Some habits are hard to break. Years removed from the record-low revenue that followed Napster and the boom of illegal file sharing, major labels have continued their piracy-era practice of asking artists for more than a share of recorded-music revenue.
“The labels are making a ton of money now, but still every offer comes with 360 rights,” says Joe Halbardier of King Holmes Paterno & Soriano. In a literal sense, the term “360” refers to the way a record label shares in all parts of an artist’s career — 360 degrees — and not just recorded-music revenue. Although most deals aren’t actually all-inclusive, a new artist’s typical recording contract for majors and large independents, according to attorneys, includes language that requires artists to share income from touring, merchandise, branding, sponsorships and even income from an acting career. That post-Napster mindset is simply “baked into deals now,” says Halbardier.
Over the past two decades, the recorded-music business has been nursed back to health on a steady diet of streaming revenue. U.S. record labels’ revenue grew 124% from $6.7 billion in 2014 to $15 billion in 2021, according to the RIAA. Spotify, which has driven much of the industry’s rebound, went from revenue of roughly $240 million in 2011, the year it launched in the United States, to $10.9 billion in 2021. The improvement, and the expectations of sunnier days ahead, have caused music asset prices to balloon and encouraged two major labels — Universal Music Group and Warner Music Group — and two independents — Reservoir Media and Believe — to list on public exchanges.
The 360 deal arose during a turbulent period for recorded music. In the mid-2000s, when piracy and digital downloading was ravaging record labels’ lucrative CD business, labels adopted these multirights recording contracts out of necessity. Recorded-music revenue fell 36% from $14.6 billion in 1999 to $9.4 billion in 2006, according to the RIAA. That was the year rock band Paramore signed what is widely considered to be the first 360 deal with Atlantic Records and Fueled by Ramen. At the time, many artists and managers derided them as unfair land grabs that encroached on sacrosanct areas of their careers. Now, labels’ demands for ancillary rights are more accepted — albeit still not preferred.
“You have to negotiate them out — or try to,” Halbardier says of non-recorded-music rights.
Fortunately for artists, attorneys are finding that labels are often willing to oblige — because it can be the difference between losing and closing a deal.
“The industry is much healthier now,” says attorney Erin Jacobson. “In general, there are more deals being done and [more] companies that want to be doing deals because they have the capital to do them.”
In recent years, the 360 deal has become more of a starting point than a foregone conclusion, according to multiple attorneys involved in negotiations with record labels. What began 16 years ago to keep labels financially afloat isn’t as necessary in today’s booming market. That means an artist’s attorney can often exclude certain revenue streams and negotiate a lower share of non-recorded-music revenue owed to the label. Artists also have an easier time getting a “shelter,” an amount of income protected from the label. A label that might have taken 20% of all non-recorded-music revenue in years past would now take just 5% or 10% above a threshold of, say, $500,000.
“The artist is able to keep more money in their pocket before the label starts participating,” says Matt Cottingham of Ritholz Levy Fields. A shelter for touring and brand/endorsement deals is especially important for a young artist building a recording career, says Sarah Scott of LaPolt Law. “This is the artist’s bread and butter, their only source of income for a while.”
Not everyone finds labels equally accommodating, but sources interviewed for this story agree the terms have improved in artists’ favor. Since every deal point is open to negotiation, artists can get better royalty rates, longer commitments and faster reversion rights that provide them with ownership of their master recordings.
There is one exception, however: In the wake of Taylor Swift’s 2021 rerecording — called “Taylor’s Version” — her albums Fearless from 2008 and Red from 2012, record labels are now requiring artists to wait longer until they can record new versions of tracks released under contract.
These 360 deals aren’t always unwarranted. Giving a label a piece of ancillary rights can make sense if the company adds value to the artist’s career, says Jeff Biederman of Greenberg Traurig. Over the years, labels went from passive participants — they collected a share of touring revenue without being in the touring business — to active participants with diversified businesses that span from sponsorships to e-commerce. Established artists once chafed at sharing ancillary revenue. At the most extreme end of the spectrum, Universal Music Group now has partnerships with superstars Drake and The Weeknd that cover recorded music, publishing, sponsorships, visual media, merchandising and branding. Even without a superstar’s negotiating leverage, a young artist can get a sensible 360 deal.
“On some level, the label makes a valid argument that they’re building the brand that other people want to invest in,” says Biederman. “So, if you get a real commitment [such as] marketing investment and time investment, then [giving the label] some share makes sense.” Exactly how much ancillary revenue an artist will share depends on whether the label is an active or passive participant. “Typically, the percentage is going to be higher when labels are taking an active role in managing or administering certain rights,” says Jacobson, “because they’re actually doing the work.”
More established acts and young artists with a little momentum — a TikTok hit is great leverage — arguably have more options than ever. Flush with cash and eager to break artists, labels are increasingly eschewing traditional contracts and getting creative. “Labels are more willing to be partners,” says Derek Crownover of Loeb & Loeb. An increasingly common option is a distribution deal that gives the artist back his or her master recordings after a fixed period, he says. Also, labels do what is called a “cut-in,” or override, agreement, where a party develops an artist as a producer and hands off the project to a label in return for points from the artist or label. Labels will also allow some artists to retain ownership of the masters, paying the label for distribution, or co-own the master recordings with the label for a period.
Another reason contracts are getting more artist-friendly: Artists simply don’t need labels as much as they used to. In the past, artists relied on labels and distributors to get their CDs onto store shelves and be heard on radio. Today, digital distribution is inexpensive, brick-and-mortar stores are not necessary, and radio exposure is less critical to success. “When you’re already having your music heard” on social media and “you’re making decent money, it’s harder to justify giving ownership to a label of your music forever in exchange for a not-very-good royalty,” says Halbardier. There is a trade-off, of course: An independent artist is unlikely to match the popularity of a major-label artist, says Crownover. “But at least you can start a business.”
With so much competition for artists, and with independence a viable alternative to a recording contract, labels are willing to spend big sums to close deals. “The climate has changed, and whereas people were holding back on advances 10 years ago or five years ago, they’re not anymore,” says Martin Mills, founder/chairman of Beggars Group. Crownover says he recently secured the largest advance of the 50 or so artist contracts he has negotiated in his career. “We basically said if we did do the major, we need big commitments of two albums, a big advance, big tour support, a big marketing budget and a big video budget.”
For many artists, though, the services a label provides are more important than the money. “Many artists don’t need to spend a lot of money,” says Josh Taylor-Anderson, founder of artist management firm Cassette Entertainment. In 2021, one of Taylor-Anderson’s clients, the rapper Example, signed a recording deal with BMG that provided enough global scale for the artist to grow outside of his home market of Australia. “An emerging artist doesn’t need a million dollars,” he says. “You need to build an audience organically.” That requires public relations, playlist pitching to streaming services and a social media strategy, he says — “things most major labels are really bad at it.”
Bigger advances and commitments from labels have a downside, too: Artists must pay back the record labels. Even when the music business is booming, how and when artists can recoup advances matters for both the label and artist, says Mills. Many artists make money from a steady trickle of streaming royalties, not bulk orders of CDs and download purchases the week of an album release. “So, paradoxically,” he says, “it’s taking longer to recoup advances even though the likelihood of recouping them is higher.”