360 Music deals give labels their standard cut of CD and digital download sales, but also give them a percentage of event ticket profits, merchandise sales, endorsement deals and anything else that uses the artist’s brand or music.
A year ago they were still seen as controversial and experimental. Labels defended them as justification for investing in an artist in a time of decreasing CD sales.
Today, though, those deals are becoming mandatory. Warner Music Group CEO Edgar Bronfman told the Web 2.0 Summit audience that his label now requires all new artists to sign 360 Deals, and that about a third of their signed artists are under those contracts.
Bronfman argued to a hostile crowd that it doesn’t make sense for labels to pour money into artist development when CD sales, their primary source of revenue, continue to decline (although he did say that digital sales now make up 20% of their revenue). Without other ways to make money from an artist, he said, they wouldn’t continue to promote artists.
Bronfman also said that 360 deals give labels the ability to give away music for promotional purposes to spur event and merchandise sales.
And that, for me, is the key. Bronfman, an outsider to the music world until recently, sees the writing on the wall – music downloads will eventually be free, and will serve as little more than marketing collateral to other revenue streams.
360 deals give labels a place in the new music economy, and there’s nothing wrong with their attempt to keep their businesses alive over the long run. Artists can choose to go with them or not, depending on their own opinion of the benefits. If labels really can bring enough marketing and promotional benefits to the table, artists will take those deals. They may be slaves to the labels, but they have a chance (albeit a very small one) of becoming rich slaves, at least.
Without these types of deals that adapt to the new realities, only the most commercial, hit making artists would probably be signed in hopes of selling the most records.
And of course, only records that were the most commercial would be released – allowing for little creativity and experimentation
I’m pretty sure that’s all the big labels will ever release anyway.
You may be good at covering technology, but you are not good at covering music. I am not trying to be rude, but you really have no idea how the music industry works.
@anon: can you please point to specifics that demonstrate why this post inaccurately reflects the music industry and how it works?
In other words, please back up this broad claim with facts or STFU.
Sure, artists are going to pissed off at having to share profits on concert & merchandise sales but I totally agree with the labels on this. Who know – this may actually be good because it’ll probably force the government to step in and start regulating ticket sales more so Ticketmaster doesn’t maintain its monopoly over the industry.
The only artists who won’t be affected by this are the ones who established themselves years ago (Radiohead, NIN, U2, Madonna, Metallica, etc.) and could “go at it alone” if they didn’t want to deal with this.
I’m all for legal free music. I rarely go to concerts anyway so it’s a great deal for me and probably most consumers.
Scott C, you are retarded. People like you are the reason why the music industry is going down the toilet. You like to listen to music but you don’t feel like paying for it to help support the artists that you like. You dont go to concerts either so these artists that you steal from (it’s not sharing, it’s stealing, Let’s make that crystal clear) make no money to keep their career going. So in the end there won’t be any REAL artists left, just Mickey Mouse, commercial bullshit because the little guys wont be able to make a career out of music because there is no way to make any money off their music that they worked so hard on only for idiots like you to steal. People have got to wake up and change before the industry turns into one big corporate mechanism where basically an artform is turned into one big commercial for us to be brainwashed by. Fuckin A
kinda harsh but i agree 100%
First of all, 360 deals are nothing new. The post explains them (roughly) to someone who doesn’t follow the industry, but the post is about 1 or 2 years late. In addition, Arrington’s continual quest to argue that music downloads will eventually be free is getting ridiculous. Sure, there will be some products that are offered free to support additional revenue streams, but I can assure you that music will still be sold for $. I also find his negative commentary on the major labels misguided. Say what you will, but without the major labels, music will suffer greatly.
Anon is right that this topic is a little old.
Don’t think that music tracks will always cost consumers $ (at least directly), but there will be a LOT more free.
I told people at a conference that I thought music s/b more of a marketing cost to get people interested in the artist (especially for younger artists). Then they make up for it on the concerts and merch. It’s like the PDF model. Offer Adobe Reader for free, but charge consumers for the software that creates PDF documents.
Offer music for free to create demand, then charge to see the artists live in concerts, on TV, etc.
Here’s one of the blogs on the subject
http://techmediums.com/2008/03/24/the-art-of-the-360-deal/
Anyone who signs a 360 contract is absolutely nuts.
