Undeniably, the recorded music business is relentlessly pursuing 360-degree deals with all new signings. Some live music promoters are also doing the same – note Live Nation and Chairman Michael Cohl’s recent resignation due to the fact that in his view Live Nation was not pursing them as aggressively as he thought that they should be. Both sides have been buying up expertise in an attempt to ensure they have the expertise to leverage ownership of all new revenue streams that 360 deals bring to the table. Does this necessarily mean that labels or live promoters will be successful in the execution of them? No!

We all know why record labels are pursing 360 deals as the traditional business model based on selling single units (i.e. CDs) is haemorrhaging in a big way. The labels argument goes like this; if they are investing in recording and marketing artists why should they not receive a piece of the pie from every single revenue stream from live, merchandising, publishing, management and recorded? To a certain extent this line of argument is valid.

However, questions need to be raised on four key levels: a) conflicts of interest in terms of the artists and what is in the best interest of the artist arise when all incoming revenue streams are owned by one entity; and b) ability to delivery effective and beneficial service to the artist across all areas tied up in a 360 deal; c) issues of income reporting transparency to artists need to be resolved; d) is it fair to extend a business model to all areas of an artists income stream that were traditionally untouchable by record companies, and were generally a life line to artists?

Examining issue a) above, what happens when an artist is against a tie up with a brand which the label wants to pursue yet the yet the live promotion side of the business does not? Which part of the business would get priority in the decision-making and would that necessarily be in the best long-term interests of the artist? Sometimes brand tie-ups can be good for a quick buck but what do they do in terms of credibility for the artist in the longer-term? Major labels have to report to shareholders and it is my view that artistic creativity controls may be taken away from artists in favour of a quick buck.

Also what if the label cannot deliver in all areas required to be serviced within a 360-deal structure? Yes labels have been buying-in expertise whether that is large management company’s a-la Universal, or live music promoter’s a-la Warner. Does this guarantee that this brought in human resource will deliver best practice in terms of service and deliver results, which matter to the artists. No it does not! It was noted on the “Major Label U-Turn” panel at London Calling on 20th June that indie labels have a success rate of seven out of ten in comparison to one out of ten for the majors labels – where does this leave artists in terms of a major label owning rights to every income stream?

Reporting transparency is of utmost importance in this realm and traditionally labels have not faired well in this respect. What checks are in place? One only has to look at the example where Snow Patrol sold 1.8 million records but still did not recoup. What checks and balances are put in place within the 360-deal structure to ensure transparency to the artist?

The fact that labels hand over raw assets to online and mobile retailers needs to change, as it is just unacceptable to not have checks and balances in place and thereby ensuring all digital asset sales are accounted for in a transparent manner. On a positive note though, if new methodologies were utilised by labels in delivery of content to digital retailers, traditionally “no go” markets would open up.

I will use the following analogy to demonstrate the strangle hold artists are in terms or record label deals. Say a bank loans you money to purchase a house (recorded music copyright). You pay back the loan and you own the house (recorded music copyright). However in a record deal you are loaned money by the label to record an album, as an artists you are only paid a 16% royalty on the wholesale price of that album. The label makes 84% of that wholesale price, but deducts your whole royalty to pay back you initial loan before you as an artist see a cent. Even when you have paid back that high interest loan the record label still owns you house (recorded music copyright).

No other business in the world would get away with such a double-dipping scam. Is it the artists problem that the label stuffed up its marketing and could not sell enough records? Of course not! So why should the label still own the artists house (recorded music copyright)? If 360 deals are forced onto artists and extend the rip-off scam across all possible income streams what benefit does it bring to the artist? I can see the benefit for the label, but not the artist.

I also understand the argument that since labels spend so much on marketing that they should be entitled to all areas of an artists income stream, as after all it is the labels marketing spend and expertise which makes an artist a star and provides the ability to maximise all income streams. However, is it morally justifiable to take all income streams without, sales reporting transparency across all income streams as well as the right checks and balances in place to ensure the artists best interests in the long term are safe?

On a final note the emerging markets are where the real opportunity lies in terms of exploitation of recorded music. 90% of global mobile subscriber growth in 2007 was in these emerging markets, which are leapfrogging fixed line broadband straight to 3G-network Internet access and content consumption. For example Nigeria traditionally known as an extremely dodgy country to do business with has an average monthly mobile content ARPU of $20 USD. This is more than in the UK or the US for that matter.

What labels are actively exploiting their music content in these emerging markets? If not, why not as the technology is their where labels no longer have to hand over their content in raw asset form? This technology from numerous suppliers enables real-time reporting. With physical sales dropping in traditional markets and digital sales increasing in all markets particularly mobile in the emerging markets, artists need to be sure that if they are going to give away rights to all income streams to record labels then labels need to be able to prove that they can robustly exploit and transparently report on all of those income streams.

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