California’s proposed bill AB 2926 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 nine months of commercial release of a contracted album—and also place restrictions on the ways in which contracts could be renegotiated, even if mutually beneficial. 

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.  An earlier version of this paper was published in May 2021 relating to similar proposed legislation which was not passed, proposed bill AB 1385 (the Free Artists from Industry Restrictions Act).

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 2926 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.