Espacio y región económica

Related to the short-term/long-term dichotomy is the idea that record labels will have to invest more money and time into each act they sign, in order to develop the act and its brand sufficiently enough to see returns. The 90% rate of failure that we have

206 Leeds, supra note 159.

examined in the traditional record industry will simply not work in the new 360 model, as there is simply less money going around in the music industry in general. The

consequence is that – relatively speaking – fewer artists will be signed under the 360 model.

The numbers already reflect this change. Chris Taylor suggests that, “today, there are fewer deals. In the early ‘90s we were doing 25 major label record deals per year. We are probably doing 10 per year now. The size of the deals is smaller than what they were before, even though there are normally more rights attached”²⁰⁸.

This is not necessarily a negative change. As we have seen earlier, record labels used to operate on a ‘throw everything to the wall and see what sticks’ mentality, where roughly 90% of acts signed generated losses for the label. With an increased investment required for each act signed – coupled with less money to be made from record sales – we might see labels spend more time and money ensuring they invest in artists that will have success in the long term.

However, the opposite may occur: record labels may start investing only in sure-fire hits, and avoid taking risks on truly original acts altogether. In this writer’s opinion, this mentality has plagued the major labels for the past 10 years, as they have simply followed whatever trend was hip at the time, signing bands that emulate the current sound, be it the next Nickelback, Radiohead, or Coldplay. Rather than look for

innovators, the industry has sought after (and rewarded) emulators, with the end result being short-lived careers. While the major labels used to invest in unique, one-of-a-kind acts, that last decade has seen them look for insurance – a guaranteed sell – before they

207 Leeds, supra note 159.

sign. According to long-time industry observer Larry LeBlanc: “Dylan and Hendrix could not get signed if they came around today – they would be far too dangerous”²⁰⁹.

If the majors wish to turn this around, the 360 should be viewed as a long-term investment in acts that will bring in more revenues than multiple acts with short-lived careers. The potential downside is that fewer acts will be signed and exposed to the capital that used to be available, but this seems to be the case regardless of whether the 360 is embraced or not.

4.9 360s only for stars?

As we examined earlier, nobody is quite sure if 360 deals will work for anyone except established stars. Stars already have a recognized ‘brand’, which makes it easy to generate ancillary revenue outside of album sales. New acts, however, have yet to prove their market potential, and as such have very little bargaining power when it comes to negotiating percentages within the 360. According to Middleton Law Group attorney Matthew Middleton, “for a new artist, it still remains to be seen if the 360-degree model works”.²¹⁰

Smaller acts cannot generate much revenue from touring, as playing clubs or opening for larger acts is rarely a breakeven venture, let alone a source of major revenue.

In fact, touring has traditionally cost labels money for smaller acts, and was seen as a necessary step in the promotion of the act and their record. So there exists a great divide in touring acts: a majority of artists are well below break even on the road, while a small

208 LeBlanc and Taylor, supra note 149.

209 LeBlanc, supra note 67.

210 Resnikoff, supra note 180.

percentage get to a level where touring becomes by far the most lucrative source of revenue of their career.

Clearly, record labels know that some of today’s new and unproven acts will catch a break and be the next megastars, but getting there is the risky part. The 360 might mean taking bigger risks than in the traditional model – as more time and money have to be invested in order for the ‘brand’ to come to fruition.

Again, labels will be forced to make wiser investments in order to bank on future success stories. As we examined with the Pilot Speed and Paramore examples, the acts need not be selling out stadiums to keep the whole agreement out of the red. Licensing, merchandise sales, and publishing can also keep the things moving forward during the development stages of a career.

4.10 360s only for certain genres?

The industry’s hunger for 360 deals might also subtly shift the ways labels view the scouting and cultivation of talent, or A&R. With touring and merchandise generating huge numbers in the past few years, record labels are looking for acts ready to tour. Some are questioning how this will affect artists that do not wish to tour, or songwriters who do not perform live.

Generally, touring acts will have an advantage over non-touring acts or writers when it comes to 360s, but songwriters are not really signing these deals, opting for publishing deals instead. For non-touring acts, they simply must shift their focus to licensing their songs for film, television, commercials, etc. The possibility of a latter-period Beatles model, where an act records but does not tour, is decreased in this new era,

unless the act is writing the kind of back-to-back #1 hits that Lennon and McCartney produced.

Artists in the rap genre, for example, might find more difficulty attracting a 360, since their recordings can be expensive to produce and very few become touring

successes. These acts will have to look to endorsement deals, for products from sneakers to computers to soft drinks, as stars like Jay-Z and P-Diddy have done with much

success.

5.0 Live Nation 360s