Francelina M. Perdomo Klukosky, Esq.
Manhattan, NY: (212) 980-7206
360 Deal
360 Deal Lawyer NYC Francelina M. Perdomo Klukosky - Perdomo Law
NYC 360 Deal Law Firm, Perdomo Law, Conveniently Located in Manhattan New York, NY 10007
A 360 Deal is an agreement, most typically between a record label and an artist, that grants the label rights to a revenue percentage of virtually ALL income-generating activities of an artist, not just record sales. According to Francelina M. Perdomo Klukosky, our Managing Partner, these recently acquired revenue percentages include, but are not limited to, revenues gained from merchandising, commercial endorsements, live performances and digital music licensing.
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This grant of rights by the artist to the label is bargained for in exchange for the vast promotional and product distribution abilities of an average record label. With this thorough financial grip over an artist, the label can strengthen declining revenues by being able to receive a percentage on much more than just record sales. While there is no such thing as a “standard” 360 deal, a label’s initial deal with an unknown artist is probably going to call for:
- Long-term duration
- Exclusivity
- Divestments of creative and managerial control
- The aforesaid relinquish of control over multiple streams of potential revenue
There are some general steps to take to weather the 360 deal’s storm; most steps come in the form of diligent negotiation and compromise. Here are a few examples:
Negotiation
Up-start artists and their attorneys should be focused on taking the “non” out of “non-negotiable.” The soaring popularity of the 360 shows that this new sort of label control is not going to simply disappear, so artists need to evolve with the times; there has to be some give and take. First, if the label is going to demand a lengthy contract, let’s say, a 5 year-4 album agreement, then an artist should be focused on increasing the royalty percentages offered to the artist, for example, for record sales and licensing.
Royalties
Royalty percentages are an integral part of an artist’s salary for years to come and must be negotiated thoroughly. A royalty is a small piece of the money pie given to the artist by the label based on an agreed to percentage of every album licensed or sold. Royalty percentages vary depending on an artist’s fame and/or potential.
Also, royalty percentages for an artist will vary with regards to whether a song, album is licensed by a music publisher to a T.V. show, film, or commercial or whether a song, album is sold by the label in a retail store; the former type of royalty percentage is generally higher for the artist.
Common industry 360 deals are likely to grant to the label both the right to sell the artist’s music and license the music as opposed to dividing this responsibility between a recording label and independent music publisher. Due to this fact, an artist should demand, or at the very least negotiate for, high licensing royalty rates (even higher than normal) if they are going to be granting away rights to all of their income generating activities.
With regards to royalty percentages in the music industry, an artist should never be left without a say. If the artist cannot secure what they would have hoped for in terms of the highest possible royalty percentage, there is always room to negotiate for the most applicable advance against royalties for the artist’s needs.
An advance against royalties is an up-front, monetary loan by a record label to an artist in order for the artist to write, record and perfect their music. Advances generally go towards recording studios and equipment. However, it is important to note that the entire advance must be paid back to the record label through the artist’s income generating activities before said artist can make a penny for themselves.
Therefore, special emphasis should be placed on the fact that an advance is nothing more than a loan; it is not a gift or a perk. An artist’s attorney should be focused on securing the appropriate amount level of an advance against royalties to fit the artist’s needs.
It is important to bear in mind that if an artist obtains a high advance this could result in need to sell many records before they’re even eligible for a paycheck. Conversely, too low of an advance means that the artist will be shortchanged while attempting to write and record their music to the best of their ability.
However, not all labels guarantee an advance against royalties in the first place and expect a demo/single to act as initial demonstration of the artist’s ability to thrive. Either way, an artist should always be cognizant of the amount, if any, of advances against royalties being offered to them, on top of the percentages of royalties they receive for sales and licenses of their work.
Not all negotiation has to do solely with sharing revenue. An unfortunate aspect of the music industry for the artist is that the label’s ability to require exclusivity of an artist is not only common, it is industry practice. The label will require that while under contract, the artist would not be able to make music for, record for, perform for, merchandise your likeness for, anyone other than us, or only with our express consent.
If the label is going to demand that the artist work exclusively with the label for 5 years, then the artist should request, or even demand if they have to, that the promotional and distribution efforts of the label are linked to tangible results. Remember, there is always room for negotiation; promotional and distribution efforts can be negotiated for especially when dealing with small gigs or projects that the artist had underway prior to signing with the label.
The label’s efforts should be detailed, tailored to the artist’s needs and should be expressly included in the agreement. An artist can seek to negotiate for getting to sell the artist’s music and how many live performances are available for the artist to exploit each year.
Managing Control
Another aspect of 360 deals calls for managerial control of an artist’s business and financial decisions as well. This area of control was commonly reserved for a personal manager of an artist, chosen by the artist, with a commission granted to the manager around 15% of an artist’s total income. If this outright refusal proves to be a deal breaker for the record label, than maybe the artist should take their talents elsewhere. There is only so much room for an artist to give away potential revenue streams that are rightfully theirs.
Is Signing a 360 Deal a Bad Career Move?
Not necessarily at all. First, artists who can achieve relatively moderate success with their music feel that the 360 can create a win-win situation for both the artist and the label. Also, whatever rights are initially granted away (generally, a vast amount of them) by the artist to the label can be renegotiated and regained in future artist-label agreements after the artist proves themselves to be a lucrative commodity for the label.
Is There a Common Industry Royalty Rate that a Record Label Pays to an Artist?
Yes, it ranges from 10-30% of the suggested retail price of any record sold. However, this rate is deceptive considering the label retains a lot of deductions for distribution, packaging and unforeseen returns on unsold copies.
Entertainment and Music Company Bundle Legal Package
- Corporate governance and structure for independent music companies
- Recording, development, and distribution agreements
- Management and Production Contracts
- Songwriting split sheets, affiliations, including ASCAP, BMI, SESAC
Contact NYC 360 Deal Attorney Francelina M. Perdomo Klukosky for a Case Assessment
Artists should be concerned with maximizing their potential earning capacity and maintaining as much creative control as they can while reaping the benefits offered by signing with a label. An attorney should be concerned with maintaining their client’s rights through fair, arms-length negotiations. Start small. Pick your weapons carefully and choose your battles strategically. No agreement should be devoid of negotiation as long as both parties are contracting for something, in their opinion, to be of equal value.
Please contact us for a case assessment.
Additional References
Perdomo Law
1270 Avenue of the Americas
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New York NY 10020
Phone: (212) 980-7206
Suite 2005
New York NY 10020
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