How bizarre… I wonder if this kind of deal will be extended to other creative areas.
Exactly. I read Seth Godin talking about this in the publishing arena.
Hello: do you have any link to this Seth Godin video or document where he talks about this 360 contracts in the publishing arena?
Ehhh, I don’t see how this has anything to do with publishing. If you are talking about writers there’s nota ton of promotion that goes on for them compared to musicians. Maybe the best promotion would be getting endorsed by Oprah.
The music industry is a separate beast from everything else (although it shares a few similarities with movies…) and must be treated differently. The good news for music fans is that artists would be pushed to release more content on a timely basis instead of one album every 5-10 years, which is just stupid.
Pelayo: http://www.26thstory.com/blog/2008/11/1-we-have-a-fresh-slate-at-harperstudio-whats-your-advice—the-huge-opportunity-for-book-publishers-is-to-get-unstuck-yo.html
It makes a band a startup and the label a VC. Other than a single song (on a song by song basis) deal, it’s just about the only thing that makes sense to me.
Interesting comparison, Bruce. Also seems to fit in line with what others are saying that the labels sign 90% losers and 10% winners. That sounds similar to VC returns to me. And plenty of commenters are writing that they musicians “don’t need the labels” and can “do it on their own”. Bootstrapping for music, anyone?
Quite an apt analogy. I think more musicians are quickly catching onto the fact that you can make a living without hitting a home-run, simply by being professional in your approach to music.
Some progress?
I think we should leave the term “label” and go straight with “management” for music Industry. Then most likely will distributed into specialized set of competencies.. e.g. music distribution manager, concert management.. etc.
The sad reality is that only 10% of signed artists ever make any REAL money…so “slaves” is the right term – but not RICH!
So all labels need do is stop signing 90% losers. And more musicians should leverage today’s alternate distribution technologies. Signing with a label, especially today, is like signing with the devil. It’s not like it’s the only path to getting your stuff out there. Are people such whores that they actually see a benefit to losing the rights to their masters, and now to a big chunk of their gate?
Jim,
“So all labels need do is stop signing 90% losers” These losers will be the winners. The internet is the key for upcoming to produce, distribute, promote and profit. New bands know how to leverage this free simple tech for their own benefit as well as their fans. ROCK ON YOU 90%!
In order for that to be a good idea you’re going to have to supply a method for determining what the good 10% is. The corollary to Sturgeon’s Revelation is that nobody can agree what that 10% is.
I hope we continue to see really talented individuals who produce music on their own or with their friends, etc etc. I think we will see more artists producing music on their own and smaller independent labels / internet companies selling their music for them versus relying on a major label to support them.
What a genius innovative idea for 1999.
Try 1959.
Bronfman argued to a hostile crowd that it doesn’t make sense for labels to pour money into artist development when CD sales, their primary source of revenue, continue to decline (although he did say that digital sales now make up 20% of their revenue). Without other ways to make money from an artist, he said, they wouldn’t continue to promote artists.
What he’s saying here is that the majors pretty much only know how to sell CDs. If you flip the statement around, he’s saying that (almost) the only benefit to signing with a major is to have your CDs sold badly. It doesn’t “make sense” for a band to pour their time into a major label deal when a) they are going to be sharecroppers; and b) the majors suck at selling music (cf. “primary source of revenue”)?
Bronfman is making a case for the majors to be a wide-spectrum gateway into music sales and distribution right when bands have the ability, power, and technology to do it without them. Mandatory 360s are a mark of desperation and lays bare the majors’ desire to dominate their artists’ careers. Sure, it doesn’t make sense for the label to sign a band without a 360, but why does it make sense for a band to sign a 360? Answer: for most bands, these days it doesn’t.
And really, go read up on Bronfman’s history and tell me he’s a good person to listen to for business advice. This is the same old same old music industry, thinking up new ways not to have to pay the band anything. Now they want to recoup you against modems!
It does make since for a band to still sign with a label, Most artist are not good at the biz part of the music biz. Thats why they sign to labels labels provide the team needed to get them everything from album art to ads in walmart most bands dont have that kind of reach or knowledge. To date almost every new band that has become a hit online has gone on to sign with a major label. And thats because to expand their reach beyond a few niche fans they needed the expertise of the labels. Labels will never leave us they are just gonna change and some new labels will be born. Most people still buy music then steal and most people dont have a problem with spending money on what they like to hear. So altho i think it will become common place to give out a single for free a full album will be sold thru places like itunes. there are parts of the industry that are dying off but the music biz as a whole will be fine as soon as the panic ends and the smart people start taking over.
