June 05, 2012

An Overview of the 360 Deal

By: Tiffany Simmons-Rufus, Esq.

            As the record business evolved from eight tracks and records to compact discs and digital downloads, record companies had to evolve their business model to make money off of the changes in technology.  With record sales on a downward spiral, record labels are on a continued search to find more streams of revenue.  A new opportunity arose with the creation of “360 deals.”  360 deals are contracts that allow the record label to receive a percentage of the earnings from all of an artist’s activities rather than just earnings from record sales.  360 deals, also called "multiple rights deals," are contracts where the record labels earn a percentage of the artist’s ancillary rights.  Ancillary rights may be the earnings made from: concert revenue, merchandise sales, endorsement deals, and ringtones.  In exchange for receiving a larger percentage of the money made by the artists they represent, the labels say they will commit to promoting the artist for a longer period of time and will actively try and develop new opportunities for them.  Essentially, the record label will serve as a manager and look after the artist's entire career rather than focusing only on selling records.

            While this concept potentially solves some of the revenue woes of the record label, what about the artist? For a new artist the 360 deal is like a “double edged sword.”  A “hungry” artist would love to be signed to any major record label; but if you have to include the label in on additional income you make, an artist is putting more money in the label’s pockets than in their own bank accounts.  However, if you look at the success of pop artist Lady Gaga, an artist with a 360 deal, she may not have been such a success without the labels’ involvement in her career. 

In 2011, accepting 360 deals is becoming the norm for new artists looking to break into the music business. If a music client is offered a 360 deal, advise them and counsel them to make the choice that is best for their career in the long term, and of course negotiate, negotiate, and negotiate. 

By: Tiffany Simmons-Rufus, Esq.