Over contract is deemed the precursor of the

Over the years, 360-degree equity deals have become
progressively common, with eminent names such as Madonna and Jay-Z signing those
agreements. A 360-degree ‘multiple-rights’ contract entails the business
relationship that is held between a music industry company and an artist. The
contract encompasses the financial support the music industry company promises
to provide the artist with, alongside any other support required of the
company. This may include assistance with the marketing and promoting of the
music, alongside any tours the artist may partake in. The company may also
agree to support the artist by advances per album, a signing bonus (unlikely
unless it is a renowned artist) and offering shares in the company. The other
side of the deal involves the artist conceding, in terms of the contract drawn
out, to allow the company to an agreed percentage of the revenues which have
been gained through the processes of live performance, the publishing of the
music and the sales of recorded music (McDonald, 2017). Fundamentally, a 360-degree
equity deal serves as a viable alternative to the originally signed record
label deals which rarely offered any investment reaching outside music
recording. The emerging of the widely debated and star signed 360-degree
contract has been argued as evidence towards the idea that the balance of power
within the music industry is shifting. Further evidence to support this idea is
the fact that the majority of publicised 360-degree
deals have been made by the music promoter Live Nation rather than individual
labels. Posing a possible threat to the recording majors with its different
areas of coverage.

In 2002 EMI signed a very innovative deal with Robbie
Williams, that initiated a change in the contracts offered by record labels.
This two part contract is deemed the precursor of the 360-degree deal. Three
years later, still at the forefront of the change, EMI signed another extended
rights contract, this time with the nu-metal band Korn. A year after that, in
2006, Live Nation overtook the pioneering label by signing the same band under
a contract with great significance to the music deal history. However, it was
the groundbreaking agreement between Madonna and Live Nation, made in 2007,
that became the first 360-degree equity deal in public discourse. It was
unexpected and new for a well-known artist, with an estimated net worth of $325
million at that time ($580 million as of 17/05/17; Forbes), to sign a contract
with a tour promoter instead of a major record label. It was an innovation
addressing the transforming market by meeting the emerging need of a change in
approach towards artists, with its own take on the one-stop shop.

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Because of the shift in the industry and  many
streams of revenue involved in the new type of agreement. the 360-degree deal
is also called a ‘multiple rights’ contract and the companies supporting the
artist are represented as music industry companies rather than recording
labels. The revenue generation areas include some of the following: merchandise
and digital sales, endorsement contracts, television and movie appearences,
concerts, live performances, tours, publishing, songwriting and lyric displays.
The companies commit to promoting the artists over longer periods and also seek
to create more opportunities for them,  hoping for a rapid success of the
investment and increased profit from shared rights. The entities can offer to
manage and look after the entire ‘break’ in the career of their signed artist
instead of production and distribution of records only, which is what they
would be originally assumed to do as a record label. Within traditional
agreements, artists used to be paid relatively minimal royalties by the record
labels. After making deductions that entailed album or track production it
translated into a very small direct income for the artist in that particular
area. However, the label would only expect recording royalties if the album was
a major commercial success, which created a certain amount of risk for the music
companies. Especially that profits from touring, publishing, endorsements,
merchandise and several other sources of revenue entirely belonged to the
artists.

Although it is very unlikely that no company in the
music industry thought of profiting from a wider stream of revenue than only
from the records, it can be argued that up until the 2000s the record labels
would not explore additional sources of revenue as there was no need for that.
The recording industry ‘boom’ in the 1990s, with the peak of CD sales, passed
relatively quick, yet still, some labels would believe in the CD’s comeback and
blame the significant decline in sales on the digital piracy that came with the
21st century. Their hopes were for the improvement of the intellectual property
enforcement to eliminate the issue, but a few years later it became clear that
the CD sales will decline up to a point where the revenue will be steady but
very low. It might also be argued, that there are always trends emerging, which
can ‘revive’ certain products. Realistically, in most cases, trends pass as
quickly as they come up, which creates an obstacle in achieving stability in
distribution and sales of a ‘revived’ product. There is also the argument of
the all-time fans and collectors, but in the age of technology and rapid
changes, even the strongest fanbase cannot fight becoming a fanbase of a barely
sustained, non-profitable niche.

Today, years after the break-through change in
contracting, the 360-degree equity deals still have a relatively vague
definition and can be structured in different ways. Nonetheless, a clear
distinction between active and passive rights should be maintained. The
contract can be represented as a traditional recording agreement with an
additional clause allowing the label a share of the artist’s income from
non-recording rights, while having no engagement in the management of those
rights (passive approach). On the other hand, the deal could be presented as a
joint-venture involving both the artist and the label, but with a significant
role of the association in the management of the rights (active approach). In that
case the artist could also be requested to sign a contract, allowing another
share, with a sister firm or a division of the enterprise to execute the
significant role. This happens, because a unit handling a different sector is
considered a separate entity (Passman, 2011).  Nevertheless, most deals
are actually a mix of both active and passive rights: for example, by mid-2007
Warners’ policy was to insist on active rights in recordings, merchandising and
fan clubs, with passive rights being negotiated for all other kinds of rights
(Goodman, 2010; in Marshall, 2012).