Yeah – labels still have contract deals with radio stations, websites, iTunes, etc. that the artists themselves would never have the time or resources themselves to setup or manage.
Everyone on the internet thinks they are famous anyways nowadays so when I hear people argue that musicians should just “avoid labels and go at it alone on the ‘net” than 99.99% of them asking to remain unknown.
The labels are the suits who know how to market artists and get them in front on consumers. Musicians make the music and draw the crowds once they are established. It’s a symbiotic relationship and unless a deal like this becomes mandatory I honestly don’t know why labels would continue doing ANYTHING for musicians. It’s not worth the headache especially when most artists flat-out tell fans to pirate music but yet pay $75+ for a crappy ticket to one of their shows.
Nobody, including me, is saying that the alternative to signing with a major label is to do it all themselves. You are indulging in extremism if the only two options are to sign a 360 with a major or “go it alone.” Of course Bronfman would like you to think so, since nobody likes to do hard work so why not sign your career and best years of your life over to him? It’ll be easier that way!
However, these days there are countless avenues to promotion and exposure that a) were not available when the majors were the only game in town; and b) are not expensive. Radio stations are a lost cause due to being bought and paid for already, college radio aside, but everything else is up in the air. There’s no reason why bands can’t affiliate with marketing people, online service providers, and so on into the aspects where the majors previously were the experts.
The majors are desperate to be the only path to musical success and this is the position Bronfman is required to take. His personal success (such that it is) depends on it. Once they are reduced to being marking agencies (their primary non-antitrust strength) they are subject to those independent actors who have the same connections they do and a better grasp of the technologies of exposure in this day and age.
The battle is not between majors and DIY, it’s between Oldsmobile and Honda. The quality of the product is what matters, and a lot of differentiators from the past have been democratized in the past decade.
Exactly right. Most of the services these major labels claim to provide to their artists can be or ARE subcontracted for. Promotion, management, distribution, marketing…
There are many firms that work on multiple levels of the music industry that once an artist reaches the point they are large enough to NEED someone else to do those things effectiveley, they can contract the tasks out to these companies. Cause in the end, that’s what a lot of labels do anyway.
“Warner Music Group CEO Edgar Bronfman told the Web 2.0 Summit audience that his label now requires all new artists to sign 360 Deals,”
I’d say getting a loan from the bank is probably a better idea than going to a label now adays.
At least once you get done paying the bank, you get to keep the profits.
This is like bank interest that keeps on taking. I think Trent Reznor had the right idea.
That’s silly. Artists who end up in the red never have to take the hit. The record companies do. You take that $ from the bank, totally different story.
Established artists don’t have to worry about risk as much, but every established artist at one time or another began as a new artist, with a 90% chance of failing.
Record companies understandably have to sign them to long term deals if 9 out of 10 are failing, and given that there’s not a lot of money in selling studio tracks nowadays, it is understandable that they now have to utilize 360 deals to continue to assume these risks.
Perhaps the case would have been different if the major labels did the Napster deal a number of years ago. Or maybe not. Nobody, including Apple, or the artists, publishers or record companies, is making a lot of money off of digital single sales. They were far better off when consumers had to buy the entire album, and only got an alternative of a one single (a physical copy) to get instead.
You don’t make clear by what you mean by “a lot of money,” but Apple’s $250MM share of a $10B industry is nothing to sneeze at. I’m not sure why you’re trying to minimize the strength of digital sales and the strength of a band’s negotiating position, but the simple facts of history tell us that over the past five years, major labels are not the go-to people for modern music merchandising. The trend is not in the majors favor unless they can sequester talent, which is what Bronfman is advocating here.
“That’s silly. Artists who end up in the red never have to take the hit. The record companies do. You take that $ from the bank, totally different story.”
That is actually a false assumption. if an artists album flops, the artist is still beholden to the label for recouping expenses. And the artist doesnt see any profits until the recoup.
If the artist stays with the same label, the bill gets tacked on to the expenses for the next album. Even if the artist is dropped, or has their deal bought out by another label, many times at least part of the revenue from their next project with a new label has to go back to the original label because they still owe the label a tab.
