The early Hollywood Studio system institutionalized vertical ownership of the creative process, in this case movies. Now, with digital media inevitably moving towards free, music companies are requiring artists sign multiple rights “360 deals” that take a cut from every revenue stream. In exchange, the artist receives the marketing and distribution machinery for celebritization. It makes the music distribution industry look more like venture capital.
Techcrunch discusses Warner Music Group CEO Edgar Bronfman’s take on 360 Deals at the Web 2.0 Summit:
Today, though, those deals are becoming mandatory. Warner Music Group CEO Edgar Bronfman told the Web 2.0 Summit audience that his label now requires all new artists to sign 360 Deals, and that about a third of their signed artists are under those contracts.
Bronfman argued to a hostile crowd that it doesn’t make sense for labels to pour money into artist development when CD sales, their primary source of revenue, continue to decline (although he did say that digital sales now make up 20% of their revenue). Without other ways to make money from an artist, he said, they wouldn’t continue to promote artists.
Bronfman also said that 360 deals give labels the ability to give away music for promotional purposes to spur event and merchandise sales.
And that, for me, is the key. Bronfman, an outsider to the music world until recently, sees the writing on the wall – music downloads will eventually be free, and will serve as little more than marketing collateral to other revenue streams.
In the future, social media – YouTube, LastFM, blogs – spawns the artist, and mass media then offers their distribution package to the artist. Talented individuals get discovered faster, and mass media benefits from lower talent development costs.