Going 360

With album sales at record lows and in the face of a recession, record companies are changing the way they do business. The age of the 360 deal has arrived. The hype that exploded when Live Nation inked a 360 deal with Madonna last fall has continued at relatively high levels. But is this new craze all it is cracked up to be?

Ron Fair, Chairman of Geffen Records, explained how the first 360 deal came about. Berry Gordy created it when he founded Motown Records. The way his company worked, Motown took care of everything from dressing the artists to recording the albums. Motown undeniably changed the music industry of the 60s, and now many industry people are looking to the 360 deal to change today’s industry.

Listening Post’s Eliot Van Buskirk quotes BPI’s (British Phonographic Industry) CEO Geoff Taylor:

Increasingly new streams of revenue are coming into the picture. As consumption patterns change, music companies are finding new ways to recoup the huge investments they make in music. They are using new technology to find new audiences and offer consumers more choice. Today’s record business is unrecognizable to that of five years ago. Labels have rapidly evolved into digitally literate businesses that generate significant revenues through licensing.

The British might have “evolved into digitally literate businesses that generate significant revenues,” but as far as I can tell, the American companies have a lot of catching up to do. Labels are beginning to lose (or at least rumored to be losing) major clients like Madonna, U2, and the Rolling Stones (that was the rumored one).

U2 could not join a new craze without adding its own spin, of course, and they pulled a pretty smart move this time. Instead of trusting the inexperienced Live Nation to produce their records, they signed another recording contract with their label, and are letting Live Nation cover everything else. With the amount of promotion experience Live Nation has under its belt, everyone ends up winning (except whoever was doing U2’s promotion before the new deal).

This hedging of bets by U2 calls into question the wisdom of putting all of one’s musical eggs into one greedy company basket. Live Nation is spending money like it’s going out of style, causing splits between the risk-takers and the more conservative higher-ups.

They’re saying to wait and see what happens to Madonna to see if this kind of deal is profitable. I, for one, totally agree. I’m so happy to see the music industry coming up with new ideas (finally), but before throwing all available funds into the new system, make sure it works! The beeper was a great invention, but what if we had all invested in it? Where would we be now?

I'm excited to see what actually happens in future of 360 deals. If they fail, the repercussions will be great. If, on the other hand, the deals actually work, it will be an important move towards the integration of the music industry into the modern world. We shall see.