The music industry to many is a complex obstacle course filled with twists and turns and flaming hoops you need to jump through to reach the starting point- yes, I said the starting point. When in reality it isn’t that complicated, you must simply know what to be aware of which in most cases for the aspiring artist is very difficult. Record companies know that the average artist will not take the time out of their creativity to fully educate themselves on how the music business actually functions, they know that the artist in question will leave that work to the attorneys, managers and A&R’s. This is not a completely bad theory to believe in, because generally you are paying them to secure the best deal for you, right?
So why is it that we constantly hear artists complaining about their “deal structure” or having a bad relationship with their label? Or, how the label is not “pushing-marketing” them correctly? Sadly, there is no specific answer to each one of these questions; because instead of one- there could possibly be a handful of reasons on why you’re getting the “sh*t end of the stick”. As many artists have done, they generally tend to blame the record label for their “failures” and lack of zeros in their bank account while not taking an retrospective look on what they have agreed upon when signing- Do you see where I’m going? No? I’ll explain.
The turnaround time on your “success” and “fatness” of your bank account boils down to the contract in which you have agreed upon. Now as in the previous article featured on Refined Hype as well as on MyMusicExec.com I have stressed the fact that you are a brand, to be seen and noticed by a major label you need to be a profitable and established brand they will be willing to invest in, otherwise you still need “development” ( read that again please ). We will be getting into artist development later on in this article as well- moving on. A great brand equals a great deal! How do you accomplish this? You create leverage! Leverage is established by creating great music that is seen to be profitable. Leverage is created by generating a following without the help of a label. Leverage is created by having you music featured in the upcoming summer blockbuster. Leverage is created by accomplishing “successes” without the backing of a label.- Get it?
Sadly, many artist will not be able to leverage a great deal even with a number of accomplishments under their belt. Finally- this brings me to the dreaded and feared topic that every artist has heard about called the “360 deal”. Many will say they know exactly what it entails but I can almost bet my sisters- best friends new litter of puppies that you still have no clue how it really works. The 360 deal has been around longer than many will confess to, major labels did not start the 360 deal, independent labels did. – Pick your jaw up please, thanks. Independent labels have been using this model since the beginning, why? Unlike a major labels, independents not only needed to spread the little money they accumulate across the board, they also need to play the jack of all trades and develop each area of the artist. (This is the main reason why a 360 deals are now mandatory)
Think about it folks, a high school history teacher is paid to teach high school students history. Now what if that same teacher begins coaching the high school basketball team? Do you think he is only going to get paid his teaching rate?- I didn’t think so either. This is exactly how 360 deals operate. Major labels believe that without their official stamp of a well established, lucrative 30 year brand that these opportunities to sell out the garden or land a merchandising deal with Nike would never happen. Now the argument that it is possible can be made but the labels do have a strong point don’t you think?
So what is a 360 deal exactly? A 360 deal enables a label to share in the revenue an artist generates from all sources, not just from the sale of records.That means when Madonna or Jay-Z ( thats right, they are both in a 360 deal with LiveNation) sell out an arena or perfume at Target, Macy’s or Nordstrom money is going to the label. The label share in all revenue of a musician career. You might not see it as fair, but like the example above record execs justify it by saying without them you probably would be performing at you local pub instead of The Roxy.
Nathan recently forwarded me “Bob Lefsetz” newsletter that he is subscribed too when choosing to discuss this topic with you guys. Bob Lefsetz is also a industry insider who conducts interviews and gives his experience of the music industry to his readers. What Nathan had forwarded me was Bob’s discussion with Warner Bro’s Chairman Lyor Cohen regarding Warner’s “Partnerships and 360 deals”. Lyor claimed that “360 deals are good because the label is thinking about the act every day of the year, this is good for their careers”. (Really?) While Bob brought up the idea of implementing a “fair deal” so the artists can be compensated correctly, Bob said 50% of net profits should belong to the artist. While Lyor claimed that the principle was good the number wasn’t.
Now, while I like where Bob’s head is at, standing for the artist and planting the idea of changing the structure of the 360 deal, here are my two cents. If you changed the splits inside of a 360 deal to a 50/50 percentage, it no longer become a 360 deal. It now becomes a “Net profit split deal” at the independent level, while this can seem like a great idea on the surface their are many many many recoupable – backhanded expenses that follow this deal that can be deemed against you. For example a label can charge you the cost of shipping a 100k units to your local Best Buy. – Fun huh?
Now, along with Lyor’s standing in regards to Warners 360 deals, he also claims that he does not believe in the term “too early to sign”, he believes that it is never too early. His mantra is to sign and develop…wait I smell bullsh*t. My friends- labels have done away with “artist development” that section of the building no longer exist, it is now an empty room filled with boxes, think of it like a storage closet. I spent some time at Warner and along with the development department, the A&R department was vanishing before my eyes; Warner’s employees were NOT willing to take a chance on an undeveloped act, the employees were extra cautious on who they vouched for. So when Lyor said they welcome the idea of signing and developing new acts, I couldn’t help but grin.
Folks let me reinforce my statement when I said “Labels have done away with artist development” and say labels have not totally forgotten about the concept, yet they simply changed it. Songwriting- this is the new artist development in our industry. Write great songs, fans come, licensing opportunities come, and labels come. This is again the driving force in our business, right? Songs. Nowadays A&R’s are looking for strong songwriters as much as they are looking for star quality. You must be an already packaged product to be recognized in todays industry. Brace yourself guys- The old days of being a diamond in the rough and labels taking a chance are long and gone and as an artist you need to come to terms with that.- Sorry but it’s true. A label will not take you in and babysit your career! …
*Sidenote: Take for instance Detroit rapper Big Sean. Sean was lucky enough to sign to G.O.O.D music without building a strong and established brand in 2007 but he didn’t debut until 2011. Yes, he was one of the few but during those four years he was developing as a songwriter – artist- and a brand while building a following. Kanye West is not known for attaching mediocrity to his well established name.
[Continued] …A label is what again? Say it with me, slowly this time. A label is a B-R-A-N-D and what is a brand? again slowly. A brand is a B-U-S-I-N-E-S-S. Record execs and shareholders could care less about your creativity. They react on one simple principle, How fast can you turn one zero into two zeros.- Get it?
I do not say this to deter you from your dreams and life goals, I say this to encourage you to maximize your negotiating power when it comes any deal presented to you by a label, major or indie, 360 or not. Maximize your leverage by educating yourself on the music industry, by working on your craft and studying Billboard magazines and analyzing industry trends. Success in any industry mainly comes down to how strong your foresight is. Having the ability to plan ahead will pave your future.
As always remember that the music industry is 50% game, 30% business and 20% talent, and any artist who is serious about their craft must seek consultation. Feel free to schedule yours with MyMusicExec.com today! Become a smarter artist!