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360 Deals and ‘Dumb’ Artists

Editor’s note: The

views expressed inside this editorial aren’t necessarily the views of

AllHipHop.com or its employees.About 15 years ago when I first entered the recording music industry (I had already put in years in the concert promotion business) a CEO of a record label with the ultimate dual currency – juice on the streets and the hottest song in rotation on New York City radio – ‘adopted’ me as his protégé. Over gourmet honey barbeque wings (this just means we weren’t at KFC) at an elegant restaurant in lower Manhattan I asked him for advice on my early path as a manager of artists.

Without hesitation he said to me, “Cedric, you have to remember Artistses is dumb. All they care about is making music, you got to tell them everything and make decisions for them. They don’t think.”

We’ll leave the pronunciation alone for now – artistses, for the uninitiated, is obviously the plural for ‘artist.’

What my street and industry ‘mentor’ was instilling in me very early on was an understanding of a reality, confirmed for me ever since. It is that the overwhelming majority of extremely creative people are either ignorant of administrative, managerial, and technical work, or find it to be a burden. To put it more bluntly, I don’t necessarily think ‘artistses is dumb,’ but many will do almost anything to avoid heavy-duty critical thinking and the nuts and bolts of business activity because it saps their energy and free spirit.

This is where a team and even staff should come in – to handle the load of legal, financial, and managerial responsibilities that accompany the commercial activity associated with creative work.

Most rap artists have a crew or entourage that will whip your ass for disrespect, but they overlook the necessity of a strong business team to balance their creative personality.

Building an army before you build a business is important, but eventually one has to get around to keeping up with contracts, taking businesses lunches, and the art of deal-making (which often involves compromise and concession – two concepts that artists resist).

This helps explain why the phenomenon now known as the ‘360 deal’ in the music industry has gone from an experimental innovation and informal practice, to a mandatory clause of some recording contracts in just a two year period.

360 deals give labels a piece of concert ticket sales, endorsement deals, merchandise arrangements, even movie projects that an artist generates income from. All of this in addition to the standard cash from album and download sales. The first such deal reportedly happened 7 years ago between Robbie Williams, the British pop singer and EMI. Now, a diverse group of artists including U2, Madonna, and Jay-Z have some version of a 360 deal.

They are called ‘360’ because they represent 360 degrees or the totality of an artist’s career and income streams, giving a label access to every area of their professional life.

Perhaps the sharpest and clearest critique of the 360 Deal comes to us from respected entertainment lawyer Kendall Minter – you can view and hear his arguments hear:

http://www.youtube.com/watch?v=6dJhsfjKgQ4

From the artist’s perspective we’ve come a long way, down, and fast.

When I was serving as GM of Wu Tang management in the mid-latter part of the 1990s the record label made money only off of record sales. It was that simple. The artists had for themselves, their ‘show money,’ ‘merch money,’ and whatever endorsement deals they could politick through corporations or on the street level. I began to see this change slightly in 1997 when I helped negotiate our Mountain Dew endorsement deal with Pepsi Co. Bringing the parties together was Steve Rifkind – the head of the record label we were signed to, Loud Records.

Steve brokered the deal not through Loud, but under the umbrella of his marketing company, SRC. He had similar arrangements with artists signed to his label and even with other labels. To let you know how thorough, even gangster, Steve was at the time, I’ll never forget the day after a meeting, one of his executives spoke to me in a hushed tone and pulled me into an office where he pulled out a copy of the official trademark certification for the term ‘street team,’ explaining to me how everyone who used that phrase could end up owing SRC money. I can assure you that the galaxy of record labels, radio stations and even PR firms (trying to show Madison Avenue they were hip) running around bragging about their ‘street teams,’ didn’t have a clue.

Wu-Tang managed this early precursor of the 360 deal quite well. We knew Rifkind could go places we couldn’t and if he was skillful and proactive enough to bring the ‘suits’ and deals to us then we should all eat together. No problem. He added value and earned his keep and we weren’t doing anything under duress. We had no contract that forced us to cut him in on deals.

But most artists are not Wu Tang. They don’t have a head like RZA. They don’t have a set of common beliefs, code or Teachings they aspire to live by. And they don’t have a team of executives, managers and coordinators who did not want to be artists themselves. Most artists desperate for ‘psychic income’ don’t have the leverage and courage to walk away from bad deals like we could and did.

As I write in my book The Entrepreneurial Secret (http://theEsecret.com/), when people ask me why do artists end up broke and without money, I always give the same answer. Because artists want fame more than money. I’ve never met a single artist – before they signed a record deal – who wanted money more than the ‘psychic income’ of spotlight, notoriety and status that came from being a recording artist. Only later and usually when their popularity is decreasing (listen to KRS-One’s ‘Outta Here’) do artists begin to appreciate the finer details of the lawyer, manager and agent infrastructure.

Then come the audits, lawsuits, and tell-all books pointing fingers.

Artists are exploited because people are exploited. There’s no place any of us can learn the science of entrepreneurship, business, and economics; the difference between them; and how the music industry fits into this larger picture.

As a result of this lack of self-knowledge, business wisdom, and a team infrastructure, artists usually become label-dependent – meaning they begin to rely upon their own record label for everything from career advice, office space, and negotiating their deal flow. They get duped into thinking their relationship with music industry power centers like MTV will last forever. They become deluded into thinking that people are doing business with them for reasons outside of the fact that they are ‘hot,’ and selling records. They can’t accept that the fame and fortune was never theirs.

In some respects the 360 deal formalizes what was already going on behind the scenes with label-dependent artists who did not know friend from foe. From the labels’ perspective, it is hard to see the 360 deal as exploitative, when it only formalizes the ‘adviser’ relationship they have had with artists outside of their contracted responsibilities.

For years record labels have been business incubators, marketing team, agent, lawyer and manager for new, struggling, and established artists – at below market value.

Music Executive Edgar Bronfman has done us all a service in admitting that it makes no business sense for labels to pour money into artists now that music sales, their primary source of revenue are down. Without access to the other streams (show money, merch money, movie money, endorsement money) the record labels have little incentive to sign and promote artists.

Edgar Bronfman ain’t an activist, so don’t ever expect him to come clean on the honored tradition of payola or the accounting tricks record labels execute with artist royalty statements. But his bluntness is what artists drunk off of fame and psychic income need to hear.

And activists – who come to the rescue after disaster – won’t be the ones to end 360 deals. Only enlightened music industry entrepreneurs – Hip-Hoppreneurs are up to that task.

Until they emerge in critical mass, music will remain a commodity or loss leader (to be given away or used only to sell other items) and record labels will continue to transform into marketing companies.

All while Artistses remain as ‘dumb’ as ever.Cedric Muhammad is a business consultant, political strategist, and monetary economist. He is author of the book, The Entrepreneurial Secret

(http://theEsecret.com/). His talk show, ‘The Cedric Muhammad and Black

Coffee Program’ can be viewed every Wednesday from 12 to 5 PM EST (USA)

at: http://www.cedricmuhammad.com/media/. He can be contacted via

e-mail at: cedric(at)cmcap.com

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