Saturday, October 2, 2010

Anita Wadhwani: Inclusive deals give record labels chance to make up revenue

It's a business formula that record labels continue to tinker with as they try to make up for lost music revenues in recent years: the "360 deal."
Also called a "multi-rights deal," the 360 deal expands the traditional business contract between an artist and a record label.

Instead of taking a role — and a financial stake — only in an artist's music sales, record labels have become involved in touring, merchandising, publishing, hammering out endorsements and crafting sponsorships.

Most were considered ancillary revenue streams in the past, but now those extras have become much more important as music revenues have declined.

In the span of 10 years, total album sales — the lifeblood of the industry — have been cut by more than half, with digital sales coming nowhere near filling the gap.

The most recent numbers look like this: total sales for digital and physical albums declined to 373.9 million units in 2009, according to numbers released by Nielsen SoundScan. In 2000, album sales peaked at 785.1 million units, or double the recent count.

Those free-falling numbers have decimated the market; the revenue associated with sales in the U.S. plunged about 41 percent over an eight-year span as of 2008, according to relatively recent RIAA data.

Music attorney Kent Marcus, who has brokered 360 deals with Nashville acts such as the band Paramore, said that the deals have had mixed success.

"In theory, it's supposed to take the pressure off the artists," Marcus said. The idea is that the label is earning revenues from a new act touring and selling T-shirts, easing the pressure for them to deliver hit music.

"But some labels are quick to leave that path of development" if the artist isn't producing hit songs, he said.

Marcus was part of a panel discussion on the evolution of the 360 deals at the Leadership Music Digital Summit, a two-day series of discussions among music industry insiders this week.

Deals help develop career

Livia Tortella, newly named co-president and chief operating officer of Warner Music Group, said the deals allow labels to patiently help develop artists' talents.

"We don't live or die by the profit and loss statement of an artist," she said. "It's a return back to the artist development of the old days. A hit will happen or not happen but a career is more important," Tortella said.

At its best, instead of a business focus solely on creating hit songs, a 360 deal can allow artists to tour, sell merchandise on the road, find their voice over time, and build a fan base through a variety of means — including social media, the proponents say.

Reach reporter Anita Wadhwani at or 615-259-8092. Read her column on the music business weekly in The Tennessean .

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