For the past few years, there has been quite a bit of talk of the ’360 deal’ and how it is becoming the new trend throughout the music industry, as major record labels attempt to rewrite the way they do business. Some see it as signing a pact with the devil, and others see it as a way to establish the kind of powerful and influential brand that otherwise may have been impossible to attain with out the help of a label. While there are clear cases for either side of the argument, it is important to understand what a 360 deal is, and how it can both positively and negatively effect your career path.

Why This Is Bad For An Artist:

- Far less ‘quick change’ for the artist

Though the company is now pursuing a long-term relationship with the artist, each short-term revenue stream will equate to significantly less money for the artist. Here is an except from an article written by entertainment lawyer Bob Donnelly that appeared on Billboard.biz:

“The 360 deals that I’ve reviewed require the artist to relinquish between 5% and 50% of revenues from sources other than record sales. To illustrate this point, let’s use 20% as the percentage that the record company is seeking from an artist’s live touring income. If that artist is paying all of the traditional touring costs (e.g. hotels, transportation, etc.) as well as paying her manager a 20% commission, her booking agent a 15% commission, and her lawyer and business manager 5% each, then that could result in a record company receiving half of every net touring dollar which winds up in the artist’s pocket.”

- Potentially dangerous for the hip-hop world

Hip-hop recordings can be expensive to produce and very few hip-hop artists find success in touring. Therefore, one of hip-hop’s most important revenue stream’s is the endorsement revenue, which has always been due solely to the artist, but is now liable to have a piece taken by the label.

- Additional ‘outside’ pressures from the music industry company

Now that the involved music industry company owns stake in the brand as a whole, they stand to make significantly more money as the artist branches further out. While it is no secret that in the past, labels have been known to apply significant pressure to artists by pushing them into making more albums (aka more money) for the label, these companies can now use this same ‘influence’ to persuade artists into making business decisions that may not reflect their own best interest.

- Can disrupt the nature of the fanbase

Long before social media became a buzz word, fans of bands like The Grateful Dead, The Allman Bros., Santana, Frank Zappa, King Crimson, Phish, etc. had created an entire subculture of ‘tapers and traders’ based on the idea of sharing bootleg recordings of live performances. In most instances, there were only two rules:

- No soundboard recordings can be captured and traded (of course, most people found a way around this, but this was put in place so that artists COULD sell the performance as an official release if they were so inclined)

- No one may charge another person for a copy of their recording.

It is this method of open taping and trading that helped bands to establish cult followings through word-of-mouth marketing (before it was called word-of-mouth marketing). However, through the terms of the 360 deal, music industry companies stand to profit off of these recordings by selling them at a premium instead of simply giving them away for free. Great for the label, but terrible for the band who has established a strong fanbase based on the ideology of giving away audience tapes of unique live performances.

How Much Will The Label Take?

Since the concept of a 360 deal is still a fairly recent phenomenon, these contracts can vary in terms of the percentage you will owe to label. But in order to illustrate the kind of percentages that a label or music industry company may take, here is another excerpt from the NY Times article discussing a recent 360 deal written up by Atlantic Records:

Atlantic’s document offers a conventional cash advance to sign the artist, who would receive a royalty for sales after expenses were recouped. With the release of the artist’s first album, however, the label has an option to pay an additional $200,000 in exchange for 30 percent of the net income from all touring, merchandise, endorsements and fan-club fees.

Considerations To Be Made Before Signing:

- Is the label merely participating in revenue streams from activities managed and controlled by the artist or will the label be managing and controlling the touring, merchandise or marketing activities and/or collecting the revenue from those activities and accounting to the artist.

360 Deals have music industry companies becoming involved with more aspects of an artist’s career than ever before. It is important to be sure that the company has the proper manpower and expertise to properly manage aspects like touring and merchandising, which they previously had nothing to do with.

- Make sure you understand the terms of the contract! The 360 Deal is a relatively new concept, and as such there are still multiple formats floating around:

- Which revenue streams are involved?

- What percentage of each stream do you owe to the label?

- What services will you be receiving in return for giving the label a piece of most, or even all of your revenue streams?

- What constitutes a breach of contract?

- Bring A Lawyer. This is standard operating procedure when dealing with most contracts, but because of the complicated nature of the 360 deal contracts, and the ability for labels to find loop holes, it is especially important for a lawyer to review the terms of the contract with you so you don’t get roped into something you may have missed.

Jon is the co-founder of MicControl, a music blogging network based on a music social networking platform. This post originally appeared as a two-part series on the MicControl blog on April 29, 2010. Jon can be found on twitter and facebook.