Dream or Nightmare?

The effects of the Digital Revolution on the music industry in Brazil and the world were disruptive and strongly impacting on the profit margins of record labels.

One of the ways found by them to refresh their activities was the use of popularly known instrument called 360º Deals.

In general, the structure of such agreement is based on the expansion of the spectrum of remuneration of record labels as they assure their participation in multiple income sources from the exploration of the artist’s career in various segments.

The use of such deals in Brazil has significantly increased in the last decade and it is important that artists and their managers/agents are fully aware of their scope and possible implications.

At the same time that signing an agreement of this nature can represent a great opportunity for the artist, the fulfillment of his dreams, in the medium/long term, it can also turn into a nightmare, depending on the conditions agreed, case by case.

The payment of attractive advances (recoverable) to artists and, sometimes, the investment in media for their careers, gives the record labels the possibility of earning, in addition to their remuneration as phonographic producers, an additional percentage remuneration on income from concerts, touring; artist’s participation in advertising campaigns (merchandising); film acting, novels, series, reality shows; licensing of products bearing their artistic names, trademarks or images; sponsorship agreements, etc.

Moreover, in situations where artists are authors of their own musical works which are interpreted by themselves, and when they are not previously published, record labels may include that those musical works should be under the conclusion of a publishing or an assignment agreement with belonging or associated companies with the same group. Therefore, they also participate in the distribution of the royalties which comes from the remuneration of artists/songwriters as copyrights on the economic exploitation of their musical works.

In general, the definition of the percentage of remuneration of record labels in each segment of the artists’ acting contained in the agreement will depend on their recognition within the music scene and their bargaining power.

Thus, beginner artists or the ones who have their career in a consolidation phase, mostly, have less active voice and tend to contract under conditions that are less favorable. It is also important to check out whether these percentages are applicable to gross revenue or net income earned (after deducting expenses of several kinds, taxes, etc.) to size the impact on the remuneration that shall be paid to the artists in the end.

One significant aspect to bear in mind is the way in which record labels can recover the advances granted to artists. Usually, contracts have clauses providing that there will be an automatic extension of the term of validity of the contract if, when the term is due, the advances granted have not been fully recovered.

In addition, there are situations where the priority recovery by the record labels of such advances imposes an onerous impact on artists revenues who sometimes receive small amounts until the amount is fully paid off.

It is also not unusual to verify in these contracts lack, or even the absence, of mechanisms for unilateral termination by artists in the event of breach of certain obligations by the record labels, creating obstacles to terminate the contractual relationship rapidly and in a less costly manner.

In summary, taking into consideration the relevant points usually included in 360º deals, among others equally important, it is necessary to emphasize the indispensability of conducting the negotiation between the parties prior to the execution of any artistic activity related to such instruments.

Finally, with minimum and fair contractual balance, it is possible to avoid that such agreements becoming shackles of iron that imprison the artists and that can compromise the sustainability of their careers.

Daniela Colla is an attorney at law specialist in Intellectual Property and Electronic Law and a member of the Di Blasi, Parente & Advogados Associados law firm. Her acting is focused in consulting and litigation involving Copyrights and Entertainment Law.

Translation: Hannah Gruber Bernstein