Cross-Collateralization
An important term to understand that figures heavily into recoupment is cross-collateralization.
Cross-collateralization takes place when the money advanced from one agreement can be recouped from another agreement.
There are 2 kinds of cross-collateralization: sequential and revenue stream.
Sequential Cross-Collateralization
Sequential cross-collateralization occurs when the money advanced by an agreement can be recouped by royalties from another agreement from the same revenue stream.
For example, if money remains that has not been recouped from an advance from a record deal then when the artist signs a new record deal the money owed will be recouped from the royalties from the new record deal.
Revenue Stream Cross-Collateralization
Revenue stream cross-collateralization occurs when the money advanced by an agreement can be recouped by royalties from another agreement from a different revenue stream.
For example, if money remains that has not been recouped from an advance from a record deal then when the artist signs a publishing deal the money owed will be recouped from the royalties from the publishing deal.
History
Sequential cross-collateralization is pretty standard within the music industry, but revenue stream cross-collateralization has become more common with the growing popularity of ‘360’ deals.
‘360’ Deals occur when an agreement states that the record label is entitled to money from all revenue streams.
Most major record labels already had in-house publishing departments, following the death of Tin Pan Alley (Tin Pan Alley - Wikipedia, the free encyclopedia) , but traditionally most record companies kept their hands off an artist’s live performance revenue.
When record sales took a permanent dip due to illegal downloading labels introduced the ‘360 (Music Row Lawyer (C. Stephen Weaver): 360 Record Deals) ’ deal to cover for the loss in revenue.
‘360’ deals usually entitled the record label to a portion of money from EVERY revenue stream generated by the artist. Record labels put up a large amount of money as well as exhaust valuable resources to ‘break’ an artist and, their justification for these deals, is that they needed more reassurance that they would profit of each release or at least make their money back. They also take credit for the artist gaining enough popularity to get paying gigs and sell merchandise.
In the 90’s, record labels such as Deathrow (Suge Knight Reflects on 'Doggystyle' | Music News | Rolling Stone) and Badboy took a lot of heat for having their artists in what would later be called ‘360’ deals. Their executives were accused of ripping artists off or for simply not caring about artists in general.
Today, ‘360’ deals are very common despite many artists having strong opinions (Sign a 360 Deal - Questions to Ask Before You Sign A 360 Record Deal) against signing them. But who can argue with signing a ‘360’ deal if the artist can now make a living off of their music.
An important term to understand that figures heavily into recoupment is cross-collateralization.
Cross-collateralization takes place when the money advanced from one agreement can be recouped from another agreement.
There are 2 kinds of cross-collateralization: sequential and revenue stream.
Sequential Cross-Collateralization
Sequential cross-collateralization occurs when the money advanced by an agreement can be recouped by royalties from another agreement from the same revenue stream.
For example, if money remains that has not been recouped from an advance from a record deal then when the artist signs a new record deal the money owed will be recouped from the royalties from the new record deal.
Revenue Stream Cross-Collateralization
Revenue stream cross-collateralization occurs when the money advanced by an agreement can be recouped by royalties from another agreement from a different revenue stream.
For example, if money remains that has not been recouped from an advance from a record deal then when the artist signs a publishing deal the money owed will be recouped from the royalties from the publishing deal.
History
Sequential cross-collateralization is pretty standard within the music industry, but revenue stream cross-collateralization has become more common with the growing popularity of ‘360’ deals.
‘360’ Deals occur when an agreement states that the record label is entitled to money from all revenue streams.
Most major record labels already had in-house publishing departments, following the death of Tin Pan Alley (Tin Pan Alley - Wikipedia, the free encyclopedia) , but traditionally most record companies kept their hands off an artist’s live performance revenue.
When record sales took a permanent dip due to illegal downloading labels introduced the ‘360 (Music Row Lawyer (C. Stephen Weaver): 360 Record Deals) ’ deal to cover for the loss in revenue.
‘360’ deals usually entitled the record label to a portion of money from EVERY revenue stream generated by the artist. Record labels put up a large amount of money as well as exhaust valuable resources to ‘break’ an artist and, their justification for these deals, is that they needed more reassurance that they would profit of each release or at least make their money back. They also take credit for the artist gaining enough popularity to get paying gigs and sell merchandise.
In the 90’s, record labels such as Deathrow (Suge Knight Reflects on 'Doggystyle' | Music News | Rolling Stone) and Badboy took a lot of heat for having their artists in what would later be called ‘360’ deals. Their executives were accused of ripping artists off or for simply not caring about artists in general.
Today, ‘360’ deals are very common despite many artists having strong opinions (Sign a 360 Deal - Questions to Ask Before You Sign A 360 Record Deal) against signing them. But who can argue with signing a ‘360’ deal if the artist can now make a living off of their music.
