Record Labels

In 1997, David Bowie did something unusual: Rather than sign a standard recording contract, he entered into a licensing agreement with EMI America. Under the terms of the deal, the label would have the rights to more than two dozen of the star’s albums for 15 years, but after that period, those rights reverted back to Bowie. For much of music industry history, this sort of arrangement was rare. “I was at [Bowie’s label] EMI then,” recalls Tim Mandelbaum, an entertainment attorney. “For 99% of the artists on the roster, the label owned the recordings in perpetuity.” 
Bowie was once the exception that proved the rule. But today, many artists demand license deals at the start of their career. “If I have an artist with a couple different labels that are interested, it’s fairly easy for them to retain copyright,” says Craig Averill, a music lawyer. 

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This is a relatively recent shift, and its long-term impact on the major labels’ business remains unclear. Signing artists to traditional deals, where labels gained ownership of their recordings in perpetuity, allowed the record companies to amass large catalogs which gave them immense power in any subsequent music licensing negotiations — with streaming services, for example. “These labels were built on owning these copyrights,” says Larry Katz, who has spent more than 30 years practicing law in the music industry. “This is a really significant transition: The model going forward is they’re basically renting music for a license period.”

“How sustainable is that over time?” Mandlebaum wonders. “If the majority of deals become agreements where the labels don’t own the recordings and they revert to the artist at some date in the future, what does that mean for the continuing growth of the catalogs that have enabled the majors to remain dominant?”

Songs released in the last five years accounted for nearly 50% of on-demand streams in the U.S. in 2024, according to Luminate’s year-end report. Licensing deals also became increasingly common over the same time period, so presumably a solid chunk of the tracks in that 50% could revert to the artists that made them, slipping out of major label control.

Record companies have been forced to offer artists license deals because these acts can build fan bases and accomplish so much today on their own. The length of the license varies according to how much leverage the artist has. In many cases, “Labels will try to get at least 20 years,” according to Carron Mitchell, a partner at Nixon Peabody. 

But if they want an act badly, they make exceptions — Loren Wells, a partner at Wells & Kappel, recently fielded a 10-year license as an opening bid from a major label that hoped to win over one of his clients. “I like the license to be as short as humanly possible,” says Audrey Benoualid, a music attorney. “I try to keep it below 10 years if I can.”

This usually does not mean that the artist gets to sign a license deal and strut away, recordings in hand, a decade later. The license period often kicks in nine to 12 months after the act releases their final album under the agreement. If it takes them five years to turn in the three records they owe the label, for example, the clock on the license doesn’t start counting down until around year six. This is still a significant improvement over a perpetuity deal, though: Under the U.S. Copyright Act, artists who signed away their recordings for life get a chance to regain these rights after 35 years, but only Stateside, not internationally. 

In most license deals, acts with little commercial success are unlikely to get their recordings back — the rights only revert to the artist if they recoup their expenses. Depending on the deal they negotiated, though, “they may be able to buy themselves out,” says Ray Garcia, a partner at Rimon Law, “either by paying off the unrecouped balance or 110% or 120% of what’s unrecouped.”

Even when labels have to give out licenses, they have ways of holding on to recordings for longer. “They’ll try to build in options where at the end of the initial period, they can re-license the rights for five or 10 more years by paying an advance equal to several years’ worth of net profits,” says Jonathan Altschul, another music lawyer. Labels also try to insert “matching rights” into the initial deal, according to Josh Binder, a partner at Rothenberg Mohr & Binder, “so that whatever the artist’s next deal is, the original label gets a chance to match it.” 

Even so, it is safe to assume that more artists have license deals with major labels now than at any point in the history of the music industry. Altschul “can’t remember the last time” he has ceded ownership of rights when negotiating a recording agreement for an artist client. 

The major labels’ business has changed significantly in recent years, and it’s possible that the shift toward licensing deals might not matter much to them. “These are public companies now, and their duty is to their shareholders,” Wells explains. “Quarterly earnings reports have outsized importance. If that means licensing the track for 10 years [to boost those earnings], sure — whatever it takes to keep shareholders happy.” 

While songs released in the last five years accounted for nearly 50% of on-demand streams in the U.S. in 2024, that trend has been relatively constant since 2020, according to Luminate data. And during that period, tracks that came out in the last 15 years make up close to 80% of on-demand U.S. streams. If this pattern holds in the future, and the majors continue to obtain licenses that last 15, 20, or 25 years, attorneys say the labels will still hold sway over most premier artists’ catalogs during their peak streaming years — that crucial time when the music is generating the most income. 

Record companies could face a challenge, though, if several successful artists with short-term license agreements decide to take their catalogs elsewhere when their deals are up. Oren Agman, an entertainment attorney who worked for a major before founding his own law practice, believes that “license deals definitely have a negative impact on the labels’ business.” He estimates that a record company could collect “millions” in additional royalty income from a popular album in a perpetuity deal compared to a 10-year license agreement. 

However, as Mandelbaum puts it, moving a catalog “is a gigantic pain” for an artist, “and some inefficiencies and loss of income occur during that switchover” — it’s often easier for a star to stay put and work with the team that is already managing their music, paying out producers and songwriters. On top of that, Mandelbaum points out that “the incumbent label can offer things to the artist that nobody else can offer.” In exchange for extending the license, for example, the record company can improve the artist’s cut of profits on the music they’ve already put out. 

Still, as license deals become more common and license periods decrease, labels will have to return to the negotiating table earlier, and with less leverage than they had in the days of perpetuity deals. “An artist who signed a deal when they could barely pay rent gets a second chance at valuing their music,” says Lulu Pantin, a music lawyer. “The artist may have learned how the industry works, have a proven track record of financial success, and be in a position to make new demands in order for the label to keep earning on the original songs.”

In a license-happy world, Altschul predicts that the recorded side of the music business may start to look more like the music publishing industry. “We saw a wave of acquisitions in publishing over the last three to five years,” he says. “In many cases, that was because artists had either retained partial ownership of their publishing catalogs or had gotten reversions.”

“I suspect that 10 or 15 years down the line, we may see that happen more with recorded music,” Altschul continues. “Labels will have to write big checks to reacquire the rights.”