 In order to
provide a better understanding of the Multiple Rights Contract an interview
with attorney Elliot Resnick explored the splits in forms he supplied. Some of
the contract terms indicated that the label should supply the following: 25%
live performance and touring, 25% publishing, 25% for digital products such as
sales from artist’s fan site and ringtones, 50% merchandise, 25% endorsements
and finally 25% for other revenue generating sources such as TV or movie
appearances and book publishing. The percentages from Resnick’s deal are
typical, though they vary from one contract to another. Whatever the split
could be, the artist’s advisor or the artist himself should ensure that the
label is committed to doing a great job that surely deserves the equity share
in the income generated. For example, the label should be committed to
manufacturing merchandise and also selling it online in return for the 25%
share (Gordon, 2013).

When it comes to publishing, a 360 degree contract may
entail what is referred to as a co-publishing terms agreement. In that case,
the company supporting the artist gain complete control over any songs the
artist publishes for the whole duration of the contract and the label receives
25% of all the revenues generated during that particular period (Gordon, 2013).
The company may also demand a 50% of all the revenues generated by the artist
songs or even a higher percentage of the publishing shares. In return, the
company would have a dedicated member responsible for pitching the songs to
some other artists, musical supervision and covers. This would aid in placement
of the songs in video games, movies and television, leading to increased
publishing, benefiting both parties.

Moreover, because there have been noticeable
fluctuations concerning commercial terms and the structure of the agreements
over the years, all the possible variations of the contract should be handled
responsibly with time and care, as there is a risk of a 360-degree contract presenting
a big disadvantage to the artist. Certain situations may deepen the issue. When
faced with the dilemma of either an exploiting 360-degree contract or no
contract at all, signing the deal still seems to be a common choice. Most music
industry companies are now insisting on having the 360-degree deals, the
artists aren’t given many choices and are left to themselves not being able to
afford a representative. That said it is only profitable for the artist if the
deal is properly negotiated and the pitfalls often involved in the deal are
well covered, which may require a certain expertise. In the case of an artist,
that is already a part of the industry, the ability of an artist’s
representative to improve the terms of the contract majorly depends on their
negotiating skills (artist’s leverage as well as lawyer’s knowledge). If
there’s a contention between the parties, the lawyer’s knowledge of the deals
will lead to improved terms of contract as compared to when the lawyer is not
well conversant with the deal (Chase, 2014).

More importantly, as far as negotiating for the
advances is important, it should also be ensured that the label can’t cross-collaterise the revenue
streams. This means that the company can’t earn from one stream and rush to pay
for unrecouped streams which had balances or were not paid for (McDonald,
2013). For example, if the company pays $50,000 to cater for the recording
costs and the royalties owned by the artist are 50cents for album or song that
probably sells at $10.00, the artist should sell 150,000 so as to break even.
Supposing that the artist only sells $50,000 and the artist revenue is $25,000,
if the contract terms allow the company to cross-collaterise different streams,
$25,000 will be in effect on the so called “red balance” in the artist’s
royalty account.

The popularity of the multiple rights contract may be
a result of an old fashioned mentality of the artists. The thought is that an
artist has to be signed to a label, although that definitely is not the only way
to succeed. The “do-it-yourself” (DIY) principle is a new way of grasping it
until an artist gets the right deal or never signs one and makes it on his own.
This means that an artist won’t have to share their income with anyone other
than themselves. Also, DIY accords an artist the ability to learn the music market
and business. Avoidance of learning the music industry exposes the artist to
ill treatment, especially in cases where they don’t have experienced representatives.
Artists must show labels that people are ready to pay for their music. A lot of
labels are more eager to generate income than to make qualitative music. If the
artists can show them that they have already made some good sales themselves,
they would therefore be taken more seriously (Karubian , 2008). Starting the
career by supporting yourself enables to fill gaps in the music market that are
generated by an oversaturated production of pop. This would also give an artist
a very good basis for negotiating a deal because they are offering something
original. Therefore, this allows the artists to build their career all by
themselves before engaging into contracts with companies.

When entering into a 360 deal, the artist gives a
percentage of their income all because they are convinced that the label will
take their career to another level. Before entering such deal the artist must
ensure that the label has enough money to invest in them (Vasquez, 2017). The
label must be in a position to pay for digital sales, promote live
performances, produce and pay for high quality music videos, design classic
website for the artists and so on. The artist should also check previous the
label’s track record to defend oneself against fraud. Artists should also
ensure that the 360-degree contracts they sign have escape clauses. Some of the
deals will tie them for up to 10 years. During that period they may be
structured in a way that the label will be required to do almost nothing. If a
label identifies another artist who is more vocal than the one they currently
have and see chances of better income, they will happily abandon the first one.
The artist’s should therefore negotiate the deal keeping in mind that it needs
to have clauses where the artist can detach himself or herself from it, but
also requires certain actions from the label. For example, they can insist on
having a clause that addresses the music release, which requires the label to
release the music tracks within a specified time frame, to a specific market
and with the intended promotional support.

