Record label as promoter

I've posted items in the past about how the model of the music business needs to change. One version is the record label as full scale promoter (as I discussed earlier this year). A story in yesterday's New York Times --
The New Deal: Band as Brand explains about the "360 contract" and how it is helping one new band, "Paramore".

Though its success is in large part due to smart pop songwriting and a fashion-forward frontwoman, music executives and talent managers also cite Paramore as a promising example of a rising new model for developing talent, one in which artists share not just revenue from their album sales but concert, merchandise and other earnings with their label in exchange for more comprehensive career support.

If the concept takes hold, it will alter not only the way music companies make money but the way new talent is groomed, and perhaps even the kind of acts that are offered contracts in the first place.

Commonly known as “multiple rights” or “360” deals, the new pacts emerged in an early iteration with the deal that Robbie Williams, the British pop singer signed with EMI in 2002. They are now used by all the major record labels and even a few independents. Madonna has been the most prominent artist to sign on (her recent $120 million deal with the concert promoter Live Nation allows it to share in her future earnings), but the majority of these new deals are made with unknown acts.

. . .

Like many innovations, these deals were born of desperation; after experiencing the financial havoc unleashed by years of slipping CD sales, music companies started viewing the ancillary income from artists as a potential new source of cash. After all, the thinking went, labels invest the most in the risky and expensive process of developing talent, so why shouldn’t they get a bigger share of the talent’s success?

In return for that bigger share, labels might give artists more money up front and in many cases touring subsidies that otherwise would not be offered. More important, perhaps, artists might be allowed more time to develop the chops needed to build a long career. And the label’s ability to crossmarket items like CDs, ring tones, V.I.P. concert packages and merchandise might make for a bigger overall pie.

Not everyone is sold on the concept. Many talent managers view 360s as a thinly veiled money grab and are skeptical that the labels, with their work forces shrinking amid industrywide cost cutting, will deliver on their promises of patience.

. . .

Even inexperienced performers may resist sharing their take from the box office, particularly at a time when plunging CD sales have pushed artists to rely even more on their concert earnings.

But record executives argue that such deals could free them from the tyranny of megahits because there would be less pressure to make back the label’s money immediately. In the 1990s the arrival of computerized data from SoundScan, which tracks retail sales, meant the industry had an instant scorecard that tempted companies to push for Hollywood blockbuster-style opening weeks. The demand for quick payoffs persisted, even though a review of the last 15 years of Billboard data shows the albums that immediately seized spots on the upper half of the Billboard Top 200 chart would go on to sell fewer copies, on average, than the releases that slowly worked their way up.

I'm not sure that this new business model is an answer to the "download challenge". It does represent an understanding on the part of the record labels that the money isn't just in the sale of recordings. That is a step forward.