Recording contracts are a huge part of the music industry business model. For record labels, record deals are a way to invest capital and reap a greater reward in the future.
There are various types of record deals, one of these types of deals is called a 360 deal.
A 360 deal is a record deal contract between an artist and a record label which gives the record label the rights to receive a percentage from ALL artist earnings I.e. touring, songwriting, merchandising, fan clubs, sponsorship’s, motion picture acting and so forth.
360 deals become an exclusive partnership between the artist and the label to join forces and share profits and income generated by the artist brand.
The Record Label Motive
As you’ve probably guessed by now, 360 comes from 360 degrees and is the perfect way to describe these kinds of deals.
360 Deals are the way for record labels to have a share of the total pie of an artist’s income. The reason for this can easily be attributed to the fact that the record industry with regard to album sales has seen it’s fair share of a downward trend due to the introduction of various technologies like streaming.
For record labels this has meant that they can no longer rely on album sales alone like it was back in the day.
Record labels now have to work hard because they are literally the brand building company and have to spend significant amounts of money on their artists in order to make them a household name.
After the brand is brought to superstardom, the artist now becomes more and more privy to various streams of income such as merch, tours, endorsements, sponsorships etc. This very reason has made most record labels look to have 360 deals with artists because of the various streams of income they’re privy to.
The record labels argument is that they spend substantial amounts of money in growing a brand and it’s only right that they have their fair share of the revenue that the brand generates. While this argument does have some merit of course, most look at it as further exploitation of the artist.
But one thing is for sure, 360 deals are here to stay.
With enough clout and bargaining power you as an artist can actually trim back on the 360 deal and it is actually common. You can get a 180 deal which would mean that the record label only gets records and publishing or you can get a 270 deal where the label gets records, publishing and merchandising.
The Inner Workings of 360 Deals
360 deals are sometimes referred to as “multiple rights deals”.
The record label in these deals is entitled to get a percentage of revenue that would otherwise go to the artist.
Some of this revenue includes:
This includes revenue from both physical and online stores, plus streaming platform income.
Tours, Concerts & other monetized performances
This is revenue from performances for which the artist will get. Including ticket sales from tours, other tour revenue, concert revenue and other monetized performances.
Merchandise basically includes merchandise branded with the artist like mugs, cups, caps, t shirts, shirts, hoodies etc.
This involves all revenue from all brands that choose to endorse you to bring awareness to their products.
Movies and Television shows
This revenue includes, any sort of licensing in movies and shows that may use the music of the artist. Furthermore, income from acting in movies and TV shows is also included here.
This includes Songwriting royalties that belong to the artist.
This involves Ringtone licensing revenue.
In 360 deals, labels usually promise to spend huge amounts in continuously improving the brand and making it marketable enough for opportunity to find it’s way to the artist. In situations like this, the record company will play the role of a part-manager to handle artist affairs rather than just handling and focusing on record selling.
360 deals allow the record label to retain the copyrights of the artist’s music and options for multiple albums. The 360 deal agreement basically includes the traditional deal agreements where the cost of production is deducted from the artists royalties.
In most traditional record deals, the artist would get paid an advance plus the label would pump in cash to record the album(s) and handle all production,marketing and any other costs incurred in the creation of the music.
The record label would then recoup its investment plus profit from record sales whilst the artist returns a percentage of the royalties, which is money that remains after the record label recoups its investment. The record label would leave non-record income to the artist alone and would solely depend on record income.
Passive and Active Interest
Usually the record company’s 360 share is called passive interest. Meaning the company has no control over the rights involved which means the artist will make what ever deals they make and simply send a cheque to the label.
Other record companies do take some of the rights involved, as opposed to getting a piece of someone else’s deal. This kind of deal is called an active interest. For example, they might insist that you (as a songwriter) sign with a publishing company they own (in other situations the publishing company may be owned by the same company that owns the record company, this company at the top is the parent company, because both the record company and publishing company are its “children”).
If the record company or their parent company also owns a merchandising company (a company in the business of selling artist-branded T-shirts, posters, etc.), they may insist that you give your merchandising rights to that company.
A variation of a 360 deal
Another variation of the 360 deal which isn’t particularly common involves setting up a separate entity that’s co-owned by the record company and the artist.
The artist then gives their 360 rights to this company, which collects all the money and distributes the net proceeds to the artist and record company in the agreed percentages.
The key distinction in this kind of deal is that the company controls all the money and writes a check to the artist.
Because of this, the company can pay the artist a larger advance, since all the money comes to the venture, and therefore it can be used to pay back the advance.
In other words, all the income streams can be cross-collateralized to recoup the advance.