Doin' 360s

In a climate where there are less and less stores that sell music (the latest casualty being Starbucks, closing 600 outlets), where digital downloads are yet to fulfill their potential, and where music, overall, doesn't seem quite as... what's the word... interesting? Innovative? Music labels have been in a constant state of panic over achieving quarterly numbers for what now seems like years, creating quite an uncreative atmosphere for both employees and the artists. The ability to meet those tri-monthly benchmarks seems to be a forgotten, ancient art form, though every now and then, there appears that mythic, half-decent quarter (most likely, after a little magic is applied to the numbers). So, periodic, half-baked downsizings ensue, though the wiser executives know that major labels will need to sell something more than music if they are going to survive.

Enter the latest messiah, the 360 deal. It's just what it sounds like, an agreement in which the label wants the whole pie and eat it too... though that's not necessarily a bad thing, especially if the recording artist comes to the table armed with a figuratively sharp knife and fork. The best thing about the 360 deal is that it enables a more effective monetizing model for a recording artist's assets. Traditionally, acts have tried their best to take care of business beyond the studio, focusing on publishing deals, touring and hawking souvenirs such as t-shirts, posters, whatever, for that needed additional income. In most cases, that income is essential, given that most "advances" from the label (the money one receives upon signing or a once-a-year distribution for the duration of the contract) traditionally is, to be polite, a modest sum until there is profit. As we all know, many artists wind up in debt to the company for hundreds of thousands (or millions) of marketing, promotion and production dollars before they have that breakthrough hit, so these supplemental cash generators are a necessity.

If the 360 deal is executed smartly, it could centralize an artist's overall career, therefore synchronizing success on various fronts. This holistic approach naturally would start with any traditional assets (CDs, DVDs, downloads, etc.) generated by studio-related recordings and live or broadcast performances. From there, it could branch out to encompass assigning of publishing rights, perhaps per song as opposed to an artist's whole catalog. Film and TV rights could be negotiated like a publishing deal, with monthly financial distributions for unfettered use, the concept also applied to third party licensing. If the label is involved with the act's live venue, it might as well manufacture and distribute on-site USB flash drives, capturing and selling every concert. And if that label wants a share of the souvenir stand, it might as well be the manufacturer and supplier as well as the venue coordinator. Then there is the artist's "name and likeness," a brand that can be taken to sneaker or peanut butter manufacturers, or used as an endorsement for sporting events or casinos.

But there is that darker side of the 360 deal. It effectively muscles-in on the only potential revenue generators recording artists or bands have once they become "un-recouped" and fall into debt with the label (which is immediately post the advance). A poor negotiation could result in an artist's losing any way to make money from the creation of music if the label owns everything. That artist might as well find a new profession after signing all marketable assets away with the promise of "best efforts" by the label that, more often than not, will result in minimal achievements. This is the danger of putting all your eggs in one basket, common sense our parents and accountants told us all our lives.

What makes this rose garden even thornier is that it creates a situation neither party honestly wants to be in. Obviously, a label will have to conjure larger advances and structure more artist-friendly contracts if it wants to lure the act into signing away more its business. But that's going to mean bigger payouts than ever in a downsizing world, with more internal assets going to managing new, barely-explored frontiers. And from the artist's side? Does the act really want to give away every safety net, everything marketable about their art and have about a dozen or so sources of income to audit at one institution?

Every angle of this 360 deal needs to be examined thoroughly by both the label and artist before anyone signs on the bottom line. But the bottom line is there aren't many moves left for the major labels except for reaching out beyond the music, and now more than ever, artists aren't as naïve about what they're giving away. It's a slippery slope that everyone's on and it seems that sooner than later, probably everyone will be doin' 360s.

Comments

[Sundialsvc4]

I personally believe that "deals" like these have LONG outlived their usefulness. I believe that they represent a misguided attempt to hang on to a business-model that -used- to be necessary ... but that is not necessary any more.

Today, the Internet has virtually eliminated the "cost of goods sold" from the distribution and therefore the sale of movies and music. You literally can sell a song for a dime if you get to keep 9.995 of those cents for yourself and book it as NET-profit. You can promote that song to the entire planet for no more than it costs you to promote it to the state of New Hampshire.

Until Now, the most important element of the music labels' business model has been "rights control." They own the copyrights and find all sorts of "costs" that must be "recouped" before the artist gets "out of debt" to begin to earn money. Historically, the labels also did every bit of the accounting, and frankly, every bit of it was rigged. (Face it, it was.) But they were the only game in town.

Music labels need to redefine themselves... which they will be quite loathe to do. Instead of being "gatekeeper," they need to be "facilitator." They can approach the artist with the proposition, "you can do okay by-yourself, but look how much more money we'll all make if you let us help you..."

Gasp...

[ragz2008]

I'm with you. And it's a lot to ask of an artist to trust the entity that is currently in such a mess to handle all aspects of income.

I believe the labels should get to that next big idea or reinvention pretty quickly because artists, management and promotion companies already are figuring out ways to handle the business of music without them.

[ragz2008]

I'm with ya.

It seems the artist has to be aware of the risks of further associating with an entity that has gotten itself into this mess in the first place! Maybe it's time for the DIY approach to be considered seriously by most recording artists. Maybe a wiser course would be the exact opposite of the 360 model, a scenario in which an act allows the label only a certain portion of their current duties.

ProTools started the ball rolling by placing some of the recording responsibilities back on the artist, and in many cases, turned the act into its own producer and engineer. ITunes (and Napster, etc.) forced the artist to examine non-physical ways of distributing their assets, questioning the need for a label's intervention in that area. We may be approaching the day when the major labels truly should be nothing more than an artist's marketing arm, with ownership of the masters remaining with the act. Granted, that won't guarantee superstardom or the giant recording budgets some artists desire, but the DIY approach has been gaining steam and creating decent success stories for the last few years.

And it seems that the music business, maybe kicking and screaming along the way, must go down this path regardless. Beyond that, I believe if it wants to continue being the tough guy on the block, it needs a new killer idea or reinvention pretty quickly...