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California’s proposed bill AB 1385 is meant to change the rules that  govern the relationship between artists and record labels.  If enacted, the proposed legislation would mean that if the number of agreed-upon albums were not delivered by the end of seven years, artists could simply walk away and leave the record label without the value for which it contracted.  In addition, it would force record labels to make option decisions on an expediated time frame—within six months of the delivery of a contracted album, whereas standard terms currently are keyed off the release of an album, and often with longer windows. 

NERA Director Dr. David Blackburn, with funding support provided by the Recording Industry Association of America, has authored a paper analyzing the proposed legislation. In the paper, Dr. Blackburn discusses the law itself and the changes it would make, summarizes the existing relationship and engagement between artists and labels, and begins to analyze the effects that the proposed legislation might have, by focusing on how the legislation would be likely to change the economic incentives artists and labels face.

Dr. Blackburn demonstrates that the effects of the proposed change and the upheaval it would cause (including harms to artists) should clearly be expected, even if the extent and scope of these changes are less certain and would require significant study and research to model and predict with more precision. Most directly, enacting AB 1385 into law should be expected to reduce artist advances and lead to fewer artists being signed to record deals, while weakening labels’ economic incentives to invest in artists (both artists already under contract new artists) and reducing the information available to labels and artists as contractual decisions need to be made, leading to changes which would leave many artists worse off as well. 

In summary, the economics of how the proposed legislation is likely to affect the relationship between artists and labels are clear, and they raise significant and important questions that should be carefully considered and analyzed before any changes are enacted into law.