Just Sign On The Dotted Line
SMOKE BREAK By MZ on March 14, 2010 at 11:53 am
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.
[Via]
26 Comments
Record Labels are the devil’s invention
Interesting post MZ. Unfortunately, if I were in that position, I’d still jump at the Major. There are just too many avenues I wouldnt know how to go down and tackle w/o the experience.
Strictly out of curiosity, I’d like to see those numbers in reference to a one Mr. Ash Roth.
These rappers better keep a 9 to 5 because you sure can make more money. Artist need to learn/research the business first before jumping in them shark waters
I’m with Beware tho….I would jump on with the Major as there are too many hoops, hurdles, pitfalls, etc in the music industry for a rookie to deal with/handle.
Once on major I as an artist would learn as much as possible about marketing, touring, production cost, publishing, etc to one day make my move to independence.
Fuck a Major, ask Wale. He had all the buzz in the world and they only shipped like 30K of them. Thats fuckery:
Wale is reportedly only projected to sale 25-28k units in his first week of Attention Deficit sales. However, Wale claims he and the label are not focused on first week sales at all.
“This is my biography,” Wale said of his debut. “It’s honest. Raw emotion…My label is letting me put out an album with a single that released seven months ago. We’re not going for first week sales. We’re only shipping out 30,000 of them. We’re going for that grind. We’re showing people that you can build a fanbase the old fashioned way.” (Honey Magazine)
That’s 3 million dollars worth on independent grind I’d be willing to do. If you got the sound, buzz, fanbase, show and marketability to attract a label, why would youeven need them since they don’t develop artists anymore. 106 and park, the BET awards are fine but if they are handcuffing you, giving you fame vs fortune, then why?
So this is basically Pill’s financial statement for the next year, eh?
die evil spawn of satan!!!
You still need majors if you want what comes with what they can provide.
Try getting adds at radio without six figures as an independent artist.
The majors are falling quickly – but so are the independent artists sales.
For instance, I was speaking to a well-known local act (beyond regional) who is independent. Just a couple of years ago he could release one album and live for a year – now he has to release 4-6 to make the same profit.
People are simply no longer purchasing music. It had gotten to the point (just no more than a few years ago) where fans would come out of pocket to support those not backed by a major (if nothing more than to stick it to the majors) – that is no longer the case. Indie releases get illegally downloaded just as prominently as the majors now.
The best way to do it is still build a buzz independently – but once the majors come hollering… sign with one.
To be honest, the shift in making a living as a musician will no longer be in albums but in touring and live shows.
Fans got greedy.
Truthfully, if most fans could get the artist as a hologram in concert (AKA S1m0ne) at a discount, they would do it.
The music business is almost dead – and the best way to profit is to build the graveyard where it is going – and sell the plots.
(What up Wendy)
^
Your reply was my main reason for even doing this. I wanted to ask you stuff before I even wrote it.
My top 4 favorite Women on planet Earth:
My mom
My fiancee
Wendy Day
Your mom
@ Anon, If you hire a good booking agent and publicist and above all make good music then you will make the same as you would at a major and only have to sell a third of the copies plus tour and merch without a hand in your pocket. Your album does 150k thru iTunes, bandcamp and your site, you’re still netting 1.5, 1.25 after paying said publicist, booking agent, lawyer and accountant. You still haven’t even counted show receipts yet.
I blame the internet, if it wasn’t for illegal downloading sales wouldn’t be as bad. With that said it also opened the doors to get your music out there quicker and not depending on a dj/radio station to play it. It also open the flood gates so now there is thousands of rappers out there with mixtapes.
There is so much music out there is hard to appreciate any new music. Looking back, an artist 5-10yrs ago would only release an album every year or two. Now they drop 2 albums and a mixtape, or 3 mixtape and a album in one year. Then you buy the album and you find the mixtape was better than the album, so I’m asking myself why did I buy the album again? Also with all the free music out there it makes it hard to pay for it.
