The 360 Deal: This Is The Contract That Most Labels Offer Artist

It’s a well known fact that 360 Deals are pretty much the norm these days for any artist wanting to align with a major label. Mainly out of curiosity I’ve always wanted to see how one broke down, because outside of ponying up for recording costs, what else can you say a major label does for an artist? They don’t develop them anymore; instead stepping in after the artist has some semblance of a following and selling them a dream.Industry jack of all trades, Wendy Day, feels the same way & penned an enlightening article on the subject. Using her contacts and knowledge from her time served, she compared a traditional deal vs. a 360 deal.

Back in the day, labels took roughly 87% of the pie while giving the artists 12% of the money AFTER the artist paid back everything spent on them from that 12% share. This means that if the artist sold $500,000 worth of CDs, and it cost $50,000 to market and promote that CD (a very low example), the artist share of $60,000 (12% of $500k) would be divided between paying the label back that $50,000 and a check for the remaining $10,000. The label would receive $490,000 for its investment and belief in that artist while the artist made $10,000. In exchange for giving up the lion’s share of the sales, the labels always told the artists that they’d make 100% of the touring. Any show money, was the artist’s to keep!
When the shit hit the fan financially for the labels, they decided to tap into the show money, and all other streams of income for the artists, as well. After all, if your profit margin is made smaller, you need to eat more of everyone’s income to keep the fat cats at the top, and the stock holders, happy. Most 360 Deals share in endorsement income (15% to 30% depending on the artist), performance income (10% to 30% depending on the artist), merchandising income (20% to 50%) and Film/TV money (15% to 40%).

While those percentages can go pretty high, they’re even more eye popping when she applied some numbers to them:

Example of a “360 Deal” Artist (this is not an actual artist example):

Male rapper based in Atlanta with a strong following. He has his own team of inexperienced friends and family around him and a very strong street following. The DJs, fans, other artists and industry are supporting him and propelling him forward. With no real single or CD in the marketplace, demand is high—he’s getting $30,000 a show and performing three or four times a week for the past few months. This will last about 6 months, approximately. He’s put out a series of mixed CDs, for free, over the past year. The label signed him to a 360 Deal a year ago but hadn’t begun to promote him yet because their roster was full. The artist got tired of waiting and began putting out a new mixed CD every month to build his buzz.

Advance: $75,000
Album budget once popularity increased: $350,000
Recoupable Marketing and Promotions: $750,000
Monthly show income: $420,000
Endorsement Deal: $50,000

Album comes out and sells a total of 350,000 copies (it was a very commercial album but the artist had been very street, almost gutter, up to the point of his album release so fans didn’t really embrace the album as expected).

Album income for label: $3.5 million
Artists’ share after recouping: negative balance of $405,000
$750,000 + $75,000 = $825,000
12% of $3.5 mill = $420,000
$825,000 – $420,000 = $405,000
Artist’s endorsement deal share: $37,500
75% of $50,000
Artists share of touring income: $1,764,000
70% of $420,000 x 6 months
Artists share of publishing income (50%): $100,000 (estimate of mechanicals and ASCAP/BMI royalties)

Income for Label: $4,773,500 gross income on an investment of $825,000
$3,500,000 sales
$405,000 recoupment
$12,500 endorsement income
$756,000 tour/show income
+ $100,000 publishing income
$4,773,500 gross income
Less Staff costs
Less Day to Day operating expenses
Less Taxes

Income for Artist: $1,122,375 income
$37,500 endorsement income
$1,764,000 tour income
+$100,000 publishing income
$1,901,500 sub total
-$405,000 recoupment
$1,496,500 gross income
Less 20% management fee
Less 5% Business Manager fee (Accountant)
Less Tour costs/legal costs/tour manager/DJ/Operating expenses/taxes

Let’s compare gross incomes…

Artist made 1.5 million while label made 4.7 million
Artist share: 24%
Label share: 76%

Let’s compare Net incomes before taxes…

Artist made approximately $1 million while the label made approximately $4.5 million
Artist share: 18%
Label share: 82%

This works great for the labels because they now get a piece of things that come directly from the artists’ music, especially in a time when music sales can yield negative returns. Taking a look at the figures that Beware provided, I’d be inclined to take my chances on the independent route if I were a rapper nowadays. Get my music out there and hit the road, build up my appearance fee. But after talking to a guy who chased a recording contract, he said he sign the traditional deal in a heartbeat. He’d take his chances with the major, just to not have to worry about paying all the day to day expenses and figuring out all the touring logistics.

"Right or wrong doesn’t matter in this instance, because whatever carrot the labels dangle there will always be someone willing to bite"  By Wendy Day ceo Rap Coalition

*This Article is from Wendy Day ceo of Rap Coalition website, If you don’t know her body of work  just google her she has contributed a lot to the music scene over the years, anytime I have a industry question I call Wendy, example back in November of 2011 I was looking for manager or booking agent that specialized in working with djs when I called her she was like Ghost Dogg you are the second call that I have gotten in last 30 minutes from a dj looking for a manager I said who was the first she replied Green Lantern. I talked to wendy right after Mid Tn Hip Hop brought me in as writer, and I ask Wendy’s permission to post some of her articles on MidTnHipHop from time to time she said ok. The music industry is 90% marketing,networking,stratagizing,etc and only 10% preforming some artist got it backwards. I hope the break down of the 360 rule answer all your questions, also if your an artist never sign a contract or distribution deal without your attorney reading it first. by DJ Ghost Dogg