Let's Talk 360 Deals

You may remember the story of one of the top R&B groups, TLC featuring Tionne “T-Boz” Watkins, Rozonda “Chilli” Thomas, and the late “Left Eye” Lopes. During the height of their fame, they earned 4 Grammy Awards, 5 MTV Video Music Awards, 5 Soul Train Music Awards, heavy commercial success, and spent over 2 years on the Billboard 200. Yet, the group ended up filing for Chapter 1 bankruptcy, stating a debt of $3.5M. They were “broke”. How? What is now commonly referred to as the “360 deal”? in the music industry has been evolving for years into what it is today, and TLC was signed to an earlier version of this type of deal.

A 360 deal is an agreement between an artist and record label in which the label agrees to provide financial and other support for the artist, including advances as well as support in marketing, promotion, etc. In turn, the artist agrees to give the label a percentage of a number of revenue streams the artist earns across the entertainment industry, such as touring/concerts, television appearances, merchandise, and publishing. Essentially, it’s viewed as a way for the label to recoup what it? spends investing in a new artist in order to? launch the artist’s career. 360 deals have gotten a bad rap; however, unless an artist goes the independent route, it is generally the entry point for entering into a deal with a major label. Having a savvy negotiator represent you on a 360 deal is key. Here are some other points to consider when negotiating a 360 deal:

1. Hire an experienced music lawyer, who will serve as an advisor and educate you on your deal. A mistake many artists make is signing contracts that they don’t understand. “When I signed, I didn’t really know what was in my contract” shared Grammy-award winner Megan Thee Stallion, who is currently in a 360 deal with her label 1501 Certified. Although Megan is signed to 1501 Certified, she is also under a management deal with Roc Nation, who? noticed red flags in her deal. Although Roc Nation and Megan attempted to renegotiate her initial deal, 1501 filed a request to block her from releasing new music. This was ultimately overturned, with a judge ruling in Megan’s favor, allowing her to release her 2020 EP, Suga. This is a good example of why it is important to to hire an industry specific and? knowledgeable lawyer/management team when negotiating contracts in the music industry.

2. Eliminate vague language in the agreement.? For instance, if the label wants 50% of performance revenue, 30% from merchandise, and 10% from endorsements, ensure that it’s clearly defined in the contract with no vague terms or language.?

3.? “Sweeten the Deal”. For example, if the label asks for 50% of performance revenue, seek to negotiate with the record label to pay for your room, board, and meals for the entire tour. The label wants 30% of merchandise? Have them take a stake in manufacturing the merchandise themselves. Some record companies are willing to provide benefits/ services in exchange for their cut.

4. Lastly, ask for an advance in exchange for every income stream that?the label seeks a portion of, and pay close attention to recoupment language in the deal. Income earned? across revenue streams should be used to recoup the advances provided by?the label (as opposed to just from recording revenues).? This concept is referred to as “cross-collateralization”.

While the 360 deal may not seem ideal, many artists choose to enter into them with hopes of becoming a major star. With proper negotiation,?artists have a chance of success?without spending? their own money and have access to the industry professionals behind the top stars in the music industry.