20 years ago, labels targeted fandom. Will it work the second time around?

As record labels push to monetize fandom yet again, the are reviving an old playbook. But will today’s artists play along? The recorded industry’s future may hinge on expanded rights deals and there ability to finally deliver on their promise, writes Tatiana Cirisano of MIDiA Research

Labels Push to Monetize Fandom… Again

by Tatiana Cirisano via MIDiA Research

The New York Times headline “The New Deal: Band As Brand” would not look out of place in today’s pages. In the article, the writer explores how record labels are responding to a need to diversify revenue streams by seeking to monetise fandom, via expanded rights deals.

But this article is not in today’s pages. It was published in 2007, and centred on so-called “360 deals” – a “rising new model for developing talent”, it reads, “where 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.” 

These deals emerged at a time when labels were unable to see a path for future recorded music growth. CD sales were tanking, piracy was rampant, and music streaming had not yet emerged as the industry’s saviour. Labels had to diversify, and fast. Interestingly, labels are in a similar position today (though a far less urgent one). Streaming revenue is not declining, but growth is slowing, and labels are looking to diversify through fandom-focused businesses once again. This means labels need to share in fandom-related revenue streams. Right on time, expanded rights deals are back in fashion – although no one would dare use the dreaded term “360”.

With the biggest labels positioning fan monetisation as critical to their futures, it is a good time to look back on the past. What happened the last time the music industry went after expanded rights – and what might play out differently now?

1. Leverage

In the 2000s, labels argued that they deserved to see more of the returns from their investment in building artist brands. Much like today, label efforts to market and break new stars often led to those artists securing brand deals and massive tours – but labels did not typically share in those wins. At the time, labels had strong leverage to demand their share. The internet had not yet become a democratising force for music distribution, and a record deal was still a prerequisite to any kind of major success. 

“artists have steadily gained leverage”

In the years since, however, artists have steadily gained leverage. Most obviously, they now have a variety of options for building careers outside of a traditional label deal. But over the last five years in particular, labels have also tended to offer deals only after an artist delivers some level of streaming and social media success independently, with the label taking on less risk themselves. This means artists are being offered deals later in their development, when their leverage is typically greater, and may have the view that they have already done much of the “labels’ job” on their own. On the other end of the spectrum, the signed superstars – the very artists that labels most need to share fandom revenue streams with – are also the ones with the most leverage, and who may be the most reluctant to share (although Universal Music Group’s deals with artists like Drake and The Weeknd show it is possible).

[ FEATURED REPORT: Music streaming consumer profile Q4 2024Stabilisation and fandom slowdown – Consumer music behaviours are both stabilising and showing signs of coming change. Change that could be challenging for all music business stakeholders, especially with regards to fandom monetisation. This report presents data-focused visuals and impactful analysis of trends and anomalies that will inform your understanding of what is happening to today’s music consumer, why it is happening, and where these trends are heading. Find out more…]

2. Capability

“labels may need to take on more risk”

To make their fan monetisation dreams a reality, labels may need to take on more risk – working with artists earlier and investing resources in building their fanbases from the start, rather than swooping in to monetise once those bases are already formed. This is a challenge for the publicly-traded majors, who are under pressure to show quarterly returns from their fandom monetisation strategies – hardly time for a 10-year artist and fandom development journey. Those challenges notwithstanding, however, the pivot to fandom could be a positive force – incentivising labels to nurture and develop young talent and focus on helping them grow core supporters, rather than passive audiences.

This means having the required infrastructure and expertise. In the 2000s, labels were slow to build these capabilities – which ultimately led to strong pushback from artists, who viewed 360 deals as exploitative. These days, labels are much better-equipped to create the infrastructure they need, whether through building, buying or partnering. By now, all three major labels have robust merchandising divisions, and there is a nonstop flood of fandom tools and platforms with which to partner, from Cosynd to Stationhead. We are even starting to see the rise of new label roles entirely, like artist community managers.

3. Alternatives

As streaming revenues began to grow in the 2010s, and the panic of the turn of the century abated, expanded rights deals fell to the backburner. With these rights no longer critical deal points, labels turned their attention to terms that would give them a better share of revenue from their real revenue driver – streaming. As a result, we never got to see the expanded rights story properly play out the first time around.

This time, though, it looks like we might. It is hard to imagine any newer, better business model taking labels’ attention away from expanded rights the way streaming did in the 2010s (although of course, many were just as skeptical of streaming back then). Plus, unlike the total collapse of the CD era, there are still strategies to squeeze new value out of streaming, whether via new markets or new tiers. 

So, how is progress going? Expanded rights represented 10% of 2023’s recorded music market, with revenues of $3.5 billion – and in MIDiA’s updated music forecasts report, out next month, we will discover how much this segment grew in 2024.

Acquiring these rights from artists is one way to do it, but not the only. It would not be surprising to see more record labels try to acquire or launch management divisions, or even agencies, which share in revenue from things like brand deals, touring, and endorsements (and have the muscle to justify it). UMG is no stranger to this strategy in Latin America, where its Latin artist services agency Global Talent Services recently acquired prominent music management firm RLM (per Music Business Worldwide).

“If the concept takes hold,” the 2007 New York Times piece says of expanded rights deals, “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.” While this wider industry shift did not happen last time, the possibility today seems likely – and it will forge even deeper shifts in how labels look and operate.

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