While the importance of 360-degree contract has
already been touched upon, it is imperative to explore it in depth. Labels give
artists the opportunities to develop. Artist development deals have been
regarded as a thing of the past unless proposed by independent labels. When
someone has their music, branding and image in order, labels would like to
support them wholesomely. Supporting such artists presents minor risk to the
labels and also opportunities for artist development (Wiebe, 2017). It’s a lot
easier for the artist, when they have someone managing their work and strategising their music.
Therefore, if a label continues supporting an artist after their first track
and tour, it probably means that they have identified great potential in the
artist and this gives the artist a fair opportunity to succeed and grow. Even
if someone doesn’t succeed as anticipated, the lessons learnt from a label
could be applied in building a lucrative and successful career.

Artists have access to skillful and best people in the
music industry through ‘multiple rights’ contracts. Though the word ‘best’ is
subjective, if an artist is signed to one of the best labels in the industry,
it means they have access to experienced engineers and music producers, but it
also means that their music is controlled by a marketing powerhouse. In simple
terms, the artist wouldn’t have to worry about every detail of their career,
but there’s also a price to it. If the label is doing its job, it will help to
get the music on radio, manage itineraries, book promo and so on. Getting into
contract with industry majors is a very exciting adventure. This doesn’t mean
that someone will have to choose people to work with but will definitely provide
them with people who understand what is ‘the secret recipe’ for the break-through
and maintenance of the career in the industry. Therefore, a 360 degree contract
is a good deal for artists, if engaged with an experienced label as well as
with properly negotiated terms of contract.

Despite the ‘multiple rights’ contracts being very
innovative, they also get a lot of critique and are often perceived as more
profitable for the labels than for the artists and are sometimes met with
critical statements, where they are said to be an easy way of obtaining money
for the labels, facing dwindling sales as well as high overheads, without
anything in return. This accusation is a result of the fact, that music
industry companies have originally and successfully sustained themselves, for a
long time, without the ‘multiple rights’ contracts. As a result, using those
contracts may therefore look like they’re suffering from the inability to
manage their own businesses and are trying to change the terms of the industry
(Basofin, 2010).

The fear of signing a disadvantaging contract is
creating even more negativity towards the 360-degree deals. It is argued to be sometimes
difficult for the artist to achieve any personal goals (musical, career wise,
financial), since most of the affairs are managed by the label. That highlights,
that the artists should only enter into a contract when they clearly understand
it and its binding terms. If someone fails to understand the terms and agrees
to sign the contract, it is hard to recognize the artist as a victim after the agreed
upon details factualize. The artists are responsible for their choices and
should approach any contract with great care and awareness.

Several scholars have viewed the 360-degree equity
deals as the music industry companies acknowledging the fact that little profit
is made by selling and distributing music. This sentiment, however, has a
simple solution; creating different methods to generate revenue may be the only
thing that needs to be done. Generation of new methods entails listening to the
demands of the consumers alongside being innovative (Vasquez, 2014). This would
be beneficial as it would raise sales in areas where there had previously have
been nothing, thus raising overall sales and profits. The utilization of
marketing methods such as amazon music, Pandora, and Spotify is a clear
indication of the effectiveness of innovativeness, creativity and in simple
terms thinking outside normal enclosures. Therefore, even though the idea of a 360-degree
offer has been mostly embraced, there are still many different ways to promote
music at an independent level.

The music market is a very complex industry often
underestimated and hidden behind a curtain of the creativity and passion brought
in by the music making artists. It can never be emphasized enough, that it is
very important for the music industry companie and artists to get their
negotiating strategies right within this exceptional deal structure contained
in relative documentation. For the artists, it is advisable to get advice and
guidance from professionals and acquire a lawyer with diverse knowledge in 360-degree
contracts to engage in negotiations on their behalf. The misconception of a 360
degree contract being very one-sided is due to the lack of understanding on
what is right or wrong while including royalty rates and putting the terms of the
deal together. The artist should outweigh the advantages of the deal with the
disadvantages involved. A detailed and thorough assessment should help the
artist making the right decisions. It can also be said that 360-degree
contracts are mostly recognized as very important parts of the music industry’s
business models. Due to the decline in physical recording of music and
increased digital piracy, the deal offers great opportunities for artists to
work with labels. This helps in maximizing profits for both the artist and the
label too (Dubber, 2013). As a result of a shift in the business, there is no
market for a record label ,as know in the 20th century, anymore. The
now called music industry companies have to seek other streams of revenue to
sustain themselves. That is due to the digitalization of the music industry as
well as the change of a mentality towards being signed to a label. Emerging
artists do not feel obliged to get signed in order to break-through and have a
chance of a career. Moreover, they seek the convenient all-around, extensive
care package at a one-stop shop ,like the pioneering Live Nation, that would handle
more than strictly the musical in- and output. ‘Multiple rights’ contracts are
an organic answer meeting those needs, allowing the music companies to make
relative adjustments, but also grow, transform and expand, rather than posing a
threat.

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