Many record labels are using 360 Deals to maintain revenue during the continuing uncertainty of the music industry. Instead of making money mostly from record royalties and the exploitation of master recordings, 360 Deals allow the labels to either own or to share in the profits from all areas of artists’ careers, including: music publishing, live touring, merchandising, sponsorships, endorsements, websites, fan clubs and their associated ads, literary rights and acting. Record labels have an incentive to solicit opportunities for artists in these areas because they share in the profits. However, labels’ actions to create opportunities for artists may rise to the level of procuring employment in violation of the California Talent Agencies Act.
The California Talent Agencies Act (the “Act”) requires any person (including any company) who procures employment for an artist to become a licensed talent agent or agency by the California Labor Commissioner. See Cal. Lab. Code § 1700 et seq. (2008). Any person who is not licensed as a talent agent or agency is prohibited from procuring employment for the artist. However, neither the Act nor any other analyses I have found actually define procurement. Based upon my research, I created a definition of “procurement,” which is featured in the full article linked below.
In the music industry, as opposed to the television and film industries, music agents secure live performance engagements while managers handle all other aspects of the artists’ careers. Manager’s activities to secure employment opportunities for artists run in violation of the Act because most managers are not licensed talent agents. Now with the popularity of 360 Deals, record labels are often pursuing some of the same opportunities that a manager would, such as securing sponsorships and endorsements, positions on tours, co-branding opportunities, and various other opportunities as outlined in the article. These actions are also in violation of the Act since the labels are not licensed as talent agents or agencies.
The scope of violations can run across various aspects of an artist’s career, including live touring, merchandising, sponsorships and endorsements, fan clubs, video games, and so on. The consequences of a lawsuit against a record label for violating the Act could void the entire 360 Deal, or sever the offending areas of the contract and cause the record label to relinquish all commissions earned from the illegal activity. Backlash from artists and accompanying litigation in this area is just getting started, but there is definitely more to come.