360 Deals Taking Hold

Edgar Bronfman CEO Warner Music GroupIf you follow music industry news you may have heard or read some articles discussing something called 360 deals or contracts. For those who may not know, 360 deals are a fairly new and somewhat controversial practice that are becoming more common in the music industry. In a nutshell, 360 deals are contracts that not only give record companies a percentage of CD and digital sales (normal) but also a percentage of concert ticket sales, merchandising and basically anything that makes money from an artist’s name.

In a “normal” contract record companies would only make a percentage off of music sales, period. Granted they get the lion’s share of music sales but with traditional cd or hard copy sales continually dropping year after year these companies are resorting to alternate sources to keep making money.

Now these types contracts are not new, but up until recently they have been viewed as experimental. But according to Warner Music Group CEO Edgar Bronfman about a third of their signed artists are under 360 type contracts. While speaking at the Web 2.0 Summit he told the audience that his label now requires all new artists to sign 360 Deals. It won’t be long before all other major labels follow suit (if they haven’t already).

The record companies would argue that they need this to stay competitve in this new age market and that they need more of a return on investment for artist promotion which can be very costly. Problem is they are dipping into revenue streams that artists are used to having to themselves. Most artists, especially new ones, don’t make a huge amount off of CD sales but can depend on concerts, live appearances, etc as their bread and butter. This may be a deciding factor for some artists on whether to sign with a major label or an independent ladel who may not require a 360 deal.

What do you think, are these types of deals ethical or just smart business on the part of the record companies? Leave some feedback…