Not to hate on any new rapper but there are way to many rappers and not enough fans/supporters, I mean there are enough but half of those people want to be artists as well. I looked at the my itunes I have under 605 artists in my library. Off top of my head I probably couldn’t name 100 if I wanted to.
I love music, even had my own inspirations to be in the rap game, but I can’t see why anyone would want to be an artist when there is basically no money in this game. Unless you have a hit single in which you can tour but once that single is no longer a classic it’s back to square one. If you have a major backing you’ll be gone in a year. I think your chances are just as good a winning the lottery. Basic what I’m trying to say there should be some type of regulation of artists that are coming into the industry. But not have it dictated by the radio station/DJ/Labels but by the fans. Not to discourage any rappers but keep your day job just in case, rap 9-5 is no guarantee and probably no unemployment….
This was a good one. Like everyone else said it looks like the industry is still catered towards having people signed with majors. That way you don’t have to worry about this, that and the third outside of making your album. Either way the well ran dry for album sales so you better get on the road if you want to eat.
post of the year…
@Foshow38 I think it was more the artists that tried to outsmart bad deals by dropping double CD’s in the late 9′s and early 00′s. The quality of music fell off in HipHop. You’d get a 12-15 song disc with 3-4 listenable cuts. iTunes came too late. If I could only pay for the cuts I wanted back then, then I wouldn’t have taught myself BearShare or Kazaa.
the way i see it, peope will deviate towards music production and song writing in the near future coz thats where the money will be.
higher cances of making it as well.
Great breakdown.
Damn shame what’s happen to the game.
i would love to see real life examples of this
yeah definitely tryin to see a real life example. But still, the label gets your name out. The labels not only have the money, but the connections to develop national buzz. Then, even if you get dropped, you can keep going independent and youre name would be much better known than if you had tried to just do shows across your region or even nationally. I know a band that tours the whole country consistently and they dont make shit for money. Dude in this equation made 1.1 mil.
ignite mindz is correct.
I saw this coming 10-15 years ago and attempted to get many acts (with major followings) to go the Prince route.
One of the rare instances in which you no longer need a major is when you have used them and built a solid (and loyal) fan base. But most acts sign with another major (after parting ways with another) because they are afraid of the work involved (which they would have to take on themselves… or hire others to do).
It is much easier to see six figures going out of the label’s pocket toward a video than your own bank account.
It is the same reason why those that I know whom are worth millions and living in million-dollar homes finance rather than paying the house off (same with cars – they would much rather say, “I am worth this much” than to come out of pocket, have less money, but own everything outright).
They would rather keep their money.
And to those artists I say the money is worth more than their careers. They know the labels are going to (and excuse me for using such an ugly term) rape them. Labels overcharge for everything. But it is the mindset of musicians.
@ Chuck
The game is changing. The ones behind the scenes want to see money – so it is difficult to get a reputable booking agent or publicist to represent you without that all important “buzz.”
So the artist is back at square one.
Sure, if you make outstanding music… it will happen. But how often do we hear great music being made (either on the independent or even major label level) these days?
And 150k? No disrespect (at all) but that just is not happening independently. 10% of that, yes. But not 150k sold – not even close without a major.
(And I would say with most acts, that 10% is going to come after a year of constant touring as well)
Now 10 – 15 years ago, 150k was easy. I know many acts and artists whom did that and more – on their own back then (and we are talking physical CD’s and cassettes – not even signed to an independent label but pressing them up and selling them on their own on consignment and to one-stops and distributors for cash upfront).
The Offspring sold 6 million in 1994 of their album “Smash,” and were all over radio and television – independently.
That will never happen again.
