The 360 deal: the new “boogey” man

If you haven’t heard of the term “360° Deal” by now, you’ve obviously been living under a rock, or you’re just a bit too “weeded” out!

So, you’ve done your homework and with hard work, determination, and your single now bumping on your local radio stations (after properly paying your “marketing dollars”), every record label in town wants you! You meet with the various record companies and they each offer you a “360° Record Agreement” aka a “360° Deal”!  (Creepy music starts playing right about…. now!)  Meanwhile, if you haven’t heard of the term “360° Deal”, I now invite you to crawl out from under that rock you’ve been living under or put down that toke and pay attention!

A 360° deal is a recording agreement whereby the label is asking (better yet, demanding!) to share in what was traditionally your “non-record” related revenue, or ancillary income.  This is to say, the labels now want a piece of your touring, merchandising, brand licensing, acting, etc. income!  Traditionally, this is income they did not get a piece of.  Their rationale is two-fold: First, because of the declining sales of CDs due to internet piracy; kids buying singles as opposed to full-length albums; and competition from videogames, movies, etc., the labels claim that they are making less money every year.  Secondly, they argue that since they spend millions of dollars marketing and promoting you as the artist and thereby creating your “brand”, why shouldn’t they benefit from something they helped create?  Think about it, would anyone really be buying Sean Jeanclothing if Arista Records hadn’t spent millions “blowing up” Puff Daddy – the recording artist?

Nonetheless, this 360° deal will definitely take a significant bite of your income.  Some record labels are asking anywhere from 10% – 20% of an artist’s gross ancillary income. Couple that with a Manager’s commission (anywhere from 10% – 20%) and an Agent’s commission for booking tour dates (usually 10%) and almost 40% – 60% percent of an artist’s income is being paid out to third-parties!!  In the case of bands, this scenario can be extremely problematic because whatever monies are left over have to be split among the various members!  The only solution for most bands will be to live on the road and constantly tour!!

In negotiating a 360° deal, there’s not that much that can be done for you as a new artist, unless you’ve created such a crazy buzz that there’s a bidding war between labels for your services.  In that kind of a scenario, an attorney could negotiate a reduction in the percentage from 30%, for example, to possibly 10%.  Also, the attorney should try to negotiate an additional advance for each ancillary right the label wants a piece of and specifically get the label to commit to taking an active role (as opposed to a passive role where they just sit back and collect money!!) regarding the disposition of the various sources of ancillary income they want a piece of.  An attorney must try to get the label to specifically outline what they will do for you and your career in return for participation in your ancillary income, otherwise you’re left at their mercy in deciding how and if they will actually market and promote you.