Record Label Contracts — Understanding The 360 Deal
Co-Written and Researched by Tyler Anthony
As the music business has evolved to the digital age, so have record labels.
Record labels used to make most of their money from the mass distribution of a particular artist’s sound recording. Now with physical sales of music decreasing exponentially each year, record companies have changed their business models to stay relevant.
One of their responses was the creation of the 360 or multiple rights deal. This article describes what 360 deals are, how they work, and things artists should consider before signing one.
360 Record Deals
Like the name implies, 360 deals give record labels a share of the artist’s entire income, which can include earnings from touring, song writing, licensing, merchandising, digital platforms, sponsorship’s, endorsements, motion picture acting, and modeling.
Essentially, a portion of profits from any money making activity undertaken by the artist gets lapped up by the record company.
In exchange for signing, record labels help build the artist’s brand as a whole. Through their networks of contacts, they can help artists develop new business opportunities and new streams of income.
By increasing the number of income streams the record label takes a cut from, labels often lower their percentage cut from record sales.
How 360 Deals Work
These deals vary depending on how big the artist is and the type of income streams the record company wants.
As a ballpark figure, most companies ask for anywhere from 10 to 25 percent of the artist’s net income from non-record sources. This amount can fluctuate depending on the company and the negotiation prowess of the artist’s legal team.
Points to Consider Before Signing a 360
Record labels ask for a significant portion of a musician’s income from other sources. As a musician, it’s important to understand — and potentially negotiate — how that income gets calculated.
As stated above, record companies will often request 10 to 25 percent of the artist’s net income, and there are ways to limit the amount of money the record label can earn.
Let’s walk through some examples.
- If you already had a non-music career before making the deal, that income should be excluded.
- Define exactly what “net” income is, and determine which deductions should be included before calculating the record company’s earnings.
- Make sure that you can deduct both commissions and non-commission based expenses from your net income calculation.
In our next article, we discuss how you can retain ownership of your music and creative works when you hire employees or contractors.