This is Celia Hirschman with On the Beat for KCRW.
Last Sunday, Jeff Leeds of the New York Times outlined 360 contract deals -- the major labels' latest attempt for a better financial relationship with recording artists. To understand these new deals, you need to know how the business used to operate. In the past, artists signed contracts that would allow that label the exclusive right to represent the artist's music. Representation included selling music at retail, as well as generating income from song placement in movies, TV shows and advertising. That was it. Seven album cycles were the standard time frame for these deals, leaving most artists contractually obligated to a particular record label for their entire career.
In exchange for exclusivity, artists were given additional benefits. Often, a significant signing bonus, monies to record their music and tour support were extended. These monies were recoupable against future income. Once records began to sell, the artist would earn a fraction of the income generated, but have a team of executives dedicated to their career development. And of course, they'd have the prestige of knowing they were signed to a star-making machine.
That was how it used to work. But the entire business landscape has shifted and this contractual model is no longer relevant for most new artists. Record sales, even digital sales are a fraction of what they once were, and financial remuneration for placements on TV, film or in advertising has declined substantially. There's not enough money generated for labels to risk their investment in new talent.
So what have the majors done? They've built more complex, more restrictive contracts called "360 deals" for many of their new signings. In a 360 deal, labels finance and commission areas outside the traditional recording contract. For instance, the label might finance a publishing deal of the artist's songs, pay the costs of launching a clothing line, finance infrastructure and staff. In 360 deals, labels invest anywhere they think they can recoup with profit.
The most controversial part of the deal is that labels commission touring income from bands. This one area was a musician's life-saver to survive in the lean years between hit records.
So why would a recording artist sign one of these new 360 deals? There are very few good reasons. Only two specific genres of music benefit from these kind of contractual arrangements in the long term. If you're a recording artist whose best shot at success is through pop commercial radio airplay, a 360 deal might give you the artist development visibility you need to earn radio programmers trust. And a new rap artist might benefit from a 360 deal, simply because the cost of building credibility on the street is too prohibitive for most to successfully launch campaigns independently. A 360 deal gives rap artists the needed tools to get a real shot, if done correctly.
But Buyer beware. These deals are long term, so read the fine print carefully. Trust no one. Ask questions. And be sure before you sign.
This is Celia Hirschman for On the Beat on KCRW.