Q: What Questions Should be Asked in a 360° Artist Deal Due Diligence?

A: Entering into a 360° artist arrangement is a big decision, because you are entrusting one company with the responsibility of managing all aspects of your career, including music sales, touring, merchandising, and even TV and film appearances.  As a result, you should make sure the company is good at all of the things they will need to do to make your career a success.  Below is a “due diligence list” of questions to ask in considering the deal you are being offered.   

1.1.    What are the deal points to be considered for the “traditional” aspects of your deal?
(a)    Term.  Number of album options?
(b)    Advances.  What advance is the Label offering? 
(c)    Royalties.  What royalty rates will you receive for record sales?  Online sales?
(d)    Copyright.  Do you retain the copyright in your recordings and compositions?
1.2.    Has the Label had success working with artists similar to you?  How do you compare to the Label’s current roster?

2.1.    What channels does the Label use for retail sales/distribution?  Physical/online?
(a)    Major chains and online retailers – Virgin, WalMart, Amazon
(b)    Online – iTunes, Orchard, IODA, IRIS and digital distribution placement
(c)    Local Record Stores

3.1.    How does the Label promote its artists and their albums? 
(a)    Radio – Does the Label have existing relationships with major radio stations?  Has it had success in getting other artists played?
(b)    Press – Are the artists on the Label featured in the music press? 
(c)    Blogs – Does the Label have a positive relationship with the major music blogs?  Does it have any influence over whether its artists are presented favorably?

4.1.    Retail Merchandising and Placement – When will our CDs be on shelves?  If we are playing in a particular town, will there be a special display at that time?
4.2.    P2P Strategy – What tracks do you plan to give away for free, either explicitly or implicitly?  Has the label engaged in such a strategy with its other artists?  Will it permit you to do so? 
4.3.    Mobile Channels

5.1.    Participation of the Label in revenue received from placement of tracks in films and television programs.
(a)    What degree of involvement and success has the Label had in placing its other artists?
(b)    What percentage of revenue participation will the Label receive?
5.2.    Placement of the artist in acting/cameo television and film appearances. 
5.3.    Commercials
(a)    Featuring music (e.g. – The Beasts of Eden with Verizon)
(b)    Featuring the artist with products (e.g. – Jon Mellencamp with Chevy)

6.1.    What percentage of touring revenue will the Label receive for its participation in Touring?   
6.2.    What steps does the label take in supporting its artists in touring efforts?   
(a)    Budget – How large is the budget the label is offering for your tour?
(b)    Promotion – Will the label assist in promotion of the tour?
(c)    Management/Control – How much control does the Label retain over details including tour schedule and use of budget?

7. WEB
7.1.    To what degree does the Label support its artists’ presence on the web?
(a)    Artist homepage development.
(b)    Social networking sites (myspace, facebook, etc.).

8.1.    Does the Label seek to participate in merchandise revenue?  If so, what percentage?
8.2.    Your music as merchandised with other products, e.g.:
(a)    Starbucks
(b)    Shopping Outlets
(c)    Auto Companies
8.3.    Merchandise featuring your band.
8.4.    What resources does the Label have to offer to help maximize revenue realized through merchandise sales? 
(a)    Design/development – Does the Label have an in-house or regular outside design department that it uses in developing merchandise for artists?
(b)    Manufacturing – Does the Label have access to resources that will streamline the manufacturing process?
(c)    Retail – Does the Label have access to retail channels through prior distribution of its other artists?

9.1.    What participation does the Label seek in revenue from ringtones or mobile applications?
9.2.    Has the Label successfully generated revenue for its other artists through ringtones or mobile applications?

10.1    Does the agreement allow you to review or audit royalty statements from the company?  What remedies are available in the event of error?