Labels ALWAYS get theirs first if an artist is at all commercially viable. And even if an artist is totally unsalvageable and is dropped completely, the label gets tax write offs for the business expenses.
Actually, a good idea would be a website like prosper.com but for musicians.
That way you can make a little bit of interest, and musicians starting out could get the money they need, and use promotional tools like myspace and the web instead.
Has anybody done this yet?
IF you truly want to compete with major labels, then you need to duplicate the infrastructure online. Working on it, but it takes time and patience
Yes. I can’t remember the name of the site, but it’s been done with moderate success.
but bands don’t need loans…they have fans, and fans have money. Buy stock in a band instead! http://www.mybandstock.com... coming jan 15
This may be the first instance of pre-spam I’ve come across.
So, as with Start-up Entrepreneurs who made it turn into Angel’s, so to for successful artists to embrace the same within their own arena.
http://www.sellaband.com/
is another one.
What dooms all the sellaband/bandstock business models to eventual failure and irrelevance is that they are missing the key ingredient that determines a band’s success: marketing muscle.
Giving a band a bunch of money to make a record or go on tour isn’t the answer. Successful bands need to build gigantic fan bases very quickly. Getting mass quantities of people to “discover” a band takes a lot of money, and a lot of marketing know how. The systems major labels use to get this done aren’t easily replicated.
mybandstock, and sell a band new from Spishak
This might have been an awesome idea back in the nineties, but it’s a little late now don’t you think? Record labels are soon to be extinct.
All heil P2P.
Dwayne.
http://probablysucks.com
i agree with dwayne.
360Locator.com-sell yourself.
PS. Trent Reznor is an idiot. He just keeps releasing new material, and it gets worse and worse every time he gives something out for “free”. There is a reason his model was successful, NIN fan-boys, nothing more..
Dwayne.
http://probablysucks.com
Isn’t it the point to have a successful model? I mean, you’re basically deriding him for having fans. Fans you may not like, but fans nonetheless.
NIN does well because of the years they spent with the majors, now they can live off their fan base. This is not anything the Grateful Dead or Dave Mathews Band haven’t been doing for years. Where he has gone wrong is by giving the impression that anybody can do this without the benefits they have had. One thing artist need to be told today is that they now have the power to make a better deal then the all or nothing deals they have been getting for years.
Excellent points. Ironically, what Bronfman is suggesting here is merely a new version of the “all or nothing.”
Considering how easy it is for a band to self-promote through MySpace and small indie labels, added with the overall downturn in commercial radio, I can’t see anyone other than large, established artists wanting this type of deal.
With the available formats in most commercial radio markets reducing to the broadest, blandest choices out there, any artists that don’t fall into those few set categories would be left on the sidelines, anyway.
In the past, you signed with a label because you had to. You needed to press records (which couldn’t be done at home), publicity, radio play, distribution, etc… None of this is the case any longer.
Thanks to the record industries greed, there are no more record stores, radio is dead, the internet is the only distribution there is and it’s open to everyone. YouTube and MySpace and iTunes and Amazon are where people learn about new music. You can make great sounding records at home for cheap. This is great for music as it allows anyone to make music. This is bad for music sales because everyone is making their own music. I say yippie?
The truth is, signing with a label is only viable if you are looking to be a huge pop star and are willing to do anything (it looks just like a telefunken U47) to do it. These kind of soulless hacks deserve everything their kindred label counterparts dish out (or in this case grab up).
I say let these whores devour themselves while the rest of us try not to yawn.
Bands don’t need record labels anymore. They can monetize each and every fan that like’s their music in a different way…what if you could buy stock in a band?
Mybandstock.com
coming January 15th.
Mybandstock.com much success to you!
Great Idea. It’s a start in the right direction
I still think that there is an elephant in the room that no-one is pointing out.
There’s a massive industry that dwarfs the music biz that is willing and waiting for musicians to fully engage with them.
I am talking about the gaming industry.
Musicians should be sending in their work to development studios for use in their games, contract themselves out to make the music for them and license individual tracks of music they have made and placed in a personal library.
I mentioned this in a blog entry of mine here – http://www.alphaxion.com/?p=129
There’s no need to use the music labels!
That’s nice, if only there were 27 hours in a day.
