A hotly debated term in the music industry, 360 deals have indeed managed to capture the attention of record labels and artists alike. It is important for any artist whether solo act, band member or producer to understand exactly how these deals work and who ends up with the bigger payoff. Before I get started explaining what a 360 deal encompasses I would like to take a few steps back and remind us all of what has been the purpose of a record label in the past and how the business model has changed.

Back in the day… Let’s go back to the Motown era just for clarity sake. The purpose of a record label in those good old days was to acquire talent by promising to develop their image and talents funded by big label dollars. Once the talent had been fully nurtured and developed those big label dollars would pay for marketing campaigns. These marketing campaigns would produce gigs, concerts and fan base thus providing exposure for the talent. Exposure which would lead to record sales. Based on contractual obligations by the artist those record sales would payoff the record labels first. Indebted by their signatures on those multi page documents, the label so happily placed before them, the artist had to make several more albums in order to try to dig out of the hole all the while acquiring more debt that had to be repaid. Thus it was and has not been uncommon to hear stories of artist who have had mega sales and number one hits, that have faded into the masses as bankrupt or poverty line statistics.

Granted there were those larger than life (or at least larger than record label) acts such as Elvis, The Beatles and The Rolling Stones that managed to conquer the masses and produce record sales that proved profitable for both label and artist.The new era had brought mega superstars front and center. Michael Jackson, Madonna and Prince have been at the forefront of artist who have gone head to head with their record labels and secured lucrative deals. Yet artist were still receiving the short end of the stick. Could this type of business model go on forever? How could an artist ever think they could reach stardom and notoriety by their own means. Only well established artist could possibly turn the tables.

Welcome the new millennium. Welcome the digital age. Welcome the end of the record label business model as we know it.

At the turn of the new century the number of internet users had grown rapidly. Napster became a household name. Online music file sharing was born. Many Napster wannabe’s followed. This posed a major threat to record sales. The majors were not going to let a home grown program drive down their profits. By 2001 the screams of copyright violations had been heard in the courts. Napster had been shut down. It wasn’t only record labels waging war against Napster big name acts such as Metallica had helped shutdown Napster. The big bad record label wasn’t the only entity losing money it was the artist as well. Napster may have been shut down but here came Kazaa, Limewire and finally iTunes which helped monetize the situation helping artist regain some of what the internet and their fans had taken away.

With record sales down, the labels looked to cut corners. Artists development had now become product development. Less focus was given to the development of the artist. The focus of the new millennium Artist development departments had shifted to breaking or promoting artist to turn over profits quickly and minimize the financial investments of the labels. This change in business model also changed how and when an artist got signed. Before having talent that could be nourished to stardom was enough to ink the deal, now artist must come prepackaged. They must come to they label with enough developed talent and image to have garnered them a growing fan base. Well if you’ve developed your talent and you’ve spent money developing your image then you’ve helped the label do some of its job. Developed a fan base? well that must mean you’ve had some success marketing your talents. These new criterias for getting signed spawned a revolution within the industry.

Yes, it is true that the internet has created losses in music sales but it should be also said that the internet has created a new venue for artist to market themselves and create new revenue. Thus the 360 deal is born. Record labels, quick on their feet, looked for new ways to make enough money to sustain themselves and their contracted talents. 360 deals, a multi-layered contract designed to control the artist’s or band’s overall career and not just their record sales. A 360 deal is designed to allow record labels to control the artist’s career in all aspects. It includes concert revenues, advertising and of course, merchandise—merchandise being the biggest profit gainer nowadays. It also involves branding the artist and maneuvering their careers to what the record labels deem better for revenue gain. Once signed, the record label will be in charge of the talent’s career including their visibility in the music industry. In a 360 deal, the record label and the artist will both get a share of profit coming from all areas of the talent’s career. For the record label, it means more money while for the artist, it means less room for personal choices.

In other words, a 360 deal is somewhat disguised as a partnership between the record label and the artists. Before it was the artists under record labels, now the record label must work hand-in-hand with their talents if they want to make money from them, or so these record labels say. In reality, it is just the record labels’ way of sharing a bigger piece of the pie. As label execs argue, an artist can never land a contract and be known by the public without them. I wonder if anyone mentioned this to Soulja Boy or Drake who have recently delivered big record numbers before signing with their labels. Jay-Z and Madonna penned huge deals pioneering the 360 deal but when the balance of power is in an artist favor those deals do make sense. However, non heavyweight acts are essentially signing away all of their rights and everything of value that gives them any leverage. 360 deals aren’t about selling music, they’re about selling anything that will make some money.

Through the use of artist development professionals, a good marketing firm and effective public relations the artist can develop a team that can do the same at a lesser price or percentage of what the record label will take. Open minded, innovative, ambitious artists and managers should look for investors to form a limited liability company (LLC) and share ownership with the artist in all aspects of the business. The LLC governed by an operating agreement will allow for flexibility and room to grow. The company could invest in new talent and form a subsidiary or the artist could eventually buy out the investor. A lot of the things are possible with the right team and the proper paperwork. If an artist takes a more responsible role in their career and understands the more control you retain the better chance you have of longevity within the industry, the potential is limitless.