Say hello to your new 360 recording contract.

There is no need to beat a dead horse, but lets kick Mr. Ed around for a second.

The music industry has changed, and even if you don't like what's happening you may have to just suck it up and deal with it if you really want to be a musical icon. So here are a few facts.

The four major, soon to be three, record labels account for 88% of recorded music sales leaving just 12% to be split among the countless indie labels out there and popping up as you read this.

The major labels are responsible for this huge difference because they have the financial backing and resources needed to launch an artists career. I am not saying you can't live comfortably with an indie, or even start out with one and then move up to the big leagues. I am just saying that if you still dream of being the next Jay-Z, Madonna, or Taylor Swift you will need a major in your corner. Now here's the downside, or the upside if you actually pay attention.

All of the major labels, Sony/BMG, Universal, and Warner have instituted the notorious 360º Deal for their new artists. Now you may be able to get signed without handing them a piece to the whole pie, but it is very unlikely at this time. Many musicians are furious about this new practice, and some hold valid arguments, but for a second let's step away from what you have been told by your buddies and examine what a 360º Deal is.

Basically put, and I am sure you all know this, the 360º gives the record label a piece of your recording royalties, publishing, merchandising, touring income, endorsement deals, licensing, and whatever else you may make money on with your brand image. Notice how I said brand image instead of music.

In the past artists just forked over money from their physical recordings and in some instances publishing royalties to their label partners and got to keep all the other income associated with their business model. Now if you just read the 360º Deal as that you would scream and shout that you were getting the shaft. What many pundits leave out is what the label gives to you for that chunk of pie.

When you sign a 360º Deal with most major labels they then takeover all of the production and costs associated with every aspect of your brand. They help design, print, and distribute your merchandise. They help solicit your music to film, television and advertising companies. They help put together your tour. They even help you find sponsors. Without this type of deal you, as the artist, would need to fund these endeavors yourself, and many times that required asking your label for a loan to get each project off the ground. Now they do that for you, basically because the more they invest the more they stand to earn.

On top of funding all of the other income streams that can make you money the labels have the connections to get your new product and services to a much larger audience than if you went at it alone. They have connections in the film and advertising industry, the touring industry, the merchandising and distribution realm, and they have those connections all over the world.  So think of it like this you could do it yourself and potentially reach two million people in one geographical location in the states, or hand it over to a company that can reach 2 billion in China alone.

When Jay-Z signed his 360º Deal with Live Nation he got 775,434 shares, plus an option on an additional 500,000 with the exercise price of $13.73.  

You see they have the money and the connections to make you into that superstar you always dreamed about. But to hammer the point home I offer one more point.  If I was the head of A&R for Sony and had two bands that I wanted to add to our roster. One of them was more than willing to sign to a 360º Deal and the other demanded a typical contract, as a business person looking out for my bottom line who do you think I would sign first?

I am not condoning the 360º Deal or condemning it in any way. I am just tired of seeing all the negativity with very little about what the majors give to you in return. Remember in any true negotiation or business deal each party should feel as though they have given a little and got a little in return. And finally if you really dream about super stardom, private jets, sold out shows at Madison Square Garden and a gold plated shark tank in your mansion you may have no choice but to sign a 360º Deal so be prepared.

And finally, if you ever have the carrot dangled in front of your face GO OUT AND GET A REPUTABLE ATTORNEY who specializes in music business contract negotiation. The ambulance chaser you saw on TV can't help. You need a contract lawyer who can make the language work better for your career and save you millions in the process.

Here are some links to learn more about 360º Deals:
http://musicians.about.com/od/ah/g/360deals.htm
http://techcrunch.com/2008/11/08/360-music-deals-become-mandatory-as-labels-prepare-for-free-music/
http://www.nytimes.com/2007/11/11/arts/music/11leed.html?_r=1
http://lawyer4musicians.com/2009/03/22/you-spin-me-right-round-like-a-360-record-deal/

The street fight over EMI's publishing catalog.

On April 19th it was announced that Sony Music had gotten the nod from the European Union to go through with their purchase of EMI's publishing rights. You can read the full article on The Guardian's website. Warner has been fighting Sony's attempts ever since EMI defaulted on a $5.4 billion dollar loan in early 2011 and was put up for sale by CitiGroup to ease the debt. Almost immediately the big four major labels were left to but three, Sony, Warner, and Universal.

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At that time Universal already controlled the market with roughly a 27% of the business and was able to pounce on the fire sale going after EMI's recorded music division which holds the rights to such artists as Norah Jones, The Smashing Pumpkins, Keith Urban, Brad Paisley, and some small band known as The Beatles. The purchase will boost Universal's market share up to 36% dominating Sony's at 23% and Warner at 15%. Despite this fact the war over EMI's assets hasn't revolved around their recorded music division, but rather their publishing division which, according to Rolling Stone Magazine, holds the rights to 1.3 million songs including works by Rihanna, The White Stripes, Sting, and many others.

Ever since EMI's publishing assets were put up for sale Sony and Warner have gone to war trying to secure these copyrights. Each company has attracted outside investors to help sweeten their offer until Sony was able to throw down $2.2 billion for the catalog ousting Warner from the race. But the third largest music conglomerate in the world wouldn't go down without a fight. Since then Warner has challenged the deal both in the U.S. and European court systems hoping to thwart Sony from gaining such a huge market share in the publishing business of the music making world. But why such a fight for publishing rights?

The reasoning has to do with the current trend of musical consumer buying behaviors, and how these behaviors can equate to large amounts of income for whomever owns the proper rights. Recorded music rights provide income to the persons who control the actual recordings of a work. So if you buy a CD, or you license Sting's recorded version of "Every Breath You Take" for a movie you have to fork over some dough to whomever owns the copyrights to the actual recordings you use. Publishing rights on the other hand cover many more situations. Not only would you have to pay whoever owns the recorded version of the Sting tune you plan to use, but you would also have to pay the publishing company for the underlying music and lyrics in the song. So what's the big deal if you own the recorded music you are getting a piece of the pie and if you own the publishing you get the other half? The answer lies in how we are using music today.

Take for example the popular FOX hit Glee. These teenagers, whom all appear to be in their mid twenties by the way, perform a number of popular music hits in each episode, but because they are the ones performing the hit the owners of the recorded music are paid less, if even paid at all. This is because they aren't using the original recording of the song, instead they are remixing it in their own way.  Yet despite this fact they still must pay the publishing holders the statutory rate. Now think about all the television shows, movies, and advertisements that do this. We've got American Idol, America's Got Talent, and The X Factor all presenting contestants singing their favorite hits and that's just in the U.S.. Still don't think it's a big deal? Now think about the millions of videos on YouTube of people performing these hits with their own bands or by themselves with their dogs singing harmony.

But the income stream gets much larger for publishing rights holders. In the current musical landscape touring has become a major breadwinner for bands. In these situations the only people getting monies from these performances are the performance rights organizations whom pay the publishing holders of the songs that are performed. Many of these publishing houses also own the rights to the Artists images, signatures, fragrances, and whatever else can be branded with their namesake.

So to put it in simple terms the recording music royalties will make you money on the uses of the actual recording while the publishing royalties will earn you money on those items plus any other way that the song may be used in the marketplace from other performers singing your tune, to public performances, and even a bunch of people trying to impress judges or sing about their high school angst on television. Which income stream would you rather have?

That is why there is a street brawl over EMI's publishing division. The big boys know how much money is at stake, and the company whom holds the largest stable of hits will eventually win the battle when it is time to knock it down to the big two.