The 360 Record Deal: Mergers and Consolidations - Essay Example

360 Deals Mergers and Consolidations The 360 Record deal There are new contracts on the horizon for record companies and artists. The last few years have created much turmoil between record companies and artists as record company revenue continues to decrease. Over the last few years, record company sales have decreased as a result of piracy and downloading from the internet. The rise of the digital age has changed how everyone makes a living in this industry so there is a lot of shuffling around trying to find a method of agreement. Recording artists income have increased in the live performance arena so the recording companies are searching for a way to keep up. This paper will discuss the 360 deal and what it means to both the artist, the recording companies, and the public at large. There are some shades of the past here. There was a time when the recording artist wrote a contract with the record company, only to receive the amount of the contract, no matter how big the artist got or how popular the song. Many of these artists died poor. Are artists headed into the same kind of contract(Hoffman, 2010). The entertainment industry will never be what it has been again, it is changed forever. In the past, the artist gave up the rights to the recordings that were made to the record industry. The artist usually got advanced royalties and the record companies paid the cost of production. This worked good for the record companies until the decline of records, now there must be some kind of transition in the business (Hoffman, 2010). There are actually two types of 360 deals out there right now. In the first case, the record company will continue to control the profit from the sale of the artist's recordings and related products but will gain a percentage funding from the artists other revenue streams. In this case, the labels non-record income from these other income streams is small and amounts to an override percentage. The labels argue in this case that what they do is driving all the other income streams as well and this percentage will allow them to drive more development for the artists (Weaver, S. 2007). The second type however, is a much bigger deal. In this, the record company participates in non-record income. They partner with the artist in profit and decision making. This might get the record companies net incomes as high as 50%. The newer artists, similar to those so many years ago would have no strength against a contract like this one. The label has all the power in this case. These artists need to be sure to have a good lawyer to negotiate these deals (Weaver, 2007). Needless to say, this is very controversial. Is this just a way for the record companies to increase revenues during a time when record sales are at their lowest The artists see it as one more attempt to see the artist as income instead of managing their business well. There is also the feeling the music becomes less important as each of the labels brands the artist in order to bring about more interest. The labels argue that this kind of a deal allows them to make more money and therefore they can take on more unknown and new artists. This says this gives them the chance to work with the artist longer and staying for the long haul. Making a decision as an artist to sign or not to sign a 360 deal has become complicated. The whole point of a 360 deal is for the record company to get a cut of the revenue streams that an artist creates. There is question here as to whether the record labels have the expertise to manage all of these kinds of revenue streams. If not, then the artist will pay the record company and someone else to manage their business. There are also decisions about percentages and how much money that actually leads to. Attorneys need to be involved to be sure that the deal that is being signed is the deal they think it is. (McDonald, 2010). There are, of course, pros and cons to every deal. Many say that the 360 deal allows a record company to spend some time and money scouting for new talent instead of concentrating just on big name artists (Austonline, 2010). The record companies are also able to keep the same artists on contract for longer periods of time, sometimes through an entire career. On the other hand, unless the record companies are offering such things as bonus, increased royalties, excellent managing and marketing and advances on future work, they have gained nothing. In fact, they are worse off than they have been. There is also the fear that this kind of deal will have to increase revenue to survive which will cause the cost of recordings as well as live performances to increase in price for the public. There are presently four major labels. Those are Sony BMG, Universal Music Group, EMI, and Warner Music Group. These labels are responsible for 75% of the music market. Each of these labels has subsidiaries though. For example, Columbia Records is a subsidiary of Sony BMG. This allow Columbia Records to drive their own budget but all of their reporting still goes back to Sony. When a recording artist signs with a company like Columbia, he also becomes responsible to the Sony contract. This causes some confusion in the big 360 deals. Who will drive the contract responsibilities and when a company like Sony negotiates with Indie labels, who will manage the label with these new deals (McDonald, 2010) This 360 deal coupled with the Section 2855 discussions could change the face of the industry. The 2855 issue relates to the long term contract side of each negotiation. The artist feel that having to sign a long term contract is unfair and many have been in hot water over the fact that albums that were to be delivered over a long term contract have not been. Many feel that the recording companies have a ethical responsibility to release the previously delivered product, that it does not belong to the recording company forever but to the artist. This becomes a controversial part of the 360 deal for if more control is given to the recording studios related to other revenue streams, will the problem become worse Will they then have long term ownership of other products from the artists Federal Lawmakers already realize that there is an unequal balance of power between the artists and the recording companies and that recording contracts are already not fair to the artist. In their effort to deal with this, there is much investigation going on. Foley stated, "artists involved in long term contracts are held in involuntary servitude."