By Matt Cottingham
Attorney, ICS Law Group, PC
Picture this: Your manager walks in and interrupts your band practice. “I’ve got some great news. Real Big Records just offered you guys a record deal!” You all jump up and down and scream like you just won the lottery. “Where do we sign?” you ask him excitedly. Your manager then informs you that Real Big Records now requires all of their artists to sign a 360 Deal. At this point, you probably have more questions than answers. Here are a few questions to consider before you sign a 360 Deal. <private_pro>
1. What Exactly is a 360 Deal?
A 360 Deal, also known as a multiple rights deal, is a contract between an artist and a record label or music company, that allows the company to share in the income the band will generate from all sources of revenue, not just from the sale of records like a traditional record contract.
2. Does the Label Really Get a Share of ALL Sources of Revenue?
It depends on the particular contract. Most true 360 Deals do include all sources of income. This even includes the income from a book the artist writes or the movie the artist stars in. The record label would get a percentage of everything the artist is involved with, including revenue from record sales, ticket sales, merchandise sales and endorsement deals.
When considering your particular deal, it is important to make sure that the label is only getting a percentage from streams of revenues in which they are actively participating. A label should not be allowed to benefit from a particular source of revenue if you or your team is doing all the work.
3. What Percentage Does the Label Get?
Again, it depends on the contract. Some labels take a flat percentage rate across the board while others require a different split for each revenue stream. These percentages can vary significantly, with some labels requiring a cut of 5% and others as much as 50%. These percentages often depend on the size and success of the label. If a label has a proven success rate, they will require a higher percentage, while a brand new independent label will be willing to take a much smaller cut.
4. How is this Type of Deal Beneficial to an Artist?
One of the main incentives to artists in signing a 360 Deal is that the label provides upfront financial support, including hefty advances and funds for marketing, touring and merchandising. It also can provide for a far less stressful relationship between the label and the artist. Artists can focus on expanding their fan base through touring because the label is still making money from ticket sales and merchandising while the artist is on the road. They can also take their time writing material for their next album, instead of being forced to churn out record after record to please the label, because the label is not just making money off of album and single sales, but from multiple sources of revenues.
Further, it also gives the label an incentive to create a mutually beneficial long-term relationship with the artist and to assist the artist in all aspects of their career. The more money the artist makes, the more money the label makes.
5. Are there any Disadvantages to this Type of Deal?
Obviously the record label has to get something in return for providing financial backing for the artist. As stated previously, labels sometimes require as much as 50% of an artist’s revenues. After paying a manager, booking agent and business manager, the artist could end up with a lot less money in their bank account.
Additionally, if the label is going to be getting a cut from a particular source of revenue, the label is going to want to have some say in how that revenue stream is managed. Certain 360 Deals allow labels to have final approval on tour schedules and even allow the labels to dictate how merchandising and promotions are handled. You can be sure that the bigger the cut the label is getting the more they will want to be involved, thus giving the artist even less control than a traditional record deal.
6. So, Should We Sign?
As you can see, it’s not as simple as yes or no. These deals can be extremely complicated. It is important to review your particular deal very carefully to see what sources of revenue are included and excluded, what the percentage splits are, what the term of the agreement is and exactly what services the label will be providing. If structured correctly, a 360 Deal can be hugely beneficial to an artist. However, if you are not careful, you could be regretting signing one for a long time to come. For this reason, you should strongly consider having your attorney review your 360 Deal before you sign it.
