Deal or No Deal: The Pros and Cons of the 360 Degree Deal

In my last post I discussed the continuing transformation of the music industry and Live Nation's lead in the changing marketplace. Live Nation has sealed the deal with three of the world's most popular artists and they have all signed 360 degree deals. This type of deal allows the company to take a piece of the revenue from all sorts of areas that were previously untouched by record companies. By making a profit in areas other than recorded music, the company can assist artists in areas that have long been forgotten namely artist development. The 360 deal may just be a way to get back to the age when record labels existed to help an artist be heard and allow that artist to grow. Many artists shy away from the 360 deal as it seems overbearing and areas once providing an artist with an income will now become less reliable for the artist. Perhaps such a deal will only work with artists who are already established but the extra funding allotted to the company will allow for the development of new artists. At least that is what should be done with the extra funding. Upon reaching my own conclusion about 360 deals and wanting to spread my hopes for a more artist friendly industry, I decided to once again venture into the blogosphere and find out what my fellow bloggers thought of the 360 degree deal. The first post I came across, "Why 360 Degree Deals Won't Turn the Music Industry Around" is from a blog entitled Indie Music Strategies authored by Martin Johnson a marketer and self proclaimed Music Business Coach. He believes the 360 deal will do little to nothing to help the artist but only mentions new artists. The second post I found, "Rewriting Record Contracts: The 360-Deal" can be found at Depunked! A Music Blog written by ex music industry writer and intern Bridgette Featherstone. She does a great job of showing the immediate reaction to 360 deals which is often disbelief, but digs deeper into the heart of the deal and finds it has some great rewards. I have commented on each blog and provided my comments with links for you below.

"Why 360 Deals Won't Turn the Music Industry Around"
Comment:
First, thank you for your thoughtful and informative post on 360 degree deals. You have demonstrated that such a deal would be detrimental to new artists but how do you think it will affect established artists? The new deals signed between various artists and Live Nation are all 360 deals and surely, seasoned industry veterans such as Madonna, Jay-Z and U2 would not jump into 10-12 year deals blindfolded. I do agree that signing a new artist to a 360 deal could be unfair to the artist but I believe that with the record label relieving the pressure of immediately sending out a mega hit on a platinum album will allow the record label to spend more time on artist development. At least that would be the ideal way for it to work. Unfortunately there are many music industry executives who simply see dollar signs instead of talented human beings. On another note, perhaps new revenue from established artists 360 deals can help fund new artists and some sort of giving back system can be put together. Unfortunately looking at the history of the music industry, I feel it may be a short term fix for the dip in profits rather than a permanent change for the better. Though I am as skeptical as you, I cannot help but hope that the music industry may someday become more artist friendly. It seems to be shifting to the artist's hands anyway. I appreciate your opinion on the matter and it will be interesting to see how long the 360 deal will last or how many artists who do sign a contract will benefit as I feel it can go either way at this point.

"Rewriting Record Contracts: The 360-Deal"
Comment:
Thank you for posting both viewpoints of the 360 deal. I have read so many blogs where authors simply denounce the deal and do not even give the other side a chance and was beginning to lose hope. It is refreshing to find that you see that on the surface it may seem detrimental but deep down the 360 deal can be quite nice for an artist. Also, your post is well organized and extremely informative. The description of how a 360 deal breaks down is quite helpful in explaining the new industry standard. I agree with you that the 360 deal will not only allow but require labels to spend more time and effort on helping an artist become successful. I feel that the 360 deal may be a major turning point for the industry and could perhaps return the business to the days of artist development. What do you think? Do you feel that established artists will fair much better than new artists with a 360 deal or do you feel that such a system may actually level the playing field? I think 360 deals give all levels of artistry a chance to reap the benefits of a major label relationship. Live Nation is picking up huge artists left and right and signing them to 360 deals. Do you think that Live Nation will soon be a major player standardizing the 360 deal, if they haven't already? Bacardi recently signed a 360 deal with Groove Armada. How do you think random companies picking up artists will affect the major labels? Certainly the old ways are soon to be unattractive to artists and the 360 deal will be the only way to go. Also with other companies stepping up to the label plate, labels are urged to be entertainment companies as opposed to simply record labels. The 360 deal may just create a brand new music industry filled with brand new jobs for the next generation. Again, thank you for your well covered post and I hope to follow your blog for future insight.

