A Full 360: How the 360 Deal Challenges the Historical Resistance to Establishing a Fiduciary Duty Between Artist and Label
24 Pages Posted: 28 Nov 2010 Last revised: 9 Mar 2011
Date Written: November 11, 2010
Courts have historically denied claims that artist and their respective record label are fiduciaries to one another. The music business has changed since many of those early cases were decided. The 360 deal and its prevalent use in today’s music industry confirm this change. As the 360 deal quickly becomes the music industry standard in regards to artist-label contract agreements, courts and practitioners should use this backdrop to revisit the issue of finding a fiduciary duty within the artist-label relationship.
360 deals can invoke a fiduciary duty among artist and label because they have the potential to transform the relationship into a partnership. A partnership is defined as an association of two or more persons to carry on as co-owners of a business. Partnerships carry with them fiduciary obligations. If artist and label are found to be partners under a 360 deal, then, as a matter of law, they become fiduciaries.
There are two primary elements in a partnership determination: profit sharing and joint control. The crux of a 360 deal is a profit sharing arrangement where both artist and label contribute time, capital, skills and effort to maximize the profitability of an artist’s brand. Under a 360 deal, artist and label arrange for the split of proceeds garnered from the artist's entire brand (not just the sale of physical recordings), as well as make provisions that affect the overall management of the brand.
The prevailing notion is that a fiduciary duty will render the artist-label relationship inoperable. However, the fiduciary obligation of a partner will not only fit in today's music industry context, but help cure some of the industries perpetual grieveances as well. A fiduciary duty can bring balance to the artist-label relationship. It can also act as a deterrent to faulty royalty accounting practices.
Keywords: Music, Entertainment Law, Music Industry, 360 Deals, Multiple Rights Agreements, Fiduciary Duty
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