In recent years a huge amount has been written about the death of the Major Record Labels (made up of Warner Music Group, EMI, Sony BMG & Universal Music Group) and one thing is certain, if they aren’t dead yet then they are definitely struggling to make the same amount of money that they used to; which with the huge overheads of running a huge overweight label – is rapidly turning terminal!

The math used to be simple, the Major Labels spent big on recording and marketing an album, using all their leverage with the main media outlets to ensure blanket coverage. They then saw big returns when the hits rolled in.

As the world of mp3 hit though sales began to fall. Falling sales meant lower returns and as the returns have diminished so the willingness to take risks has also ebbed away. Just like Hollywood studios now rely on sequels and film franchises to bring in the big bucks every summer so to it feels like Major Labels are just looking for safe acts to guarantee a return on their investment. Methods range from reforming all the old acts whose back catalogue they own to innovative tie ins with reality TV shows which basically do all their advertising for them before they’ve even had to release a record. Other more clandestine methods include an increase in the use of corporate style market research and using sophisocated computer ‘rating’ programs to predict if a band or single will be a hit or not.

The 360

Not only is the A&R and marketing striving towards new ways to guarantee large returns for investments but the type of deals being offered are also changing. An artist used to sign a deal with a label to recording and release an album and any profits from the sales of that album alone were split between the label and the artist. The reality of today’s market is that recorded music sales are plummeting but the live music market is increasingly strong with growing audiences willing to pay top dollar for good gigs. Many labels now, both independent and major, are trying to offset some of their losses in the recorded music sector by muscling in on the live and merchdising scene as well.

Where as historically a label gave the artist an advance to record an album and earned a split of the profits solely from those album sales, a 360 deal takes a split of profits from all aspects of the artist’s income. This can include ticket sales at gigs, merchandising, publishing, licensing, sponsorship and any other money the artist makes. These deals aren’t necessarily accompanied by increases in advances or budgets (though some labels are now offering to deal with all aspects of the artists managerial business in-house eg. also acting as booking agent, live promoter etc); the labels are just trying to find ways of justifying their recording investment in the artist.

So on the face of it it’s a horrible deal for the artists, the greedy record company grabbing more of the pie and taking away rights and money that should rightfully belong to the artist. Is this just a knee jerk reaction though? Well there are definitely some arguments for pursuing and signing a 360 deal with a major label. The main one is that if you don’t mind being moulded and market tested and shaped by the major label machine and all you want is Top 10 hits then major labels can still deliver that. They have the expertise, the contacts and clout with the media and more importantly the budgets to market and promote acts on the biggest scale. What you can lose in many cases is some creative control and the opportunity to farm out different aspects of your creative product (eg. recorded, live etc) to different people under different terms.

It’s also probably worth mentioning here that the whole situation with record deals is currently in complete flux. People are floundering around desperately trying to find a formula that works in the current digital age. While the 360 deal is one way the labels are trying to increase their revenue and reduce their risk they are also pursuing many other routes including ideas like artist sponsorship. This involves a brand or company paying an artist to do anything from perform at promotional events to allowing their name and music to be used in the company’s advertising and marketing.

The fruits of this are just beginning to emerge with examples like Groove Armada signing a multi year deal with Bacardi. This is sure to be a growth area over time but to what extent you lose your artistic credibility by signing up to be branded by a multinational company is going to be a question many artists should be asking themselves.

The major trend currently in the industry is that if you are aiming to sign with a major label (with all the financial and promotional influence that brings) you are going to have to be signing away an increasingly large amount of your rights and royalties. For most major label deals now, it’s 360 or good-bye.

Luckily for the artists the fall of the major label’s dominance has opened up huge opportunities for their traditional adversaries – the indie labels.

Indie Record Labels –>