The 360 Degree Contract (aka the "Multiple Rights" Model)

In the traditional music industry model, artists would generally sign three broad contracts with three different individual/companies. These were a) a recording agreement, b) a publishing deal and c) an artist/management agreement. The recording deal was designed specifically to govern the relationship between the artist and the label - in particular, the matter of commercial release of his music recordings, the creation and ownership of copyrights in his recordings, and the issue of what percentage of the sale price would be paid to the artist by the label.

The publishing deal governed the relationship between the artist as songwriter, and his publisher - a company or individual dedicated to marketing and generating income from the copyright in the artist's compositions (as opposed to the copyright in the recordings), including performance, mechanical and synchronisation royalties.

The artist/management agreement was designed to govern the relationship between the artist and his manager, who would have a mandate ranging from individual functions (like touring only) all the way to a general power of attorney which allowed the manager to negotiate for the artist in all matters pertaining to his career, including the above two contracts and other income streams such as merchandising and, in particular, endorsements and sponsorships. Traditionally, the manager would take a percentage of income generated for the artist.

So historically, an active artist-composer would usually enter into these three seperate contracts, with three seperate individuals or companies. The advantage to the artist of this scenario was that there were three seperate experts focusing on their particular individual fields, in respect of his music. It also created some natural healthy tensions that often worked in the artist's favour (e.g. the manager would be fighting for the artist to receive higher advances and recording percentages, the publisher would be pressurising the label to pay the mechanical royalties on CD reproduction and not have strict 'controlled compositions' clauses in the recording contract, and so on). The majors, of course, started blurring these lines quite early on, when they all opened publishing houses. But at least the two remaining roles remained seperate and distinct, since the competencies were completely different.

But as record labels started to feel the financial pinch of lower recording revenues when the internet and music piracy came about, some of them took the view that they (as labels, not publishers) should diversify their activities in respect of their artists to include streams of income not usually earned by the label, such as tour income, publishing income, merchandising income and management income. Thus, the concept of the '360 Degree Contract' was born (or at least given a name).

As its name would suggest, the 360 deal implies that the label is now contractually empowered to manage (and earn from) all the artist's various forms of income - not just recording. (Indeed, the contrary also took place, namely that some publishers began to look towards recording and management income, and some managers began to look towards recording and publishing income. In fact the first recognised 360 deal was created by Live Nation, known more for its activities in concert promotion than recordings or publishing).

Like many innovations, this concept was borne out of desperation: after experiencing the financial havoc unleashed by years of slipping CD sales, labels started viewing the artists' other income streams as a potential new source of cash. After all, the thinking went, labels invest the most in the risky and expensive process of developing talent, so why should they not get a bigger share of the talent's success? In return for that bigger share, labels were prepared to give artists bigger advances, bigger cuts than on a traditional label deal, and in many cases tour support that otherwise would not have been offered. More important, perhaps, artists argued that 360 deals could free them from the "tyranny of mega-hits", because there would be less pressure to make back the label's money immediately.

Thus the three roles were merged into one in (the pure) 360 deal, and the artist signed to a 360 deal with one company for all label, publisher and management responsibilities (or perhaps most, if it is not a complete or 'pure' 360 deal). The natural tensions I referred to above are negated, and one individual or company has complete control over all the artist's professional income.

This creates an automatic conflict of interest, according to some writers. Furthermore, the question of competency becomes vital. Put another way, "what does this label know about touring, publishing, merchandising and artist management? Alternatively, what does this promoter know about selling records and downloads, publishing and artist management? Alternatively, what does this publisher know about touring, merchandising, selling records and artist management? "

That, in essence, is what a 360 Music Contract is - a new music industry business model designed for the label to acquire more revenue streams for more responsibities, in contractual form. But these contracts can vary greatly in their contents. When faced with a 360 deal, you need to determine how fair or unfair its contents are, bearing in mind that all functions are now going to one company.

As a general principle, however, I would advise you to be very cautious: again, depending on the actual terms of the actual contract, and depending on whom you are dealing with, the 360 deal can be a very dangerous thing, because it entrusts all aspects of your career and your earning potential to one entity, usually for about 30% of the earnings - all the earnings.

Therein lies the risk: if the label happens to be adept at marketing recording but not so skilled at organising tours, generating publishing income or merchandising, for example, those aspects of your career can suffer terribly as a result. Furthermore, it might create other risks such as the label allowing itself to recoup recording advances from publishing, touring or merchandising (not a good situation for the artist). Above all, the potential for conflict of interest is great, and the potential for exploitation is even greater.

On the other hand, if the label has developed the skills required in all revenue areas (and you really need to check its track record in this regard), if the deal is a fair one (inter alia) reasonable income-share and recoupment clauses across various categories, and above all, there is transparency with regard to potential conflicts of interest, the 360 deal can be a convenient way of minimising the 'suits' you have to deal with, streamlining your career, and of getting a more understanding approach from your label.

It certainly makes the label's business model more viable and will (according to the label's at any rate) increase the label's ability to enlarge the overall income pie, which is in general a good thing for the industry. (Whether label's or promoters' involvement in areas beyond recording or promoting will actually produce real increases in the overall pie is hotly debated within the music industry and remains to be seen).

But above all, you have to be absolutely certain that you can trust the label or 360 provider you are signing to - much more so than would be the case with a simple record deal, because you are signing so much more over to it. Labels are known to give larger advances than has been in recent times, as long as it is a 360 deal that is being signed. In addition, the financial considerations are completely different in a 360, with the label (now often being called "the 360 provider") taking something in the region of 30% of income across the board. This means that they can be less demanding in terms of unit sale expectations.

The 360 deal also opens up new opportunities for the label to monetise the artist to the corporate world. Because the 360 deal gives the label rights across the board in respect of the artist, sponsorships, endorsement deals and other opportunities are more easily entered into (without having to consult external managers and publishers). In addition, the label's ability to cross-market items like CDs, ring tones, V.I.P. concert packages and merchandise might make for a bigger overall pie, and therefore more money for both parties.

There are also some variations of the 'pure' 360 deal happening. For example, some providers only want two out of the three functions, or only a part of the third. Some labels are applying the 360 model, but in a 'non-360' way. An example of this is Sony Music who often sign three seperate contracts with their artists, to three seperate companies with three different names (for example, their management company in South Africa is called New Day, but Sony apparently owns all three companies).

This recently happened with Sony South Africa's signing of well-known Ugandan rapper Keko in late 2012. While the contracts were acceptable in content, there were inconsistencies, because the terms, options and notice periods did not tie up. I presume this was simply due to administrative oversight. To Sony's credit, however, they prepared to insert a clear clause into the recording contract to the effect that no recording royalties whatsoever were recoupable. I guess the only way they could do this was by ensuring that they were getting a 360 deal, and calculating that they would achieve enough income from Keko in the other two spheres of her career, to justify this.

So the 360 contract has both its pro's and its con's.