The New Deal: Band as Brand
Understanding the new 360 concept in music.
With many major labels posting significant losses every quarter, Warner Music have decided that enough is enough and as such have decided to require all of their artists to sign the new '360 deal' before working with them.
Whereas previously, labels only got a cut of album sales and related airplay, under the '360 deal' they will entitle themselves to a slice of the merchandise and touring pie. In effect, the band will become a subsidiary company to the record label and be required to declare its earning in every field which the label will then take a cut of. The name likely comes from the fact that no matter where a band turns in degrees, there's someone there with a hand out demanding money
IF you surveyed the crowd this summer at the punk-flavored Vans Warped Tour here, thick with unexpected piercings and regrettable tattoos, the Paramore fans were hard to miss. Many were clean-cut young girls sporting the same shaggy orange-and-blonde hairstyle as the one worn by the band’s singer, Hayley Williams, in the music video for this pop-punk band’s hit song, “Misery Business.”
“I just want to be just like her,” said a 12-year-old fan named Christine, who cried while standing in line to get autographs from Ms. Williams, 18, and her band mates. Ms. Williams cupped a hand over her mouth and spun away for a moment for fear of losing her own composure.
Paramore is undeniably ascendant: after three years of tireless runs through clubs and festivals, the band, from Franklin, Tenn., has built a passionate audience that has snapped up more than 350,000 copies of its recent second album, “Riot!,” more than doubling the sales of its debut. And now the band is selling out theaters on its biggest tour to date.
Though its success is in large part due to smart pop songwriting and a fashion-forward frontwoman, music executives and talent managers also cite Paramore as a promising example of a rising new model for developing talent, one in which artists share not just revenue from their album sales but concert, merchandise and other earnings with their label in exchange for more comprehensive career support.
If the concept takes hold, it will alter not only the way music companies make money but the way new talent is groomed, and perhaps even the kind of acts that are offered contracts in the first place.
Commonly known as “multiple rights” or “360” deals, the new pacts emerged in an early iteration with the deal that Robbie Williams, the British pop singer signed with EMI in 2002. They are now used by all the major record labels and even a few independents. Madonna has been the most prominent artist to sign on (her recent $120 million deal with the concert promoter Live Nation allows it to share in her future earnings), but the majority of these new deals are made with unknown acts.
It’s not possible to tabulate the number of acts working under 360 deals, but worldwide, record labels share in the earnings with such diverse acts as Lordi, a Finnish metal band which has its own soft drink and credit card, and Camila, a Mexican pop trio that has been drawing big crowds to its concerts. In the United States, Interscope Records benefits from the marketing spinoffs from the Pussycat Dolls, including a Dolls-theme nightclub in Las Vegas.
“Five or eight years ago an eyebrow would be raised,” said the music producer Josh Abraham, whose recent credits include recordings by Slayer and Pink. “Now it’s everywhere. You can’t talk about what a deal looks like without seeing 360.”
Like many innovations, these deals were born of desperation; after experiencing the financial havoc unleashed by years of slipping CD sales, music companies started viewing the ancillary income from artists as a potential new source of cash. After all, the thinking went, labels invest the most in the risky and expensive process of developing talent, so why shouldn’t they get a bigger share of the talent’s success?
In return for that bigger share, labels might give artists more money up front and in many cases touring subsidies that otherwise would not be offered. More important, perhaps, artists might be allowed more time to develop the chops needed to build a long career. And the label’s ability to crossmarket items like CDs, ring tones, V.I.P. concert packages and merchandise might make for a bigger overall pie.
Not everyone is sold on the concept. Many talent managers view 360s as a thinly veiled money grab and are skeptical that the labels, with their work forces shrinking amid industrywide cost cutting, will deliver on their promises of patience.
“That’s a hard speech for many people to buy into,” said Bruce Flohr, a longtime talent executive who signed the Dave Matthews Band to RCA Records and now works for ATO Records, an independent label. “You can speak to me that you’re going to work a record for 18 months. You’re going to work a record for 18 months when it’s selling 420 copies six months from now? Come on — really?”
Even inexperienced performers may resist sharing their take from the box office, particularly at a time when plunging CD sales have pushed artists to rely even more on their concert earnings.
But record executives argue that such deals could free them from the tyranny of megahits because there would be less pressure to make back the label’s money immediately. In the 1990s the arrival of computerized data from SoundScan, which tracks retail sales, meant the industry had an instant scorecard that tempted companies to push for Hollywood blockbuster-style opening weeks. The demand for quick payoffs persisted, even though a review of the last 15 years of Billboard data shows the albums that immediately seized spots on the upper half of the Billboard Top 200 chart would go on to sell fewer copies, on average, than the releases that slowly worked their way up.
“If we weren’t so mono-focused on the selling of recorded music, we could actually take a really holistic approach to the development of an artist brand,” said Craig Kallman, chairman of Atlantic Records, which signed Paramore, along with Fueled By Ramen Records. “What’s the healthiest decision to be made, not just to sell the CD but to build the artist’s fan base?”
The industry’s hunger for 360 deals might also subtly shift the ways labels view the scouting and cultivation of talent, a process known as A&R, or artist and repertory, development.
Rap acts, for example, might lose out, since their recordings can be expensive to produce and very few become touring successes. On the other hand, rappers can attract lucrative endorsements for products from sneakers to computers to soft drinks; many have started apparel lines. With an eye to a piece of that potential revenue, Atlantic recently signed the Brooklyn rapper Maino to a 360-style pact.
