RIAA Cites Studies Saying California’s Proposed FAIR Act Would “Destabilize” Music Biz

The Recording Industry Association of America and a coalition of more than 20 record labels have released three new studies that claim a bill pending in the California state legislature would “upend the existing creative ecosystem that is producing the largest advances and royalty payments in music business history.”

Assembly Bill 1385, known as the Free Artists from Industry Restrictions (FAIR) Act, was introduced by Assemblywoman Lorena Gonzalez (D-San Diego) in March with the support of SAG-AFTRA and a coalition representing musical artists, including the Music Artists Coalition, the Black Music Action Coalition and Songwriters of North America. Supporters of the FAIR Act say it would modernize the law to reflect how film, TV and music are made and distributed by limiting the length of time that production studios and record labels are able to unilaterally hold actors and recording artists.

The RIAA and its coalition, however, say that the bill, if enacted into law, would “jeopardize” California’s music economy. “California is synonymous with the music industry and must remain that way,” said RIAA president and CEO Mitch Glazier. “These studies show how AB 1385 would destabilize California’s music industry, cut opportunities for working artists and slow the state’s economic recovery.”

A report from the non-profit Phoenix Center for Advanced Legal & Economic Public Policy Studies noted that “In recent years, the music industry has made a comeback after decades of declining revenues from digital piracy. Streaming services have returned the industry to revenue growth, though the profits from streaming services for both record labels and recording artists are below those received in the now distant past of physical media. The industry continues to face challenges including the Covid pandemic that hit the industry, especially performing artists, particularly hard. Coming to the aid of struggling musicians may be a suitable task, but AB 1385 is counterproductive in this regard. Basic economic logic implies that while some successful recording artists may receive a windfall from the proposed changes in California law, the long-term consequences for recording artists are dire. Under the proposed law, record labels are expected to reduce, perhaps substantially, the support of recording artists, especially new artists and artists serving smaller genres. Also, since the limits on contracts proposed in AB 1385 may be avoided in other states, the music business may migrate to other music hubs like New York and Tennessee, or other states where voluntary and enforceable contracts may be written.”

Another report, from NERA Economic Consulting, says that the bill “could have significant, unintended consequences on the investments made in the music business. The economics of how the proposed legislation is likely to affect the relationship between recording artists and record labels are clear, and they raise significant and important questions that should be carefully considered and analyzed before any changes are enacted into law. While this should concern anyone interested in the music industry, including artists who may not benefit from these proposed changes at all, given the music industry’s importance to California’s economy, it should be of even greater concern in California, which has the biggest music economy in the United States.”

A third report, from Steven S. Wildman, a professor of economics as Michigan State University, said that “commonalities between today’s recording industry and that of 20 years ago strongly suggest that restrictions Assembly Bill 1385 would place on contracts would limit the range of financially feasible contractual arrangements in ways that would harm the interests of artists and undermine investment in their development and careers, especially new and unproven artists at the beginnings of their careers. Record companies, independents as well as the majors, would be hurt, along with the recording industry as a whole, especially the very vital part of the industry based in California.”

Supporters of the legislation, however, say that AB 1385 will level the playing field between artists and the labels.

“It is imperative that the California Assembly allow actors and recording artists to work unencumbered by unfair contracts,” said SAG-AFTRA president Gabrielle Carteris. “Artists deserve the same protections and rights to seek work as every other worker. Our contracts were created prior to the 1960s. Now, instead of only three major networks, there are hundreds of different platforms for watching content. And our recording artists’ work is streamed across the globe while powerful labels use one-sided contracts to limit their ability to work for anyone else. Consumers have more choices than ever and artists should too.”

“Streaming has been an unprecedented bonanza for the record labels, but not so for artists,” said Irving Azoff, founder of the Music Artists Coalition. “It is unfair that the only Californians excluded from the protection of the Seven Year Statute are recording artists. We ask our record label partners and members of the California legislature to join us and support this important initiative. We must protect artists and modernize this archaic law.”

“The landscape of the entertainment industry has dramatically changed, yet companies still benefit from outdated laws that allow them to wield an overwhelming amount of control over artists,” said Gonzalez. “No worker should ever be bound to an unreasonable contract that holds them back from making decisions about their own livelihood. It’s time we changed the law to reflect a new reality for creators.”

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