The Great Paradigm Shift: More Artists Sign with Live Nation

In an earlier post, I discussed the rise of Live Nation, the world's largest concert promoter, as CEO Michael Rapino claimed his company would explore other areas of the music business. In the last week, Live Nation's artist development department Artist Nation, has decided to sign a deal with U2, arguably one of the world's most popular rock bands, in addition to their preexisting contract with Madonna. On top of those two, the company is soon sealing the deal with Def Jam CEO and rap superstar Jay-Z. These three contracts would give Live Nation top artists in rap, rock and pop music genres. All three of these contracts are of a new breed called the 360 degree deal. In such a deal, the artist shares revenue not only from recorded music but also touring, merchandise, and other business ventures. Jeff Leeds of The New York Times says, "Like many innovations, these deals were born of desperation". Record labels take a deeper look at the types of ancillary income and have figured out a way to get some of the money for themselves. Many artists make the bulk of their income from these ancillary sources such as touring and merchandise which would make a 360 deal appear rather unappealing. On the other hand, for mega superstars such as those signed to Live Nation, the total revenue is already extremely high that sharing some with the company is not viewed as detrimental. In defense of the company presenting the artist with a 360 deal, it allows the label to take a different approach to selling an artist, as the current model is slowly floundering. This type of deal reassures the company that there will be income from a variety of avenues so immediately producing a hit record will not be an artist's only chance at success. Also, by moving away from the stress of making mega hits, the company can spend more time developing the artist which is something that has been absent from record labels for quite some time. The 360 deal has the potential to save the music industry if it is used properly.

In Live Nation's case, the three artists they have made deals with are already superstars with extremely large and extremely loyal fan bases thus rendering artist development unnecessary. Live Nation's deals require sharing of profits from touring, merchandise, fan club memberships, DVDs, website sales, recorded music and even sponsorship agreements. In return, the company offers the artist a large signing bonus as well as large advances for future albums. Also, the company offers the artist stock options as part of the compensation. This leads to the artist feeling as if they have more of a partnership with the company and will allow the artist to feel more comfortable in a ten to twelve year contract. Though the company shrugs off skepticism of overpaying for its artists, some believe the company could lose money. Naysayers feel that Live Nation will need to overly exploit all possible revenue streams in order to turn a profit. On the other hand, Live Nation could be offering lavish advances and bonuses to the first few deals and change their tactics later in the game. Live Nation has got to create a buzz around Artist Nation before they can start signing anyone other than superstars and in the United States, superstars do not come cheap.

Live Nation's ambitious CEO, Michael Rapino has big ideas for Artist Nation and has come to believe that his company has more expertise in the newly important areas which will be the new revenue streams for music. "I am the biggest enemy of record labels," he has said recently. As Live Nation is a world wide concert promoter owning and/or operating hundreds of venues, arenas and festival sites, the company has preexisting relationships with many corporate sponsors. Live Nation's current sponsors make it easier for the company to find sponsors for their individual artists and perhaps lead to contracts forbidding sponsors from working with other labels or concert promoters. Also, being a concert promoter appears more attractive to artists who understand the importance of touring. Madonna said recently "the paradigm in the music business has shifted and as an artist and a business woman, I have to move with that shift". U2 claims, "We want a closer more direct relationship between the band and its audience and Live Nation has pledged to help us with that". Jay Z has been in and out of various areas of the music business ranging from artist to talent scout to label CEO and has only now found solace in Live Nation's stress on touring as a means of revenue. Jay Z told the NY Times, "In a way I want to operate like an indie band. Play the music on tour instead of relying on radio" He hopes the company can help him do just that. With requests from potential clients for a fresh look at the music business stressing live music and the relationship between performer and audience, who better to lend a helping hand (and seemingly endless amount of money) than the world's largest concert promoter?

Signing three superstars from three vitally important popular music genres to 360 deals sure seems like a fantastic idea. Live Nation will control parts of the whole from all sorts of revenue streams from a variety of artists who will likely generate income from all kinds of avenues. Though ten to twelve years is a long time to wait, it will be interesting to see if these superstars are worth their hundred million dollar price tags. Live Nation continues to be at the verge of the great paradigm shift happening in the music industry and if the 360 deal is the savior or the swan song of the industry, Live Nation will be first to salute or shun the new contract.