Y R T : S E U L ND C L C I IR A USI C E THE M LL IC R FU R U F COMES O T ST U O S HI F S THE ND N NY A IO L IRO AT A LIC Despite the fact that the IMP concepts associated with 360 deals Ehave been reflected in the template of most recording contracts for the past Ddecade, commentary from both sides of the artist/label contractual equation continues unabated. “3 0” There is a helpful perspective to be gained by stepping 6 back from the present state of affairs and assessing BY HOWARD SIEGEL, ESQ. current trends against historical industry practice. In the case of 360 deals, there is also an inescapable irony. What are 360 deals? They can be described fairly simply. 360 agreements permit a record company to Has enough been said participate in the artist’s income stream from sources in and written about the addition to those generated by the sale of records. The all-encompassing implication of the term “360” might ’s reliance suggest that the label is involved in all of the artist’s on so-called 360 income sources, but that is not necessarily the case. The label may, depending upon the course of contract recording agreements? negotiations, end up participating in the artist’s earnings Apparently not. from one or more of the following: merchandising, endorsements, fan clubs, tours and music publishing, among other activities. Some record companies have also assumed a management role in the artist’s career, thereby deriving commission income based on the label’s providing personal management services.

12 Nevada Lawyer May 2015 The irony of these participations isn’t going anywhere soon. It is in the artist’s career development and in an artist’s earnings is that they are an industry that has survived other more support on all levels. Moreover, distinctly reminiscent of the record media transitions — from the original given the extremely daunting industry as it was more than a half “Edison discs,” to the various challenges of getting a record deal century ago. In the 1950s and 1960s configurations of vinyl, to tape in the first place, and turning those it was not uncommon for a label to (including reel-to-reel, eight track deals into successful marketplace own an artist’s publishing; neither and cassette tapes), to CDs, products, many artists are grateful was it unusual for the record company and now to digital formats. for the involvement of the to be involved in management, tours Moreover, music is so much record companies in the broader and other ancillary sources of their a part of our culture, of every scope of the artist’s professional artists’ income streams. This type of aspect of our lives and, indeed, activities. Labels, on the other deal became scarce during the more of our very genetic makeup, hand, often take additional risks prosperous decades of the 1970s that the industry, and especially under 360 , by through the early 2000s. But with the the consumer, will, as they have expending staff time and additional explosive growth of the new music done in the past, most certainly money on the non-recording facets delivery systems (i.e., the ability for find a way to fit the inevitable, of an artist’s career. the consumer to download or stream ongoing advances in technology Perhaps the best measure particular songs, rather than having into the parameters of a workable of fairness is this: are the to purchase an entire ), more economic structure. 360 deals are record companies meaningfully pervasive label involvement has once one such structure. contributing their energies and again taken hold. Whether or not 360 deals resources to those areas from The justification, or at least the are fair is an often-asked and which they are deriving income? explanation, usually offered for these deceptively simple question. Not If the labels are passive, and arrangements is that the plummeting only is the concept of merely taking their cuts as income from traditional record sales fairness, by definition, they come in, clearly over the past 10 years has threatened largely subjective, but there is little fairness the very existence of record the fairness debate has to the scenario. On companies and, without some device been raging for as long the other hand, it is in place to keep the labels from going as these deals have been obviously more difficult out of business, the entire industry in existence. One might to argue unfairness would be at risk. Statistically, there is suppose that labels in cases where the no question that the near-extinction generally consider labels are bringing of sales from hard copy formats of the 360 paradigm something of real recorded music has dramatically cut to be fair, given value to the table. into record company income. Studies that the labels Subjective generally reflect a decline in album derive income yardsticks aside, sales in excess of 70 percent since from multiple the reality is 2002, with a concomitant decline in sources under the that today’s overall music-related income. The typical template; music industry end user now has more options, and conversely, one is very different all of them translate into less income might therefore also from the industry for the labels than provided by the assume that artists, who that gave rise to the traditional album-buying model. are compelled to surrender more traditional notions of record deal Since record companies still remain of their earnings under 360 deals, economics. In spite of those obvious the primary source of venture capital would view such arrangements differences, including those that for artists seeking the monies needed as oppressive. However, while permit a more expansive label to record an album, it can certainly that is the case in many instances, participation in the artist’s income be argued that keeping the labels it is far from a universally held stream, 360 deals certainly do not alive and relatively healthy is in the perception. Some artists recognize represent a total departure from the industry’s best interest. that the partnership forged by the historical economic template. The Despite these challenges, it is structure of 360 deals helps to ensure safe to say that the music business more active participation by the label continued on page 15

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THE MUSIC INDUSTRY COMES FULL CIRCLE: label continues to take 100 chance of succeeding in the percent of the financial THE HISTORICAL highly competitive marketplace risk. Therefore, when monies without the economic backing invested in recording and IRONY AND FUTURE and industry savvy offered by other areas such as touring, record companies. Therefore, merchandising and publishing IMPLICATIONS OF it is probable that both the are not recouped by the label, traditional relationship between there is no personal debt owed artists and their labels, and the by the artist to the record “360” DEALS critical role that 360 agreements company. Typically, any play in that relationship, will such sums are recoverable only continue to define the record business through royalties earned through Still, with an increasing for some time to come. record sales, or generated by number of artists becoming the artist’s other activities in disenchanted with their labels, the music industry. That core and with artists’ choices economic component of the for alternative avenues of conventional company/artist conventional distribution limited relationship remains unchanged. (there are currently only four major True, the overall pie from which record companies, as the result of the record company stands to make mergers and marketplace attrition), money is more generously defined some acts have elected to abandon under a 360 agreement; but, where the labels altogether and seek to HOWARD the companies’ investments and profit from their recordings on SIEGEL efforts have helped to produce a their own, or through partnerships is a senior larger pie, then permitting them with nontraditional entertainment partner in Pryor to have a piece of that larger companies. Madonna, Nine Inch Cashman LLP’s Entertainment pie does not seem, as some Nails, Radiohead and the Group. For more than 40 years he has represented have argued, prima facie, Eagles were among the clients in all aspects of the unconscionable. first major acts to venture entertainment business, with However, when the label away from the record a particular emphasis on the invests little or no money company paradigm; since music industry, during which and expends little or then, artists such as Ani time he has served as counsel no effort to support an DiFranco, Macklemore, to many of the industry’s most artist’s overall career Ingrid Michaelson and, prominent recording artists, activities, that same more recently and most , producers, analysis may well notably, Taylor Swift managers and executives. lead to a contrary have also broken Siegel served as judicial conclusion. ties with their clerk for the New York State It seems clear labels. Ironically, Court of Appeals from 1970 to 1972 and was an adjunct that 360 deals the nontraditional professor of law at Fordham will remain for the 360 model can Law School for 24 years. He foreseeable future. In only survive in an is a member of the editorial the longer run, however, environment of the board of Entertainment their viability will depend on traditional artist/record company Law and Finance and of whether both the labels and the artists relationship. Any widespread departure Multimedia Web Strategist, as are deriving sufficient benefit from such of artists from their labels could spell well as the Editor-in-Chief of arrangements. If there is a fair rate of the end, not only of 360 deals, but the nationally distributed book return on both sides of the label/artist of the music business as we know “Entertainment Law,” currently equation, it is likely that this type of it. Such a mass exodus is not likely, in its fourth edition. will continue to dominate however; only well-established, widely the music business landscape. recognized acts have a reasonable

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