touches from album sales to touring to merchandise. In return the artist is promised national and international marketing and promotion by a label who still has the connections and manpower to launch such a campaign. I am still not sure if this model can be mutually beneficial. Judging by the insistence of some labels to only use 360 deals, I have a feeling they tend to skew in favor of the labels a bit more than the artist. Just a hunch though.
If a band is looking for a more traditional deal, they are still available. A one and five deal (one album with the option for five more) is still commonplace with many of the lables who are still around. These are typically too long of a time period and too onerous on the artist (transfer of ownership your music is the norm), but have been around for so long that they have become the “industry standard”. In the past a label would convince an artist that a long term recording agreement was the way to go and would sweeten the deal with a phat or fat advance. Not so much these days.
Bottom line, an indpendent band that kills it at CMJ next week will probably get an offer from one of the many lurking label execs present at its showcase. Whichever type of deal is offered, rest assured there will be a teeny tiny advance attached. Labels do not have any money. Its gone. The days of six figure advances and seven figure recording budgets are history. The labels’ belt has gotten tighter just like every industry in America. On top of that, we are in the final quarter of the year so any coin that the labels had has most likely been committed to an earlier project.
So what’s my point? Don’t wait for a killer deal. It just isn’t going to happen. Musicians should definitely listen to any offer and be courteous while doing so. Then they should think about this: can they do the same thing the label is offering on their own? If the answer is yes, and a band can forge strong relationships with strategic management companies, booking agents, merchandise companies and lawyers, they may not need a label. If a band can do all of that, they definitely do not want to give up ownership of their music or have someones hands in their pocket during a performance, at the merchandise tent and at the record store.
Lots to think about. Perhaps we should wait to think about it all until after next week when we have completed the music marathon.
SHAMELESS PLUG(S) OF THE WEEK:
Toki is getting well deserved press. Click her wicked cool necklace above for more info.
You may have already seen this, but I think its awesome: