Why Artists Should Do A 180 From a 360

[mojobone]

Bob Lefsetz hepped me to this one:

http://www.billboard.biz/bbbiz/content_ ... 6289bf169e

[simonparker]

"But in many of these 360 deals, the label's rights continue well beyond their recoupment of their investment. In fact, in some 360 deals the artist is required to pay her record company a share of her touring/merchandise/music publishing earnings long after the artist has been dropped by that label, and sometimes the payments are forever."

I think this says it all....

[Len911]

I don't understand why a company like Goldman Sachs isn't underwriting recording artists. I would think it wouldn't be so unlike sub-prime mortgages. At least after all the bundling and reselling and government bailouts, they would have a kinder image of supporting the arts and promoting culture. Just sayin'.

[Tree]

I'm surprised to see Taxi have so many listings for the 360 deals. I was surprised to see an article about it in a recent newsletter of theirs too. Sad to see that they endorsed it so easily, but happy to see the article mention specific things to watch out for in the contracts.

Len, I love it! Signing a band as a sub-prime mortgage. I'm surprised the RIAA didn't jump on the bailout bandwagon.

[Hookjaw Brown]

I grew up with Lacy J Dalton (Jill Croston). After her third album with the Nashville cats she was in debt for $360,000 and was cleaning houses for household money. Lacy hit the charts with The Tennessee Waltz, was a presenter at the Country Music Awards. She wrote and recorded some really good music but the label always took it all. I loaned her my recording equipment to write her fourth album and then lost track. She raises wild mustangs in Nevada now and plays very occasionally.

Take Care.....use a lawyer.

le Hook

[billg1]

A 360 deal can be ok if it's limited by the time frame that's agreed upon where the label can recoup investment and make a reasonable profit. It's the "reasonable profit" part that's a problem. In the 80's MCA was ready to drop a lot of dougth on my band and wanted us to sign for 5yrs. The problem was then (and it sounds like it hasn't changed) . . . a rep will TELL you what they're gonna do but the only thing written (in actual numbers!) in the contract is what YOU'RE gonna do.

Where this article is sort of mis-leading is in the DIY category (and this is also sort of genre dependent). Everyone should have the experience of recording a song as best they can in their home studio as a demo and then going into a full blown "unlimited resource" studio with a REAL producer, a REAL engineer, and a person that has mixed hit records. You think you can, but the truth is you honestly can't make a record as sonically good as the person with the huge budget and killer connections.

To me that's the biggest bummer with this entire situation (major release vs Indie DIY release). The "sound" of records suffer. To make it worst it becomes reletive. Listen to enough DIY stuff and it begins to sound ok to you but any pro mastering engineer how the stuff they get now compares to the stuff that came to them even 10yrs. ago (or via a major label) and they will tell you that the stuff now sucks by comparison. Eventually the tools available to the DIY may be equal but the experience is the big difference and that's what BIG LABEL money makes possible.

The best scenario if offered a 360 deal is to get some agreement on exactly what is going to be invested and try negotiate a fair term for the contract. (get a lawyer whose fee is based on getting you an agreeable deal) If the label doesn't go for it then go out and make your own personal best record & maybe it will be competitive . . . but don't fool yourself into thinking it will be as good sonically as a big budget recording.

(posting before coffee should be outlawed)

[mojobone]

Here's another perspective:

http://lefsetz.com/wordpress/index.php/ ... 360-deals/

And some responses to "Anonymous":

Re-Re-360 Deals

BOB,

THANKS FOR PASSING THIS ALONG.

I DID RECEIVE ONE OTHER EMAIL CRITICAL OF MY COMMENTARY...AND PROBABLY 60+ WHICH AGREED WITH IT.

I HAVE DONE PANELS ON 360 DEALS AT SXSW AND OTHER MAJOR MUSIC EVENTS...AND IT'S THE LAWYERS FOR THE RECORD LABELS AT THESE EVENTS WHO ARE USING THE TERM "MULTIPLE RIGHTS DEALS".

AS FOR THE NET VERSUS GROSS ISSUE...I AGREE THAT IF AN ARTIST HAS NO CHOICE OTHER THAN TO DO A 360 DEAL THAT HE/SHE SHOULD TRY TO WIND UP IN A "TRUE NET" POSITION...MEANING THAT THE LABEL IS PAID ON EXACTLY THE SAME BASIS AS THE ARTIST IS PAID...BUT RECORD LABELS SIMPLY WON'T AGREE TO THAT CONCEPT...UNLESS YOU HAVE AN ARTIST WHO HAS SOME LEVERAGE GOING INTO THE NEGOTIATION OF THE DEAL...OR IS WILLING TO TRADE OTHER MAJOR ELEMENTS OF THE DEAL (E.G. ADVANCE/ROYALTY RATES/ETC.) FOR THIS CONCESSION....I HAVE BEEN ABLE TO GET SOME "NET' CONCESSIONS...BUT VERY RARELY HAVE I SEEN A 360 DEAL BASED UPON "TRUE NET".

AS FOR THE CAUTIONARY TALE AT THE END OF THE EMAIL...I WONDER WHICH HYPOTHETICAL ARTIST WOULD BE BETTER OFF...THE ONE HE DESCRIBED WHO NEVER HAD THEIR BITE AT THE APPLE...OR THE ARTIST WHO WAS SIGNED TO A 360 DEAL...WAS DROPPED AFTER ONE UNSUCCESSFUL ALBUM...AND NOW MAY HAVE ONGOING 360 OBLIGATIONS TO LABEL#1 EVEN IF THEY SIGN A NEW 360 DEAL WITH LABEL #2? ...NOW THERE'S A HOBSON'S CHOICE!

I ENJOY YOUR BLOG VERY MUCH...THANKS FOR ALWAYS LETTING US KNOW EXACTLY WHERE YOU STAND.

BEST REGARDS,
BOB DONNELLY

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Re-360 Deals

From my experience, Donnelly is right and Mr. Anonymous is an a**hole. And a shill.

*name witheld*
Attorney At Law, PC



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I'd like to meet the lawyer who has lately negotiated a "pure net" for the label's percentage on tour. Don't think so.

Douglas M***, Esq.?


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Re-360 Deals

How are we to know how credible this perspective is without a name to back it up? Bob Donnelly stands behind his words with his name and reputation - I'd like to see the anonymous author stand behind his own words in the same way.


*name witheld*
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Re-360 Deals

Quoth Anonymous: "Also, I've never heard anyone utter the phrase "multiple rights deal," so I guess Donnelly and I must just run in different circles."

Really? Wow:

http://www.google.com/search?q=multiple ... =firefox-a

"What kind of f***ed up world do we live in" where a person can call Donnelly's research in the field of artist negotiation into question, not research it, and then not sign one's name?

Anonymous fish in a barrel, Bob.

Best, *name witheld*



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Re-360 Deals

The 'Net Profits" deals are filled with problems as well. While letting the label deduct distribution, manufacturing and marketing costs sounds fair, those "costs" are profit generators for the labels. You can believe that they are making a profit on the costs they are charging the project, so even if there is nothing left to split, they have made money.

**** ******
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Anonymous responds:

Hi Bob L -

Again, please don't use my name. I'm not trying to use this forum to promote myself and I don’t want to disclose any specifics of any deal that might be identifiable with any of my clients without their permission.

First, a general comment: I have no axe to grind against the author of the article and have no desire to discredit him. I just read a portion of his article via Lefsetz' blog and was surprised that so much of it differed from my own experiences negotiating these kinds of deals over the past few years. So I thought that Lefsetz's readers might benefit from this different perspective. It seems to me that the more information that artists, their managers and lawyers have about these kinds of deals, the better armed they will be when negotiating. In fact, I will ask my clients for permission to provide Lefsetz with redacted excerpts of actual language for him to share as he sees fit. With that in mind, let me offer these responses to the mail bag:

I understand that EMI lawyers are apparently instructed to refer to these deals as "multiple rights deals." That's the one system I've not negotiated a 360 deal with, so I guess my "different circles" comment still rings true. I've not heard that phrase actually spoken by anybody I've negotiated with so go figure.

On gross vs. net, I guess I'm just having different experiences. What I'm seeing out there are revenue sharing arrangements actually based on true "net." For example, on "Major A" the language is generic - you take the artist's gross, subtract all of the artist's third party costs including third party commissions, and THAT's the pool that's subject to label participation. On "Major B" the concept is similar, but they cap third party commission deductions at 30% in most categories and 35% where an agent is likely to be involved. So, if an Artist's tour gross is $500k but they incur $200k in third party costs and pay 10% to an agent, 20% to a manager and 5% to a business manager, and the label's "participation rate" is 25%, the label gets $48,750 which is about 16% of the Artist's gross-less-hard-costs (before deducting commissions). And the clients getting these concessions are not ultra-hyped bidding-war fodder. These are largely conventional "new artists" (who, by definition, typically have SOME buzz lest there be no deal in the first place, but their only leverage is the label's excitement to bring them aboard)!

On the "Hobson's Choice" call, Bob D's hypo feels like a fallacy to me because I'm just typically not seeing deals where artists remain bound to share 360 revenue with labels after termination of their agreement. Perhaps that does happen in some circumstances, but I'm not seeing it. But getting back to my "hypo" consider this scenario: (A) you are a struggling 23-year-old pop singer with no deal and no real prospects in 2010, (B) in 2008 you had a substantial offer on the table from a major label committed to pushing your single with a mid-six-figure radio/video campaign (while funding your album with another mid-six-figure budget), (C) your old-school lawyer couldn't stomach any 360 provisions in a deal with his name on it so he killed the deal, and (D) you have access to a time machine to take you back to 2008. What would you do with that time machine? Bearing in mind that major labels generally don't sign new artists without 360 provisions in 2008, do you remain steadfast in your opposition to the 360 concept and "stay indie"? Or do you take the deal and shoot for the charts?

Again, I'm not a FAN of "360 deals" and, if I had a magic wand, I'd get rid of them altogether; eliminate mechanical royalty rate reductions and album caps; require labels to "recoup" their investment from their raw net instead of at artist's royalty rate or, better yet, impose a statutory minimum per-unit rate for artists that is NOT subject to recoupment of recording and promotion costs (why should the writer/publishers be the only one to get this benefit); designate record labels as fiduciaries to their artists to eliminate accounting cleverness; cap all record deals at seven years (no matter what); require labels to unconditionally release artists from their contracts if they shelve an artist's album for more 9 months with an option to buy back any unreleased material at "cost" on a track-by-track basis; and require tax withholding on all sums paid to artists unless a CPA signs an affidavit accepting full responsibility for accounting and paying taxes to the government (this is to protect the ARTIST from falling behind in taxes).

Of course, I don't own a magic wand so, until I do, my job is to help my clients secure their best deal on planet Earth in 2010 (given the available options).

Good luck to all.
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I never thought I would be the lawyer that my friend Doug M*** wanted to meet, but, yes, I have done label "360" deals where the participation on touring is "net", albeit with caps on professional fee percentages to protect against obvious abuse, and sometimes a floor as a much smaller percentage of adjusted gross once the act is making in excess of a certain nightly performing fee, to protect against an artist using up all the profits on excessive personal expenses. I disagree with Mr. Donnelly's sweeping conclusion, as I find that labels understand that they cannot expect an artist to come out of pocket to pay a 360 override when the artist is losing money or barely paying the grocery bills.

In response to Mr. Donnelly's presumed reply that my client's must have excessive leverage, I contend that every act a label is willing to sign in this difficult climate must be sufficiently desirable to be able to secure a reasonable compromise on all the important deal terms. Labels aren't signing acts just because they can get favorable terms. Rather, as was always the case, labels sign acts because they believe they will be successful. That belief creates leverage.

It also helps to be good at what we do for a living.

Gary S*********
__________________________________________

From: *name witheld*

See? It never ends.
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Mojo: And, finally, "Anonymous" replies:

Hi Bob - Please DO use my name here.

I guess if Gary S****** is content to restate virtually everything I just said and sign his name to it then I may as well come out of the closet.

Anonymous is Daniel Stuart.

Doug, I'd be happy to finally meet you in person after all of these years.

Cheers
____

Note: You can read Mr. Stuart's bio here: http://www.manatt.com/attorneys.aspx?id=3126

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In defense of my own reputation, I will state that my friend Gary S.' precedents regarding "adjusted gross" and protecting a "floor" of nightly fees are commensurate with my negotiations. Because even the label lawyers are smart enough to know that if they are taking a "pure net" on touring, that can be an illusory benefit...

Doug M***, Esq.
M*** Music & Media Law, P.C.

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Most of the above is more or less public, Bob's email subscribers saw the whole thing, but much of it was not available (nor of interest) to casual Lefsetz blog readers; I couldn't find it all in the blog archive, so I've removed most of the names. (names of some very well-connected music biz lawyers) None of this means that you should never sign a 360 deal; it may work in your favor under certain very unusual circumstances. All of this underscores a point we often repeat on these forums; if you can't understand the deal, make sure your lawyer does.