It's All for You, Greg or A Brazen Attempt to Use Trends in the Recording Industry to Generate Beef

I know I just finished a fairly substantial music post, but there's more. In my continuing efforts as a footsoldier in the recording industry's war to survive and sack your wallet, let's talk about Paramore and the rising popularity of the 360 deal.
This is Paramore, a pop-punk act out of Tennessee signed to Atlantic Records and the poster-children for a major record label's successful use of the 360 deal. The New York Times covered the 360 deal in some detail this weekend, explaining how it benefits both major labels and their signed acts. For those of you super-interested in this stuff, shoot me a line on the comments page, and I can explain in greater detail.

Traditionally, record labels have provided the lion's share of the funds for an artist's promotion and marketing opportunities. The label fronts the money for the artist to record an album and then puts forth the money for the sales and marketing of that record. On the sales and marketing end, the label pays for everything from co-op advertising (where a label pays for a certain portion of physical space to advertise a record in a retail store) to radio promotion (buying ad time and paying independent radio promoters to push the record on DJs) to publicity appearances on television and in-person to P.O.P. materials (like the flyers and banners you see at stores) to street-team marketing. The label foots the bill for everything from the band's wardrobe for a photo shoot to meals eaten in the recording studio to posters you see around town advertising the album.

Traditionally, the only way that the label makes back its money is on the sale of that record, which it shares with the artist. In a recording contract, the artist agrees to pay back most recording costs and certain marketing costs so the label can recoup its losses. Did you catch that? The label gets back its money back first for recording and some of the marketing costs, which it takes off the top of the record's profits before giving money to the artist. (This is why the distinction between recoupable and non-recoupable costs in a recording contract is key. It's the difference between having a bill and not having a bill for tens of thousands of dollars if not more.) Yet the label and the artist share the revenue stream from the sale of the record. While the label owns the master sound recordings for the tracks on the record (a standard part of a record deal) and makes a fair amount of money in selling the album, the label must compensate the artist as the performer and/or writer of the song (called a "mechanical royalty"), while selling the album cheap enough at wholesale so that the label doesn't anger retailers by reducing their profit margins.

The artist, by contrast, has traditionally profitted on the record and everything else associated with the artist's name and face. The artist makes money off touring, the selling of merchandise, publishing royalties (mechanical, as mentioned above, and performance royalties from the spins off the radio), performances, licensing to TV and film, sponsorship opportunities, the sale of ringtones, the clothing line, etc.

The 360 deal, in short, is where the artist share a greater portion of his/her/their revenue streams with the label. Labels give the artist a greater front-end (literally, "money up front" after inking the deal), money for touring, and more monetary and resource support for artist development. The artist, in turn, gives the label a cut of the other revenue streams, like tour profits, merchandise rights, etc.

The 360 deal is an endless source of controversy in the music industry because it flips the seventy-five year-old business model of a hundred year-old industry on its head. Some here on the Quail editorial board see it as the last gasp of a dying industry, the death rattle of major record labels trying to keep their strangehold on artists' income. Others see it as a fair redistribution of resources between the engine behind the artists and the artists themselves. What do you think?