After accounting for school, day job, night job, writing/producing time, studio time, significant other time, practice & performing time, self-promotion time – where does someone who can hardly balance a checkbook find the time to attract a deal, retain counsel & negotiate a video game deal?
Someone mentioned these sound like VC deals, which I think is very accurate, particularly on the independent level. Artists that can self promote well and build in a audience will be the ones that get the investment dollars to further extend their reach.
Amazing insight, and a free link to your blog as well. Gosh, if someone were smart they’d take your advice and, I don’t know, make a video game where you can play songs by your favorite bands. I bet someone could make a lot of money with an idea like that, I wonder why it hasn’t happened yet.
Yes, there is an obvious dist channel in rockband, GTA4, and other games, not many indies have pursued that as a single mechanism for dist. I dont follow the topic and dont really care, but there is an opportunity for bands/ managers to directly approach game CO’s, not sure it is happening except w/ large labels.
Yahoo must suck to work for right now since all you got is snark, and you have an amazing amount of time to spend on it.
nice sarcasm..
You have a great point in that Guitar Hero could quite easily incorporate a mechanism to make use of songs from independent bands which is just a single example as to how much of a promotional platform gaming could be for them.
The only issue with using indie bands within guitar hero is the common issue that other things such as karioke and busking suffers from – most people will stick with music they know rather than the few experimental people who will check out/use unknown music.
But then, my point wasn’t about there being a dearth of music based games but rather that musicians aren’t limited to big music in order to make a career out of their passion/talent.
Their choices are booming, from using machinima to fuel sales to licensing their music and/or freelancing with studios for use within the games themselves.
And to the guy trying to take the piss about there not being enough time in the day.. consider that this would be their dayjob – Being a musician doesn’t mean that it can’t be a salaried activity.
Also, I didn’t force anyone to go to the link since I posted the main jist of the article as my comment, it’s just I don’t think people would appreciate a comment post as long as the original article. ;P
But then, my point wasn’t about there being a dearth of music based games but rather that musicians aren’t limited to big music in order to make a career out of their passion/talent.
Their choices are booming, from using machinima to fuel sales to licensing their music and/or freelancing with studios for use within the games themselves.
Absolutely. The venues for exposure have exploded in recent years and musicians ignore these channels at their peril.
Working with music labels is a recipe for disaster in my opinion. They are only interested in making a ton of money and view artists as assets or liabilities, not people. If you’re an asset they just try to maximize their profit, if you’re a liability they dump you. What the music industry needs is a truly disruptive innovation instead of these crappy incremental advancements that the “labels” keep making to try and squeeze more revenue from fans.
I’m pretty sure that’s all the big labels will ever release anyway.
http://vidsonly.blogspot.com
Hey Mike, some history:
The labels have been pushing 360 deals for some time. They can get them from baby bands, but there’s not much there there. Established bands with significant touring and merch lines only do 360 deals if someone gives them a truckload of cash (see Madonna, Jay-Z deals with LiveNation, etc), which defeats the whole point, from the label’s perspective. So it’s a great idea in theory (from the label’s perspective) but hard to prove there’s much payoff.
Also, don’t know why Edgar is portraying himself as an outsider in the music business. He’s been in it since 1998, when he converted some of his family’s holdings into ownership of Polygram.
Sorry my history lesson was wrong – he’d been in it prior to 1998, via Universal/MCA
Can somebody ..anybody please tell me how the heck the label tracks each and every show and or merch that the band sells..i believe that there is most definatly a significant amout of blind spots that the artist would be able to make a substantial amout of money without the taxation or even acknowledgent of revenue to the label ..i would sign a 360 deal it’s waaayy to many ways to make money once the label actually make you a house hold name
The labels track this stuff via their relationships with venues and by installing their own people in management positions with the band. Think about all those VC-mandated board members (or C-levels) in startups ruining companies and/or making the employees miserable. Same idea.
it makes sense in time of declining CD sales…now if only they do the same for movies
cobra
I think that music should be free… and movies, and books. In fact anything connected with the arts should be free. Hey, while we’re at it, let’s make the whole world work for free,,, that’s the ticket… especially guys like Edgar Bronfman. He wouldn’t mind working for free. Come to think of it, we can all eat for free too. I mean the food is just sitting there in those grocery stores. Let’s all go, in mass, to the nearest WalMart supercenter and get whatever we want… I mean… it’s there for the taking.
