Record Labels

Ricky Montgomery began rehearsing for his tour in late January. The singer/songwriter played shows across America before heading to Europe, Asia and Australia, returning to the U.S. in June. “It had been a long year, and I was also sick,” he says. That’s when he found out his label had dropped him. 
“There was a disconnect as far as creative direction,” he explains. “The label didn’t really know what to do with me, and instead of listening to my ideas, they just tried to apply standard pop templates. Ed Sheeran was the one they thought would work.”

That “disconnect” is the subject of Montgomery’s upcoming single, a downcast acoustic ballad out October 24 called “Superfan.” He sings with a deflated quaver: “Team just got the numbers in/Said try it more like Ed Sheeran/But he’s not me, and I’m not him.”

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Being dropped hasn’t hurt Montgomery’s career, though. In fact, he’s now earning more streams — around 2 million streams a day across his catalog — than he was previously. “For better or worse, it’s a social media content game now,” says the 31-year-old singer, who has close to 2 million TikTok followers. “So if you’ve been investing your time into that, the odds are that you’re going to be totally fine if a label decides to drop you.” 

Getting dropped is in vogue this year: Two of the biggest breakout artists of 2024, Chappell Roan and Shaboozey, were both cut by major labels before their recent explosive success. And more acts could soon join their ranks, because the major labels have been cutting costs by slashing staff — and dropping artists.

“Each time there have been major staff layoffs across the label systems, concurrently there were artists released from rosters,” says Leon Morabia, a partner at Mark Music & Media Law. “Some artists are really happy about it and relieved, and some artists are very upset. Their reaction ultimately depends on how much they depend on the record company to do what they do.” 

Dropped acts lose access to an extended support team; plans for upcoming releases must be jettisoned or heavily reworked; tours can be scrapped. That said, Lulu Pantin, founder of loop legal, is adamant that “being dropped has no bearing on long-term success.” And this is probably more true than ever. 

During a recent interview with Bloomberg, Sony Music CEO Rob Stringer pointed out that when he joined the music industry in 1985, labels had a lock on manufacturing, distribution and radio. “We had a lot more power,” he said. Today, in contrast, “the artists have at the very least equal power to us.” 

That’s because they can make music cheaply, and promote it internationally, without ever leaving the house. “Artists have to be as good, if not better, at marketing as any professional marketer now,” Montgomery says. “They are, by default, the most experienced person in the room in marketing meetings.”

At the same time, the buttons that labels can push — to get radio play, appearances on award shows and late-night television, and prominent press placements — no longer guarantee real fans. As a result, Montgomery says, “Labels only want to focus on Tiktok or Reels or YouTube Shorts right now. I had three times as many meetings about TikTok strategy as I did about music. There’s no reason you can’t do that stuff on your own.”

Still, getting dropped can be jarring, a corporate version of a breakup. And like a breakup, disentangling takes a while, as it requires additional negotiation between the artist’s team and the label. “It’s not just, someone waves a magic wand and then you’re dropped,” says an A&R who left a major label job earlier this year. 

This legal wrangling can be crucial for the next phase of an artist’s career. In a typical record deal, the label enjoys exclusive rights to any songs delivered during the contract period — even if they haven’t come out yet. For artists who are being shown the door, then, “the key point is who gets ownership of the unreleased music,” Pantin says.

Record companies are reluctant to give these rights up, since they helped fund the songs’ creation. To secure the return of unreleased music, artists may have to give the label a concession, either in the form of “an ‘override’ payment or a royalty on sales and streams,” Pantin adds. 

If the label refuses to give up the rights to unreleased songs, artists have one other option. “I’ve called labels and asked them to waive the re-recording restriction,” says Tiffany Almy, founder of PKA Law. The re-recording restriction is in place to prevent an artist from putting out a competing version of a song the label already released, a tactic made famous by Taylor Swift with her Taylor’s Version album re-recordings. But the restriction serves no purpose if the label never put out the track in the first place. And if the artist succeeds in convincing the record company to nix that provision, they can then re-cut their music  — on their own dime this time — for release.

Another point of negotiation when artists and labels are uncoupling: The act may be able to obtain some additional money, depending on the structure of their contract. “The deal could be worth $500,000, and $150,000 is given to the artist on signing and the rest is for recording,” the former A&R executive explains. “Then when you deliver the album, whatever’s left from the fund is supposed to go into the artist’s pocket.” 

Attorneys try to prepare for these situations long before the label is even thinking about trimming rosters by including what’s known as “a pay-or-play provision” in the artist’s initial contract. (The initial deal negotiation period is when lawyers push for other protections as well: “I always try to build in caveats that the re-recording restriction doesn’t apply if the track doesn’t get released within a certain period of time,” Almy says.)

The pay-or-play clause ensures that, “If you get dropped in the middle of the contract period, you will be entitled to at least a portion of the remainder of the fund,” explains Oren Agman, an entertainment attorney. “Labels are now capping that, so they’ll give you maybe 30% or 40% of the balance. [But] if you have no pay-or-play provision, then you’re not getting anything other than the advance.” Jodie Shihadeh, a music lawyer, calls this provision “one of the last key points” when negotiating a record deal. 

While the lawyers for both sides go back and forth after an act is dropped, the artist may be stuck twiddling their thumbs. “I’ve seen labels delay responses for months, extending the process and keeping artists in limbo,” Pantin says.

That limbo period matters because an artist technically can’t sign a new deal before getting out of the old agreement. Some do so anyway, figuring a label that dropped them isn’t likely to spend money suing them for breach of contract. “It can be a game of chicken,” the former A&R notes. 

For an artist’s collaborators, it may be more than that — they don’t have the potential cushion of a pay-or-play clause. Many labels give a producer half their fee for a track up front, and fork over the rest only when that track comes out, Almy says. A dropped artist may mean a shelved track; for a producer, a shelved track represents lost income. “I’ve called the A&R at the label that dropped the artist and asked them to consider paying the producer for the work that they already did,” Almy says. Mixers are often in the same predicament. 

Artists have it easier, because they can just start recording and releasing as they see fit. “I’ve seen some artists where it really helped that they got dropped, even though they didn’t want to be,” Shihadeh says.

Another recent post-drop success story is Gigi Perez, who parted ways with Interscope earlier this year. “I was stuck inside of a machine that didn’t work or make sense for me and I was unhappy,” she wrote in a lengthy message on Instagram on March 8. “I think a ton of artists were/are in this position as this new model of the music industry changes.” 

She ended her post on an upbeat note: “Let’s go, bitches.” And in July, she released “Sailor Song,” a muscular folk track that works as well in an arena as it does around a campfire. It proved to be effective on TikTok as well: Users were soon soundtracking tens of thousands of videos with at least three different snippets of the single. 

Streams of “Sailor Song” shot up. And on October 8th, Perez announced a new label home: Island Records.