(Holland, 2001). This inspection of the present laws coupled with the new attempts at 360 deals is making everyone uncomfortable on both sides. At the moment, this will all affect the consumer, the record company and the artists in such a way as to create loyalty and label confusion all around. In a time when revenue is already a problem, it would be important to get this settled to prevent that confusion. Mergers and Consolidation of Media Companies Media merger is also a very controversial subject at the moment. The problem is media monopoly. Media monopoly has a history in this country. ABC for example can trace its origins back to 1919 (Naureckas, 1995). NBC was created by General Electric, Westinghouse, AT&T, and United Fruit. NBC and its allies actually completely controlled the patents for radio and had a virtual monopoly because of the merger. NBC created CBS and had two separate streams of radio usage. ABC struggled against the huge conglomerate. Through many legal judgments and antitrust proceedings, there were breakups to preserve the news. Since this time, there have been many mergers and consolidations, most watched very closely by the anti-trust people. The two largest companies providing the news were seeing the news from the same angle which is always a possible problem in mergers and monopolies. Recently Comcast and NBC Universal announced a merger. This is the nation's largest cable company and they will now have a controlling interest in 27 local television stations, a movie studio, and many other holdings. This would allow Comcast to control huge pieces of the cable, internet, and content industries. This will increase prices to consumers for both cable TV and internet services. It may very well increase the number of sensationalism programs and fewer family shows on the cable. It eliminates competition. There are many other things like pushing prices up for other providers and putting NBC shows behind a Comcast pay wall. This alone means that if you want to watch a NBC presentation, you have to be a Comcast subscriber. Comcast already has a history of making consumers pay for hundreds of channels in order to get the ones they want(Silver & Winter, 2009). This one merger may also trigger mergers throughout the industry in a effort to compete. When there is media consolidation, history shows that there is an increase in violence and sexuality in programming in order to compete with adult programming, disallowing that so many children watch large amounts of television. There are only one set of winners in deals like this and those are the executives and stockholders in these companies. The public loses in many ways. Programming is not as good because there is less competition to be different. Sex and sensationalism sell so there is more of it and the news is biased because it all comes from the same place. These kinds of mergers should be blocked through Federal legislation. However, there are some advantages to having media conglomerates though they do not always happen on United States soil. Large media conglomerates do have more influence in other countries and other cultures. When media companies in other countries such as Latin America are corrupt, the conglomerate media company from the United States is able to achieve air time and affect information received by the people under these circumstances. What they see is still conservative but is not completely biased by their governments. In conclusion, in the case of the 360 record deal, there are some advantages to the artist but most of those advantages are to the recording companies. There has been a history of unfair treatment for recording artist by the record companies and this could be even greater than before unless these artists assure themselves of excellent legal council before signing the dotted line. The end result for consumers could very well be higher prices to offset the revenue stream that will need to be increased so recording companies can take their "share". As to the merging and consolidation of media companies, the end result is essentially the same. The media company wins with less competition and more control and the public loses by having to pay higher prices with less choice. We kind of makes you feel like Wal-Mart is moving in. It does away with all the competition and those that want a choice do not get one. Resources Arts Law Centre, (2010). 360 Degree record deals. Australia Online. http://www.artslaw.com.auArtLaw/Archine/2008/08360DegreeRecordDeals.asp Hoffman, I. (2010). The all around 360 deal. Ivan Hoffman, B.A., J.D. http://www.ivanhoffman.com/allaround.html Holland,B. (2001). Record labels, artists at loggerheads over contracts. Billboard. 113(38) http://web.ebscohost.com/ehost/detailvid=5&hid=101&sid-ce5fe5d9-4ed7-499d-8479-36 McDonald, H. (2010). 360 deals. About.com. Music Careers. http://musicians.about.com/od/ah/g/360deals.htm. McDonald, H. (2010). Big Four Record Labels. About.com. Music Careers http://musicians.about.com/od/musicindustrybasics/g/BigFour.htm McDonald, H. (2010). Before you sing a 360 deal. ABout.com. Music Careers http://musicians.about.com/od/musiccontracts/bb/signa360deal.htm Naureckas, J. (1995). Media monopoly; long history, short memories. Fairness and Accuracy in Reporting. http://www.fair.org/index.phppage=1332. Silver, J & Winter, T. (2009). Comcast-NBC U merger could hurt consumers. The Philadelphia Inquirer. http://www.philly.com/inquirer/opinion/78749242.html Weaver, S., (2007). The 360 Record Deal. Music Row Lawyer. http://musicrowlawyer.typepad.com/music_row_lawyer/2007/12/the-360-record.html Read More