360 Deals, and How They Can Help or Harm
Before the streaming titans changed the landscape of music consumption, people got a hold of music through the radio and from buying physical copies of albums.[1] Even during the age of iTunes, people would regularly pay a set price for each song purchased.[2] Naturally, this meant a great deal of money was being made via sales of albums and singles. However, streaming platforms, like Spotify and Apple Music, upended this dependable revenue stream.[3] Nowadays, consumers pay a monthly subscription fee to their streaming platform of choice, and in return have unlimited access to the platform’s entire catalog of music. For example, in 2019 the Spotify premium subscriptions ranged from $9.99 to $29.99, depending on the type of plan one purchased.[4] And the catalog is hardly sparse. Indeed, Spotify boasts of carrying over 70 million songs, and Apple Music has over 75 million songs.[5]
This stark change in how we consume music has also necessitated a change in how record labels structure their deals with artists.[6] In the not-so-distant past, a record label would make a contract with an artist to produce an album.[7] The artist would receive a monetary advance, along with other production related assistance, and in return, the label and artist would split the revenue generated from sales of the completed work.[8]
However, revenue from sales greatly declined, and as such, labels sought to take a piece of the artist’s other ventures, such as touring, merchandise sales, and endorsements.[9] This sort of agreement is formally known as a “Multiple Rights Agreement” and is colloquially called a “360 Deal.”[10] In exchange, the label continues to offer the artist essentially the same benefits as in the past: expertise in promoting and distributing the artist’s recordings, and sometimes a cash advance.[11]
A question raised by some is whether the nature of the relationship between label and artist is fundamentally changed through this sort of contract.[12] Under a classic record deal, courts have routinely held that no fiduciary duty exists between the parties.[13] Perhaps under a 360 Deal, there now exists a partnership, and consequently a fiduciary duty to the other party.[14] Partnerships are said to exist when there is evidence of profit sharing, joint control of the business, and an intent to create a partnership.[15] The fiduciary duty created by a partnership includes the duty of loyalty and the duty of care, which would require a partner to account for profits arising from the partnership and to refrain from dealing with the partnership on behalf of a party having an interest adverse to the partnership.[16] If, under 360 Deals, partnerships are created along with its fiduciary duties, this would potentially benefit the music industry as a whole, as artists and labels will have to disclose to each other self-interested business opportunities and obtain consent from the other party.[17]
It is noteworthy that 360 Deals are not an all or nothing proposition. Often, a record label will contract to collect revenue from some of an artist’s ancillary ventures while not claiming all of them.[18] In this sense, the term 360 Deal is somewhat of a misnomer.[19] These sorts of less-than-360 deals have become ubiquitous in today’s music industry, and major artists have signed similar contracts.[20]
Ultimately, the 360 Deal has the potential to bring an artist substantial benefit in the form of greater label involvement in all areas of the artist’s career. Nonetheless, one must be cognizant of the real potential for label abuse, particularly in the form of a label shirking its responsibility to the artist, while happily collecting revenue it did not truly earn from an array of sources. An artist would be wise to carefully study a record label’s track record with previous artists to assess how involved they become in ancillary ventures, and how deserving they are in reaping those rewards.
Footnotes
