Thursday, 04 February 2010 23:20

I gotta state right upfront that I am biased against 360 Deals. I understand WHY they exist, I just find them unfairly oppressive in the label’s favor in an industry with a draconic history of jerking artists out of money. I stopped negotiating deals for artists in 2005 because I refuse to do a 360 Deal for any artist! How strongly do you have to hate something to stop your own income over it?

In the early 2000s, the music industry went through a severe change. Music sales plummeted, the importance of the internet reigned supreme, and there was an influx of artists into the industry causing an over saturation never seen before. It’s gotten worse, not better, for the major record labels.

Once used to a healthy profit margin that afforded grand lifestyles for those at the top of the food chain, the major labels became disgruntled as sales dropped while they missed the boat on less profitable digital sales. Taking on the role of dinosaurs fighting for survival, they tried everything from stopping the new digital revolution, to fighting it, to suing it, to band wagon jumping too late. Nothing worked for them. And they still haven’t learned from their mistakes—they still continue to fight the ways the consumers want to receive their music.

So to justify their continuing existence, th ey decided to take an even larger share of the pie from the ONLY aspect of the equation that they controlled—the artist (or the “content” provided for digital download). Back in the day, labels took roughly 87% of the pie while giving the artists 12% of the money AFTER the artist paid back everything spent on them from that 12% share. This means that if the artist sold $500,000 worth of CDs, and it cost $50,000 to market and promote that CD (a very low example), the artist share of $60,000 (12% of $500k) would be divided between paying the label back that $50,000 and a check for the remaining $10,000. The label would receive $490,000 for its investment and belief in that artist while the artist made $10,000. In exchange for giving up the lion’s share of the sales, the labels always told the artists that they’d make 100% of the touring. Any show money, was the artist’s to keep!

When the s**thit the fan financially for the labels, they decided to tap into the show money, and all other streams of income for the artists, as well. After all, if your profit margin is made smaller, you need to eat more of everyone’s income to keep the fat cats at the top, and the stock holders, happy. Most 360 Deals share in endorsement income (15% to 30% depending on the artist), performance income (10% to 30% depending on the artist), merchandising income (20% to 50%) and Film/TV money (15% to 40%). Before I go any further, I have to thank Bob Celestin (Law Offices of Robert A Celestin www.raclawfirm.com) for supplying me a 360 Deal contract for an indie label and the good folks at Warner Bros Records for leaking me a major label contract for an artist’s 360 Deal. This enabled me to write about REAL contracts instead of just what I’d heard from lawyers, artists, and label folks.

How do labels justify taking an even BIGGER share of the pie from artists? They complain that they are doing all of the developing, investing, marketing, and promoting. Their argument is that they believe in the artist when the artist has nothing, and they feel that assuming the lion’s share of the risk should result in sharing in a lion’s share of the profit. If the label is developing and building the artist to a level of super stardom, they feel they have the right to share in a percentage of everything that super stardom affords the artist. So if they drive the artist platinum, they feel they should get a piece of the tour that came from the fame the label helped the artist build, and a piece of the endorsement deal or film income that came from the fame that the label helped build. I guess I could see this argument better, if I actually agreed that the labels did their jobs well of building artists.

I have a different vantage point of record labels. I see major labels based in tall glass buildings in NY and L.A. that have little interaction with the streets, fans, or the artists. I see them sign artists that have already started to build a buzz or sell music themselves, and then I see them sit back and let the artists’ teams continue to do much of the work themselves. I don’t see major labels taking much risk with their artists, but do continue to put them through a system that is almost an outdated cookie cutter version of how to sell CDs. The labels rarely interact with the fans and are quite out of touch about what the fans want or are willing to buy. They seem to create this assembly line of artists who all sound similar and fit a certain format at radio. They seem to throw a lot of music into the marketplace and work whatever catches on quickly and easily. Most labels do what’s best and easiest for the label, not what’s in the best interest of the artist. Now, in a way, it’s very unfair of me to make this sweeping generalization, because there are some amazing people who work inside of major labels and really go all out for the artists. But I find these people to be the exception, not the norm, and I also find them to be frustrated most of the time because they constantly have to fight with their bosses and the status quo to succeed on a project.

I also find that competitor labels usually hire the best people away from the labels who are experiencing some success, thereby breaking up the synergy within a team once they all learn to work well together. This is why a label like Def Jam or Universal could be so strong in the late 90s and yet be struggling to succeed today. I find that artists rarely look at the teams working at labels and just fiend for a record deal no matter the success of the label or who’s at the label (staff or other artists).

So labels got further away from the fans, the staffs got lazier or more frustrated (perhaps more work for less pay?), the artists took less risk because there were more of them and they were just happy to have a record deal, and the fans started expecting music for free because they could just download it if they didn’t feel like paying for it. Major labels continued reducing spending, slashing budgets, cutting pay, and signing “sure things” (whatever that means). And to justify the spending they were still doing, they decided to offer deals that cut into more of the artists’ income. The argument was that out of 50 artists signed to their label, only one was successful and funding the 49 losses. No other business on earth has such a backwards business model. Imagine if Ford built cars and accepted the fact that every model but the Taurus was meant to be a loss leader, and that the Taurus sales had to make up the loss of every other brand under their umbrella. Huh?

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