Just because things can be easily stolen doesn’t make them free. We need to change the values of our culture. If millions of people started stealing Big Screen TVs , should that make them worthless. Thousands of cars are stolen every day, why pay anybody to make those? It’s the culture of no responsibility that’s the problem. Teach your kids that stealing is wrong… wow… what a concept. Oh, and set a example by not stealing, or cheating or otherwise screwing your fellow man. Don’t like the sound of that… then you’re the problem!
Sad but true. Correct me if I am wrong. Most artists usually had to tour their asses of to make a living. The record companies made most of the profits from the cd and record sales. But it doesn’t make stealing music right either. Unfortunately, unless you create a technology to prevent theft, you might as well roll with it.
I think more musicians will go out on their own and sign with independent labels or just set up their own production companies since it is easy to distribute their music digitally now.
@peter kafka – your are correct – he owned UMG before selling to Vivendi- and a composer in his own right – wrote songs for Celine Dion among others.
“about a third of their signed artists are under those contracts.” – about 1 in 9 acts make the “real” money for labels – so saying 1/3 of the artist are under 360 contracts does not cut it – which 1/3 is it? Defintely not the big acts like Madonna , who bolted Maverick/WMG to sign multi-million dollar contacts with Live Nation.
Agree completely, 360 deals are what need to happen for the labels to survive – but ain’t going to happen anytime soon. So don’t hold your breath for “free music” and “label survival” at the same time – the thesis you are trying to prove in your lifetime.
And as for Warner Music Group (NYSE: WMG) performance – have you seen WMG stock price lately? Looks like Napster (NAPS) in purgatory. or you put it another way – it is 1/3 the price from a few months ago. If anything looks like being free (priced at zero) in the near future WMG stock might be the leading candidate….
I negotiated one of Warner’s first 360 deals for an artist last summer – this is where the business is going. It wouldn’t be so bad, if the labels actually provided value beyond sales of recorded music, and hadn’t been screwing artists out of royalties for the past few decades.
> 360 deals give labels the ability to give away music for
> promotional purposes to spur event and merchandise sales.
Too bad they’re nearly 40 years late to the party.
The Grateful Dead figured this out in the early seventies, and they were totally spun-out on psychedelics.
For some related reading on intellectual property issues as pertain to digitized products, see John Barlow’s wonderful article “The Economy of Ideas: Selling Wine Without Bottles on the Global Net”
–> http://homes.eff.org/~barlow/EconomyOfIdeas.html
Barlow writes…
“The fact is, no one but the Grateful Dead can perform a Grateful Dead song, so if you want the experience and not its thin projection, you have to buy a ticket from us. In other words, our intellectual property protection derives from our being the only real-time source of it.”
@EH: Nice writing throughout the comment tread. Drop me a line through the contact link on my site if you have any interest in writing a few posts.
TL
http://jamtopia.com/
Keep your family and business completely separated
At nichea.info, we call it the revolution enforced by a bad economy.
I think Eric Galen touched bases on the main point. I have worked in the music business for 15 years. This is a horrible deal (360).
There is no artists development anymore. So signing to a major with a deal like this if you are a new or underground artists enslaves your brand as much as you music.
If your a major artists you do have some negotiation leverage but what if the company gets bought out like with all of the mergers in the past 10 years? That could change your working situation (major artists or not).
Also financially speaking its not smart to put all of your eggs in one basket. If the deal goes sour the artists could (in the past) wait until their agreement time frame ended. And record no albums until the deals dies. But they could tour, sell merch, and endorsements (sponsors). A 360 deal would effectively hold your ability to earn other forms of income (without going rouge that is) .
Agreed, it all depends on how much negotiation leverage you have. And that’s no new thing. Majors have always played hardball with artists.
With all the digital distribution opportunities now, there’s more opportunity for artists to make a go of it as independents. But more competition. It’s a tough biz!
I totally agree on that MWYS! And have been a big supporter of artists self reliance for years.
With companies like ourselves, TuneCore, Eventbrite, iTunes, GigMaven, MPTrax, Amazon, eBay and many others, it’s easy for musicians to have their own, quite effective, 360 strategy.
Any artist signing a 360 deal must always look into the many empowerment opportunities available before committing.