Group Says Its Analysis Shows Proposed California Law Will Harm Music Creators

May 5, 2021

Proposed California legislation would make contracts between labels and artists nearly unenforceable, reducing the incentive for record labels to invest in recording artists and potentially depressing California’s music economy by as much as $600 million a year, according to an analysis by the Phoenix Center for Advanced Legal & Economic Public Policy Studies.

The center is a nonprofit that studies broad public policy issues related to governance, social and economic conditions, with a particular emphasis on the law and economics of the digital age.

The center notes that over the past two decades, digital piracy has wreaked havoc on the music industry, with industry revenues falling more than 60% between 1999 and 2009. Despite rising income from streaming services, total revenues (for the music industry remain suppressed, according to the center.

The center examined new legislation proposed in California “that could meaningfully alter the ability of record labels and recording artists to craft suitable, voluntary contracts for recorded music” in the state.

Assembly Bill aims to prohibit the labels from seeking damages for contractual non-performance, and it imposes a statutory limit on the exercise of options for more recordings by successful recording artists.

Proponents of AB1385 argue that it helps struggling artists by strengthening their position in negotiations with record labels.

The center’s analysis asserts the bill makes contracts between labels and recording artists nearly unenforceable, reducing the incentive for record labels to invest in artists. The bill, if passed, will reduce recording artists’ income, and will lead to a sizable contraction in the music business in California, as both labels and artists are incentivized to move to states where meaningful, voluntary contracts may be crafted and enforced, the center’s analysis shows.

“AB 1385 is to the music industry what California’s AB 5 was to the gig economy,” stated study co-author and Phoenix Center Senior Fellow Professor T. Randolph Beard. “If AB 1385 becomes law, then the effort to unwind it will begin soon thereafter when its predictable consequences arise. Californians will have to issue another reprimand to their state government.”

A copy of the analysis can be downloaded free from the center’s website.

Topics California

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