A California Chamber of Commerce-opposed bill that would deliver a massive blow to the state’s music industry and drive talent and jobs out of California passed a Senate policy committee this week with one Democrat voting no.
The proposal, AB 983 (Kalra; D-San Jose), changes the rules for recording agreements in the state, undermines the freedom to contract, and jeopardizes California’s music industry.
Members of the Senate Labor, Public Employment and Retirement Committee said the bill needs work and asked the author to continue working with opponents to resolve issues.
California’s Unique Framework
California has long been known as the nation’s entertainment capital, boasting an unparalleled music history and diverse arts community. The music industry is a pillar of California’s economy, contributing $39.5 billion to the state’s gross domestic product (GDP) and supporting more than 430,000 jobs.
The even and fair playing field enshrined in California Labor Code Section 2885 has enabled artist royalties to increase faster than label revenues. New artists today have more opportunities to achieve success than ever before. In recent years, terms have improved in artists’ favor — flexible contracts allow artists to negotiate better royalty rates and longer commitments. In the end, they can walk away at the end of the seven years if they choose to do so.
Recording contracts in California protect working artists by placing a seven-year limit on the enforceability of personal services contracts in the state. This framework typically provides artists with upfront, nonrefundable payments from record labels, in addition to significant investment in their career development.
In exchange, an artist agrees to deliver a set number of records to the label. If an artist leaves a contract after seven years without providing contractually promised recordings, the label can seek to recover any provable losses—as any party to a contract has a right to do.
The seven-year limit is unique to California, allowing an individual who commits to perform personal services to walk away from contractual obligations after seven years, regardless of any terms in the contract to the contrary. No other state allows this kind of offramp for contracts.
The rule does provide some guarantees though, namely that both parties, artist and label, receive what they bargained for. This fair and balanced approach has helped position California at the epicenter of the nation’s music industry.
AB 983 Rewrites Rules of Recording Contracts
AB 983 guts this existing framework and freezes deal terms in inflexible statutory text, reducing opportunities and resources to invest in emerging talent in the state.
It would eliminate the label’s statutory right to recover provable losses if an artist has breached their agreement to deliver recordings during the seven-year life of a deal — creating bad incentives and undermining the strong partnerships that exist today where labels and artists work together to make great music and succeed.
AB 983, the CalChamber warned, is “an inappropriate exercise of legislative power that will deter investments in California.”
Shrinks Music Economy by Up to $600 Million
Music contributes substantially to California’s economy, and the provisions in AB 983 will have significant negative impacts on the industry.
Experts have warned that the bill’s provisions on recording agreements would drive down artist advances, make it harder for diverse new acts to get signed, and drain between $400 million and $600 million out of the state’s music economy, the CalChamber said.
“Now is the time to invest in California’s economy to ensure California remains a leader in this industry, not to hamper its growth,” the CalChamber urged. “We cannot afford to lose jobs and this important part of California’s economy by upending a system that works.”
Key Vote
AB 983 passed the Senate Labor, Public Employment and Retirement Committee on June 22, 3-1:
Ayes: Cortese (D-San Jose), Durazo (D-Los Angeles), Laird (D-Santa Cruz).
No: Newman (D-Fullerton).
Absent: Ochoa Bogh (R-Yucaipa).
The bill will be considered next by the Assembly Judiciary Committee.
