Come Full Circle

Inside the music industry's 360 paradigm [From the May/June issue of Nashville Post magazine]

Madonna is rarely accused of understatement, but this 2007 pronouncement might qualify: "The paradigm in the music business has shifted – and I have to move with that shift."

That, she said, was why she ditched her record label, Warner Music Group, to sign a landmark 360 deal with concert promoter Live Nation.

In this case, the "paradigm shift" translated to the industry's traditional source of income – music sales – in freefall, with no bottom in sight. Madonna's 10-year contract with Live Nation would have artist and promoter sharing more promising revenue streams like touring, merchandise and film projects.

The deal, thought to be worth some $120 million, was considered by some industry insiders to be a gamble – not by the Material Girl, but by Live Nation, which was betting big on the long-term marketability of an aging brand.

While the Madonna deal made headlines, as did similar deals in 2008 by rapper Jay-Z and Irish super group U2, the 360 has been used more frequently, and with no fanfare, by labels signing promising, relatively unknown talent.

In 2007, The New York Times explored the fledgling trend, pointing to Franklin, Tenn.-based Paramore as one of the ascendant groups who had signed with a label promising enhanced promotion and artist development in exchange for revenue-sharing rights. That label? Warner Music Group, who took a pass on Madonna in 2007 but signed Paramore in December 2005, in one of the label's first expanded-rights deals.

Critics of the 360 say it's those new artists who are risking big, gambling on a label's willingness to continue the promotions momentum long-term, in a notoriously fickle industry.

But Scott Borchetta, who led the trend when he signed Taylor Swift in September 2005, says the 360 is all about reasonable return on investment.

"If we take this artist from zero to hero, and we use all of our marketing might, all of our promotion might, and it works at the highest levels, why all of a sudden would we be thrown out with the bath water in that moment?" he says.

James Stroud, who like Borchetta adopted the revenue-sharing model when he left DreamWorks to start his own label, Stroudavarious Records, says mutual respect – and contractual flexibility – have to be part of the deal, too.

"Everything changes with success," he says, "and so the artist and the label need to play fair with each other."

Borchetta concurs. "We work really hard to have very fair and long-lasting deals and relationships with our artists – and it's not easy. They take a lot of time, and they take a lot of caring and nurturing. Artists want to know that you have their back, and that's a big deal."

Swift declined comment on her own 360 deal, and it's too early to say how these arrangements might ultimately shake out with a lesser star and a different label. But at the moment, for Taylor Swift and Big Machine, it looks like smiles all around.