Labels, artists, and contracts in today's music industry: An economic analysis

August 2023
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In this paper, Debra Aron and Steven S. Wildman analyze the economics of contracting practices in the modern recording industry.  In the last twenty years the development of digital technology, the broad dissemination of broadband access, and the near ubiquity of smartphones, laptops and tablet devices have revolutionized the distribution  and production of music. One notable feature of label recording contracts that has remained consistent is that they are project-delimited rather than time-delimited. That is, a contract provides for a specified number of projects rather than a set period of time, and the contract ends when either the projects are completed, or the label chooses not to exercise its option under the contract to fund the next project.

The authors reviewed data descriptive of hundreds of contracts and deal memos on a confidential basis, as well as a sampling of artists contracts and contract templates, and found that major label contracts vary substantially on numerous dimensions such as album commitments, advances, recording funds, royalties, marketing funds, tour support, and legal advances, among others. Product-delimited contracts strike a balance because, on the one hand, the evidence demonstrates that they provide ample opportunity for major label artists who prove to be successful to renegotiate their contracts, while on the other hand they encourage more label investments in artists than would time-delimited contracts, to the benefit of the artist and the label.

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