What is a 360 record deal?
by Kamal Moo, Esq.
Nowadays it's crucial for anyone involved in the music industry to understand 360 deals and how they work. First, a little bit of history: back in the good ol' days of the music business (meaning, before the year 2000), record companies had one job--to make and sell records. But, of course, before the Internet became such a pervasive part of everyday life, the only way people could buy music was through physical media (CDs, cassettes, vinyl records, etc.). But then, after 2000, as the popularity of the Internet rose, so did music piracy. And, ever since, music piracy has steadily eaten away at record sales year after year.
Faced with declining sales, the record companies started to think of different ways to make money. Hence, the 360 deal was born. With a traditional record deal, a label would release an artist's album and make money from those sales only. But, with a 360 deal, the record company not only produces and releases albums for the artist, they also share in all income the artist generates, which may include any combination of record sales, touring, publishing, and merchandising.
This begs the question: are 360 deals good for artists? Unfortunately, the only answer I can give is: it depends. Traditionally, bands have made the bulk of their income from touring and merchandising, so allowing the record companies to dip into those income streams doesn't sit well with most artists. And, even if the artist receives a higher royalty rate on album sales, that usually doesn't make up for the deficit in touring and merchandising income.
However, there are also some advantages to the 360 model, which I have personally encountered. For a few years, I managed a band (let's call them "Band X") that had a 360 deal in place. Part of the deal consisted of their label producing their merchandise (printing shirts, stickers, etc.) Now, realistically, most acts don't make much money in the beginning of their careers, because touring is expensive and building a following takes time. So, when Band X went on their first few tours, they of course needed merchandise to sell at their concerts, but producing merchandise can be very expensive, especially when it comes to printing shirts. Most merchandise companies will often allow artists to order shirts on credit and then pay back the debt after the tour. But, what if the tour is a bust and the artist ends up losing money? Well, then the artist will start to get some very unpleasant phone calls from that merchandise company. But, with the 360 deal, if the record label is printing an artist's shirts as part of the deal, they tend to let the artist slide for a while because they know there's not much money coming in the door. This approach inherently allows artists to tour and build a following without the hassle of third party creditors breathing down their necks. Of course, this entire scenario is all subject to how a particular label treats its artists -- and believe me, there are a few not-so-friendly labels out there.
The good thing about 360 deals is that there is no "standard" type yet, so that leaves artists room to negotiate. If a record label wants an artist badly enough, then there's always room to negotiate. And, it's important that artists stand firm because after a while there will likely emerge a "standard 360 deal," and it would be a shame if that standard ends up putting artists in the poorhouse. That being said, we live in exciting times and the music industry is changing at a rapid pace, and it seems like the 360 deal will be here to stay for a while, if not permanently.
Note: Kamal Moo is a California licensed attorney. The information contained in this article is not legal advice. Reading this article does not create an attorney-client privilege. You should consult with an attorney if you need legal advice.
Also of interest: