Avoiding The ‘360 Deal’ Snare

Musician Jack Conte (left), the co-founder of Patreon, performing with Nataly Dawn as the band Pomplamoose.
Photo by Joe Loong.

In an epic battle, suitable for a (relatively) big-budget YouTube video, an army of powerful but faltering giants faces off against a small but nimble band of rebels trying to secure their independence.

Instead of a trailer for a new fantasy series, this is a decent description of the state of the music industry. Big record companies swing snares in the form of increasingly standard “360 deals,” while unsigned artists who value their artistic and financial independence try to go their own way by building a direct connection to their fans and supporters. One such connection gaining in popularity is Patreon.

Patreon, which was founded in 2013, is a crowdfunding platform. Unlike Kickstarter or GoFundMe, however, Patreon is not set up to fundraise for a one-time lump sum. Instead, the idea is that fans (or “patrons”) subscribe to support a particular artist’s work over time. While Patreon is so far most popular with artists who run YouTube channels, it is also used by other musicians, podcast creators and webcomic artists.

Musician Nataly Dawn, who is half of the band Pomplamoose in addition to working as a solo performer, was an early and vocal supporter. (Her collaborator Jack Conte is Patreon’s co-founder and CEO, though Dawn observed in a recent interview he has not been taking a salary in that position, instead earning his living from his music through Patreon and elsewhere.) She has also lamented the fate of artists with labels who are not able to make a living after the label takes their cut of their earnings. And while many of the artists on Patreon have niche followings, a few bigger artists have moved to the site, including a cappella group Pentatonix and singer-songwriter Amanda Palmer.

For a young artist, a 360 deal like the one Dawn criticized represents the opposite end of the spectrum from Patreon. Such deals have been around for years now, but are becoming increasingly dominant. An established record label has capital, connections, a brand name and access to other big companies, such as those specializing in tour management, ticketing or music video production. The label offers to use these resources to make an artist famous; in exchange, the label will take a cut of everything from tour revenue to merchandise to endorsement deals. Instead of simply selling the artist’s records, the label inserts itself into every part of an artist’s revenue stream.

On the other end of the scale, creators working totally on their own take responsibility for developing their personal brand, delivering their product to fans (whether videos, songs or other pieces of art), and building a direct relationship with an audience. This direct artist-audience connection exists today in a form that has only been possible for the last decade or so, and it is what fuels a model like Patreon. While Patreon does take a 5 percent cut of pledges - as their website observes, “Don’t forget that we need to survive!” - it does not touch revenue from any other sources.

The implications of Patreon’s model extend beyond music, and indeed musicians are not the only, or even the dominant, group to flock to the site. Filmmakers, especially those interested in the short film, were formerly limited to audiences mainly at universities and film festivals, but now have the means to reach any interested viewer with a sufficiently fast Internet connection. Podcasters, whose platform exploded in popularity with last year’s “Serial,” have long relied on voluntary listener donations; they now have a new option for structuring that income. Investigative journalists who make a name for themselves have an option to garner support for a project free of some of the pressures that come from working with a traditional publication. Opinion writers may be able to draw on their audiences too. Fiction authors might even avail themselves, suggesting the potential return of the serialized narrative in a much larger way. Some of the artists on Patreon already offer creations in more than one of these forms.

The idea of artists supporting themselves without middlemen such as publishers or record labels is not new, and it did not originate with Patreon. But Patreon offers a relatively centralized way for a consumer to support a menu of creators, and in that, it is an interesting development. It’s a relatively new company, but as of March, its Google search traffic had roughly doubled over the past year, suggesting there is a market for what Billboard called “an online tip jar.”

Not long ago, I talked to an experienced music business executive. I asked her why any artist these days would sign a 360 deal. She told me that the artists who do often feel they lack options, and see such deals as the only way to get distribution on the radio and cable TV channels that promote music. This may still be true; these distribution channels are still a big lever for traditional labels.

But the trends are pretty clear. Once upon a time, radio play sold records. These days, music sales are not the main revenue source for most artists. Artists make some money from streaming services such as Spotify, but generally not much. Instead, most of their revenue comes from ticket sales, merchandise and advertising - notably ads on YouTube videos. All of these avenues rely on the artist’s personal popularity with fans. While labels do have the resources to help increase this popularity through exposure, exposure alone is not enough.

Popularity these days is often built on direct personal engagement. Taylor Swift had a record deal early in her career, but she would never have become the phenomenon she is without her personal stream of tweets, posts and likes. This summer, Swift made waves by sending heartfelt responses to fans tagging her on Instagram. Through this engagement, her fans have come to love her as a person as much as an artist. No label could have done that for her. An artist coming up today, hoping to be the next Taylor Swift, would have less incentive to spend time and energy on this sort of goodwill-building with a 360 deal in place.

But much more than for the Taylor Swifts of the world, Patreon and similar funding mechanisms are for talents who have not already broken into the wider cultural conversation. Patreon may allow lesser-known talents, who may have only cultivated a niche audience, to assemble that audience on a large enough scale to support themselves and their work.

Of course the fact that they can be self-sustaining in theory doesn’t mean that every artist will be in reality. Convincing enough of their fans to become paying patrons will probably be a struggle for newer and smaller artists. A quick browse through Patreon users shows that for every project generating thousands of dollars per video, many others are making more like $40 or $50. While this is still more than many artists make on YouTube ad revenue alone, it’s not enough for most artists to quit their day jobs. Patreon’s repeating subscriptions can also be set up on a per month or a per creation basis. If a YouTuber is set up on the latter model and the rent is coming due, there’s a temptation to push out subpar content in a hurry. The penalty is built in, however: Do this regularly, and you’ll lose your subscribers.

At the end of the day, what separates the Davids of Patreon from the Goliaths of the record labels is what their business models produce. The Goliaths, who can always find another star-in-the-making to promote, make their money from content that, in many cases, would have been created anyway. The Davids, with the help of their patrons, are adding appreciably to our pool of cultural wealth.