360 Deal - Artists, influencers and business model.

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360 deal or multi right deal, is commonly used in the music industry to outline the legal relationship of an artists with a record label. The consensus is that the relationship between an artist and a record label intensifies due to that the later shares all revenue streams of the former. The artists, on return, can expect help with production (both in capital and knowledge), promotion and monetization of his or her craft.

In other words, with a 360 deal, a record label takes a cut of merchandising, live-performances, sponsorships and any other revenue stream. The artists, on the other hand, can expect to be helped to become larger than what he or she would have been able to achieve on its own. At least in theory.

The popularization of the 360 deal came by the time the recording industry was facing problems with P2P file sharing platforms. During this period users would share records with each other, bypassing in the process the monetization system put in place by the music industry.

The 360 deal, or the model thereof, is interesting because of the many forms it can take. The model is not only used in the music industry, but there are many other industries that use the model to increase revenue of both the company and the exploited subject. Companies that have a luxury position when it comes to exploitation of any unique resources can benefit from this model. Be it talent, positioning or knowledge.

Throughout this article we explore three major points. In the artists section we explore how the model eventually came to be and explore the corporate foundation. During the influences section a case is made why this group are in line to experience similar 360 deals (bear with me on that) or a variation thereof. Lastly, we will be looking at the actual business model and how to make it work from a business development perspective.

There is no denying in that current day and age artists are not able to get traditional label deal - that is that the artists only share revenue from their actual records anymore. Any record deal will have some from from of revenue sharing across the different income streams an artist can generate. The base foundation for the 360 deals are multiple, yet most are rooted in the past.

Though record labels have always been identified by public opinion as art extortionists, there was a time record labels would generate enough income by selling records that other revenue streams were not pursued.

The consensus on a normal record deal, was that the record label would take a higher cut on selling records, including owning the songs. While artists and their managers could profit from ancillary sales. This was the status quo until an external factor changed that.
In the late nineties and early noughties, internet access and internet adoption rate exploded. The mainstream usage of internet brought a new dimension in business that was never explored before.

New ventures started to emerge on internet. One of those ventures, Napster, caught on like wildfire. Napster offered something no one else had ever done before – at least at that scale – easy access to free music.

Napster was just the start, it opened the floodgates for similar file sharing ventures like Kazaa and BitTorrent. Though it was the demise for record sales, artist suffered a similar fate with other platforms being launched in the mid and late noughties. Platforms like YouTube, or any other social platform for fan engagement, opened the floodgates for uncurated artists to enter the fray. The excess of new up and coming artists made it difficult for new and old artists to find their positioning, which is displayed in how 360 deals came to be.

Users did not go unscathed either. Record labels decided to take the legal approach for illegal consumption of music. Backing anti-piracy lobbies, suing peer-to-peer providers and suing users. Needless to say, this led to friction between users, labels and artists.

With a new influx of artists and a regression in record sales, labels had to come up with a business model that would make more sense to recoup the profit once made. Labels made the connection of what artists wanted (e.g. promotional support, advance, tour support) and what labels offered (e.g. capital and support), labels had the better negotiation positioning. Moreover, labels sought profit revenues beyond record sales, as the assumption was that the labels and their investment is what made the artists (hot) sought after.

As a side note, on why labels started developing higher profits margins. In the past labels would sign several artists in which the label did not know if they would break-even. This led to several artists becoming a loss for the label (as a side note to the side note – according to IFPI between 1.4M US$ and 750K US$ is spent on new acts to break to the public).

The loss needed to be countered, therefore the model was always designed that one out of twenty acts would be successful to balance the loss or break-even. This meant that if a label was able to break artists two tenths of the time, the label in question would be considered a success in the music industry. Eventually everything in the music industry would become more sophisticated as labels would be better at breaking artists and reducing costs, but the percentages stayed the same. This in turn would become the golden age for record sales, before plummeting during the internet era.

The 360 deals led record labels to extend the services they would offer artists. Eventually labels would pivot into firms that supported artists in a myriad of ways at a cost of sharing the revenue in all those areas. Simultaneously labels would wage war against piracy. From thereon, record labels did not have as a sole focus selling records but conveyed their companies in supporting the artists in all other areas interesting for the labels and artists.

Moreover, this meant that the hegemony of labels started to break, allowing other companies to enter the music industry in different ways.

Though out of the scope, the largest promoter in the world, Live Nation, started looking into 360 deals with acts like Jay-Z and Madonna. Later Apple started exploring exclusivity in music with artist like U2, under the reign of Jimmy Iovine. While YouTube, at the moment of writing this article, under the reign of Lyor Cohen, is exploring different ways of exploiting the music on the YouTube platform and the accompanying videos.

Although the influx of new artists that started using new promotional channels (read: YouTube, Facebook, SoundCloud, etc.) may seem unimportant in the mid to late noughties, it increasingly became more important in the future.

By the twenty-tens it became one of the main influencers for artists being able to get a record deal. Labels could scout with open-data if there was a product market fit. An artist with no online traction would be quickly dismissed for other talents that have done the necessary for their crafts to be heard.

Moreover, the advances internet brought in the twenty-tens opened other options for artists. Working on their career while not being affiliated with a label other than their own. Allowing artists to stay independent.

Sites like Patreon, GoFundMe and any other crowd funding site, private or angel investors, even brands that want to be associated with an act, promoters and many others. This all has affected the transition of 360 deals to something more malleable and fluid instead of a rigid model