Take a look at what Edgar Bronfman (CEO of Warner Music Group) had to say about their loss in this article at Billboard:
When multi-rights (a.k.a. 360) deals start to provide significant revenue, WMG will have the added benefit of lengthier contracts. Bronfman told an analyst that “in many cases the 360 deals are actually longer than a recording agreement.” That means more time will elapse before WMG has to renegotiate with an artist. Since WMG is not in the business of “paying retail” for established artists, as Bronfman put it, the longer contracts allow the company to accrue additional benefits from the artists it breaks. Once the contract is up, a superstar artist will be able to command much better terms and may be out of WMG’s price range.
(taken from http://www.billboard.biz/bbbiz/content_display/industry/e3i4c8c39f58df428b9978634c2f0a323a4)
Why is this important? Well, let’s start with a brief explanation of 360 deals:
Previously, record companies paid for a big expensive album to be recorded all awesome. Then, they took most of the profit from the record sales. Now that people are buying less CDs, record labels can’t recoup their costs. So for a company to invest in the production of an album today, many tend to do two things different- Firstly, the company invests less (because albums are cheaper to record/manufacture and less likely to sell). Secondly, they ask to be fully invested in the bands success (they want part of ticket sales, merchandise, licensing, etc.).
So, for big acts like Switchfoot (who reports being very happy about their 360 deal), it makes sense. The record company is able to make back their money through shows and merch, Switchfoot gets to make another album that makes me wish for death- everybody wins. Only problem is, it hasn’t quite kicked in yet (if it ever will).
Warner is counting on the monsters they create to tour, sell merchandise, get commercial time, and otherwise exploit their brand. I’m interested to see if Bronfman was explaining that 360 deals will pay off or if he was stalling for the sake of stockholders. I guess only time will tell.
- Ian Gollahon