For the first time ever the Grammy Awards has made streaming only albums available for award consideration. This evolution of the ceremonious celebration of music is even more exciting this year due to an innovative 23 year old record label-less genre bending rapper by the name of Chance The Rapper. He has made history with his latest album, Coloring Book, as the first streaming only album to debut at No.8 on The Billboard top 200 ranking and first ever to be nominated for several Grammy categories including Best Rap Album of the Year.
As more and more genuine artists are turning down one-sided record label deals it will be interesting to see how this will affect the ever outdated 360 deals that many major labels so firmly hold dear. 360 deals are contracts created by record labels to ensure that the label has multiple streams of revenue. Due to the technological innovation of digital music streaming labels had to find a way to make up for the dip in record sales, So along came the 360 deal which allows the record label to receive a percentage of the earnings not only from the artist’s record sales but also for ancillaries. Ancillaries are the artist’s accounting to the label for passive income such from touring, live performances, publishing, marketing, merchandise, fan clubs, and more. The label agrees to provide financial and creative support for the artist, including advances and distribution and the artist agrees to give the company a, sometimes large, percentage of their revenue streams. It is similar to a management agreement where the manager takes a percentage of all opportunities they procured for their client (think entire scope-literary rights, local/world tours, YouTube deals, and endorsement deals).
This is why we often hear artists complain that they are broke even though they are highly ranked on billboard charts and have successful sold out tours. It is also why some artists favor indie labels that are usually more willing to negotiate better profit sharing contract terms. With ever evolving technology and legislation (such as the Digital Millennium Copyright Act) it is important for budding artists, songwriters, and producers to understand their rights and liabilities when considering signing to a record label.