The 360 mentality isn’t a new industry concept. Also referred to as multiple rights deals, collateral entertainment activity agreements, or collective agreements – these beasts have been taking advantage of musicians for decades but have recently been adopted as “the norm” for artist label relations. What’s fascinating, however, about the unique music ecosystem of today is that a label’s blunder may equate to opportunity somewhere else. Now more than ever, opportunity lurks around every corner for emerging groups. In today’s market, if you don’t want to sign a 360, don’t. Because many emerging avenues exist that essentially create an “Anti-360 Deal” formula.
To understand the anti-360 landscape you must first understand the totality of what a 360 deal entails. The concept is simple:
“Because we (the label) feel so strongly about you (the group) we are willing to invest in your career. In order to do that, we must assist with several aspects of your career to assure success. This is a massive financial risk; therefore we want to enter into a partnership with you. In order for us to properly invest in the group we will issue a multiple rights deal. These are standard. Due to the fact we will become so deeply involved assisting your career, we must receive a percentage of career-based income.”
Career-based income includes a percentage of fan club revenue, merch, publishing, tour revenue, endorsements, or if it so applies – acting fees, book deals, movie contracts, appearance dollars and so forth.
Another layer to the 360 situations: rarely does the label allow for the artist to deduct expenses prior to taking their cut. For example, an artist may gross $25,000 from a self-booked tour but accumulate $5,000 in gas expense, $2,000 in hotel accommodations, $1,000 insurance cost, $3,000 in rental fees, $2,000 food expenses and $2,000 paid out to the booking agent, just to name a few. Essentially the band nets $10,000 (not $25,000), but the label will take their multi rights cut from the $25,000. The label’s logic is that because the label invested in sound recordings and marketing to drive sales of the sound recordings, the band only gained popularity due to the label’s involvement.
Additionally, because music sales only represent a small percentage of an artist’s total worth, labels feel a sense of entitlement to the derivative works spawned from the music. Step aside and let the anti-360 take over.
Major labels have a daunting battle on their hands if they aspire to remain meaningful and profitable. The battle isn’t with piracy, streaming or filesharing, it’s with the new players of today. Companies using anti-360 approaches care more about enhancing an image, a product, or a lifestyle brand than selling 1 million records. They are willing to take artists with them on this ride, using them for marketing benefit whilst allowing the artist to benefit as much as possible.
For example, would a label tell an artist this?
“We’ll pay for the production of your album, but we want you to retain control over all the copyrights, trademarks, images and album sales. Additionally, we’ll give you distribution for free and give you guaranteed performance/tours every year at your regular tour rate. On top of that, we’ll pay for the tour, hotels, meals, etc.”
Whilst labels want everything (360), lifestyle labels – or brands – want to give the artist everything (anti-360). The situation identified above is real (I read the contract). If you add the fact that many of these anti-360 deals offer visibility and opportunities (for free) which major labels could only generate after $10 million of investments, anti-360 labels are changing the industry landscape right at this very moment.
But anti-360 deals must have a downside – right? Unlike the traditional record relationship, anti-360 deals generate new concerns that must be analysed. Instead of dissecting royalty percentages, territory rights, publishing and multi rights that naturally emerge with traditional deals, the four areas below remain critical points when evaluating the effectiveness of anti-360 deals:
1. Lifestyle Branding
Companies who generate anti-360 opportunities typically have certain customers. For example – Red Bull energy drink is highly embraced in the extreme sports community. Snowboarding, skateboarding, BMX riders and adrenaline enthusiasts typically involved in this community gravitate towards certain genres of music. With this known – does your band fit the community typically accessed by the company? If the answer is NO, don’t force the relationship because it won’t benefit the band or the company.
2. Unique Outlets
Non-traditional deals typically translate into a lack of traditional distribution and radio exposure. This isn’t a bad thing, however it is an area that must be evaluated when seeking the correct anti-360 fit. For example – Hard Rock Records, one of the newest anti-360 players in the game, lacks ambition with traditional physical/digital distribution. It’s likely you’ll never see their artists in major chain stores, purchase albums in iTunes or hear them on the radio. However, Hard Rock Records artists and their products will be highly visible throughout Hard Rock Café’s 173 locations scattered throughout 53 countries. Additionally, their artists will be consistently showcased at Hard Rock Casino stages around the globe and pumping through speakers at any Hard Rock location.
A majority of anti-360 companies have little interested in controlling intellectual property. Their particular interest lies with marketing, promotion and visual components. If offered a partnership deal, it’s important to analyse what is still owned by the band – copyrights, trademarks, a majority stake in royalties, publishing, etc. Secondly, if the company retains some portion of ownership (that’s okay) it’s becomes important to review the duration of time. For example, labels typically own product “in perpetuity” (i.e. – forever), as anti-360 deals may own product for a specific amount of time.
Anti-360 companies have the luxury of already penetrating an established market (cf. point 1 – Lifestyle Branding). As this may appear appealing on one hand, it could also prove detrimental on the other. For example – many anti-360 deals may require a gratis license towards “Company-related use.” What’s company-related use, and how deep does this go? Fictiously, assume Mountain Dew signs Band X to an anti-360 deal and the band gives them a gratis use license for music produced while under the agreement. Mountain Dew may use a particular track for commercials, sporting events, theme songs, product bundles, etc. Additionally, Mountain Dew may have a sister company that produces sports related documentaries, which now has access to the songs. If Band X retains publishing rights in the anti-360 agreement addressed above, they should generate hefty income from the situations identified. However, due to the gratis license, they’ve now lost a large portion of publishing income due to “Company related use.”
Frascogna will discuss how to attract anti-360 offers as a band, how to structure mutually beneficial non-traditional deals as a business and give case study examples at midem 2013.
Martin F. Frascogna is an entertainment attorney who represents clients both indie and major in 23 countries spanning 6 continents. Frascogna’s practice, Frascogna Entertainment Law, notably specialises in advising DIY artists. Follow him on Twitter for daily tips.