And labels may take a closer look at the progeny of the Grateful Dead: hard-touring jam bands that don’t necessarily sell many CD’s or score radio hits but do draw obsessively loyal fans who gobble up tickets and memorabilia. “We used to look at jam bands as bands that absolutely we shouldn’t sign,” Mr. Kallman said. “Now all of a sudden I’m saying: ‘Guys, you absolutely must find the next hottest jam band. I need the next Phish. Urgently.’”
A somewhat similar blueprint emerged in 2005 when Atlantic and a small partner, the Florida company Fueled By Ramen, signed Paramore with plans to build a brand-name rock band, one that now not only racks up sold-out shows but sells merchandise from flip-flops to tube tops. The band members, who were mostly teenagers when they signed, felt drawn to a comprehensive approach that allowed for slower growth, Ms. Williams said during a recent chat on the band’s tour bus.
The slow work of playing scores of clubs has paid off so far. It took time for Ms. Williams’s marketable girl-power persona to blossom. At first she usually wore a T-shirt and jeans, but after roughly two years of gigs, she had an epiphany.
“We were leaving Glasgow, Scotland, on the way to another city, and I remember saying, ‘I don’t want to wear this kind of stuff anymore, because I kind of feel like a dude,’” she recalled.
As the band developed, Atlantic and Fueled By Ramen underwrote many of its touring expenses, including, early on, the purchase of a van and payments to Ms. Williams’s mother to continue the band members’ high school education on the road, said John Janick, Fueled By Ramen’s top executive.
Paramore’s handlers wanted the band to hone its craft off the industry radar, forgoing the push to get radio play for any singles from the band’s first album, 2005’s “All We Know is Falling.” Instead, Fueled By Ramen tried to drum up support on Web sites like Purevolume.com, where users explore new music. “The band was so young, and they were trying to figure out who they were,” Mr. Janick said.
Paramore’s debut sold more than 140,000 CDs: no flop but far below typical expectations for a band considered a label priority. “We were given all the time in the world, and all the support we could ever ask for, to basically do nothing but play shows,” Ms. Williams said. Without the 360 approach, she said, “I don’t know that we would’ve been given that lenience.”
Though the concept could be applied to anyone, even fleetingly famous pop stars, the real potential of a 360-style pact does not emerge unless an act is popular long enough to attract either loyal fans who reliably buy tickets, or attention from business partners who might help market spinoffs like a fragrance or sneaker line.
“Let’s face it, if you’ve sold 1.5 million albums off one single, and here comes your clothing line, and here comes your personalized phone, you haven’t really built a fan base,” Mr. Flohr of ATO said. “You’ve built fans of songs.”
If 360s mean that labels might practice more patience in developing raw talent, however, they could hardly have picked a worse moment. In the open culture of the Internet fans can render judgment on burgeoning artists almost instantly, long before the musicians have a chance to hone their songs or road-test their performance skills. Indie-rock bands run a gantlet of blogs that might include a round of breathless hype that vaults them to Next-Big-Thing status then a thorough backlash, all before they even release an album.
While most labels now monitor blogs for new acts to sign, many executives insist that, once they commit to developing a new act’s career, they can discount much of the online banter. “It’s not just like, ‘Oh my god, they’re not hip in Williamsburg anymore, so therefore it’s over,’” said Steve Ralbovsky, a longtime A&R executive who signed artists including Kings of Leon at RCA Records and now runs his own unit, Canvasback, at Columbia Records. “You just have to realize there’s a world apart” from the blogosphere.
Mr. Ralbovsky, who has started to discuss 360-style pacts with several artists, said it will take “a couple of years” before anyone can determine whether a group’s ancillary income can offset the continuing slide in album sales. As for Paramore, executives say they still view the band as an investment, and decline to disclose financial details of Atlantic’s arrangement.
Particulars of a 360 deal might differ from label to label, but a recent Atlantic offer to another act provides an example of how one might be structured.
Atlantic’s document offers a conventional cash advance to sign the artist, who would receive a royalty for sales after expenses were recouped. With the release of the artist’s first album, however, the label has an option to pay an additional $200,000 in exchange for 30 percent of the net income from all touring, merchandise, endorsements and fan-club fees.
Atlantic would also have the right to approve the act’s tour schedule, and the salaries of certain tour and merchandise sales employees hired by the artist. But the label also offers the artist a 30 percent cut of the label’s album profits — if any — which represents an improvement from the typical industry royalty of 15 percent.
Mr. Kallman said that if Atlantic engages more artists in such agreements, it will have to devote more resources to a smaller roster and raise the stakes for each album. “Your batting average has to go up,” he said. If new artists don’t become successful, “I’ve doubled and tripled down on everything and I’m still playing to empty houses and not selling records.”
As for Paramore, the band’s chance to develop away from the spotlight of the mainstream marketplace has now ended. With its gathering fame, the band has already confronted a handful of tough decisions about how to maintain its identity. Ms. Williams said she rejected an overture from a shoe company that wanted to feature her — alone — in an ad campaign.
Still, to grow, the band will have to expand its reach. Josh Farro, Paramore’s guitarist, sounded wary. Until now “we didn’t want to get lumped into that whole machine, MTV and all that stuff,” he said. “We felt like it was just too soon. And we’d rather build a solid fan base.”
He added, “We have such crazy fans, and those are the ones that are going to stick with us forever.”
Article Written By: JEFF LEEDS New York Times
November 11, 2007