Dope insight. Major labels still continue to look at Hip Hop as disposable. It doesnt help that everyday we’re bombarded with dozens of mixtapes with new material. Even established artists signed to majors are doing mixtapes to keep their names alive. With that aside I am still convinced that independence has its many advantages. While mainstream radio play and nationwide exposure are standard for majors with independence developing a fanbase through guerilla marketing and just grinding the rewards are greater. Developing a brand takes time but execution is also key to reaching a wider audience. When I look at a artist like Souljah boy I notice he has carved his own niche and created his own opportunity through viral content. Now I’m not a fan but I have to commend his methods. As artists you need to follow the blueprint of successes prior and create your own blueprint along the way. You can earn the fast buck or you can learn and empower yourself for a greater return. The choice is yours. But if you’ve worked hard to gain the attention of a major please know that you’re worth every penny so do your homework.
Damn good post MZ. I’m bout to spread this link like crazy.
Honestly, the name of the game is licensing anyways. Plenty of company’s out there for independent artists to do non-exclusive blanket licenses with. affixmusic.com is a good one. Also, record labels aren’t really signing rappers nowadays anyways unless their fully-developed without label help. If you can weed through politics, songwriting and publishing is a good way to go behind the scenes.
@ Tdubatl
Great advice… and others should take note. However, it is much more difficult than it seems to do what you have suggested [presently].
There is a way the labels do things… and unless they approach you, the door remains shut.
I was speaking with a producer of a very popular cable show last week and his take on including indie acts in his series is that he and his music supervisor are very much open to the idea… but unless you are represented by an agent or manager (and one with a reputable and credible name), your chances are just not there.
They are not going to even listen to your music.
(The same goes for publishers – they are not even going to give you a shot unless someone valid co-signs you)
People have valid ideas – and honestly, it would not hurt the industry one bit to be more open. But the industry is all about ego – they want you to have to go through them because it makes them feel that much more powerful. And that is the only thing it comes down to beyond it being the way things have always been done (the music industry is all about keeping things the same – ever notice that? lol).
Executives (associates) try and come at me sideways every once in a while and they quickly realize not to play with me. Try and blackball me. I could care less.
It will not happen unless I become expendable and no longer make people money.
While others submit and bow down to them… I have (and have forever) refused to do so.
(Especially if I am on the same level as you)
@The Real Anonymous
I’m asking because 1) I am curious and 2) because you are extremely knowledgeable about the industry. This entire thread has been about an artist’s album, what about the residuals? Take an artist like Ja Rule who has been out of the spotlight for awhile. His last commercial album was R.U.L.E, which came out in 2004. His last album (The Mirror) was leaked and he ended up giving it away.
From what I gathered, him and Gotti negotiated with Def Jam to retain his masters. How much of an impact does this make on an artist financially? Because these new artists lose their material to the labels, do they not?
In Ja’s case, he’s touring but he’s not making enough on his shows (or his movies) to not only sign new acts on his mPire imprint, but to keep his multi-million dollar NJ mansion, the recording studio, etc. If I may ask, how does he do it? Is it all ownership of his intellectual property or something else?
* Sorry to use the Ja Rule reference. I couldn’t think of another rapper that sold a shit ton of music that dropped off the radar but still is kinda hanging on by a thread. Thanks in advance.
i love posts like this, you learn from both the comments and the post. dj skee had this pretty good write up on what drake should have done on xxl. i wonder if it even had a chance to work.
Major labels should be treated as banks.
They offer a lot of services and relationships that can absolutely still develop newer acts.
@Chuck_you – I’m not sure there is an indie that would’ve had the budget to press 30k+ units on the front end (for Wale). He’s also sold 82k+ to date (28k first week). Although you’re right thinking you can sell a lot less and make MORE money on an indie, in terms of record sales… think about this…
The more units you sell, the more people are exposed to your music (radio, licensing opps, etc), the more money promoters are going to be willing to put up and get you in bigger venues. You don’t think a major can help an artist start touring larger venues, quicker?
At the end of the day, I’m not going to shun major labels for signing acts to 360-deals. Particularly if they can make an argument that they help in the development and marketing of the artist as a whole. At the end of the day, releasing music is the greatest marketing tool any artist can create. From there it’s on the label, management and the rest of the team involved to get that artist out there to the masses.