How to change the licensing offers in the world of major labels

andN 1997, David Bowie did something unusual: rather than signing a standard registration contract, he enrolled in a licensing agreement with EMI America. In the conditions of the agreement, the label would have the rights to more than two dozen albums of the star for 15 years, but after that period, those rights returned to Bowie. For a large part of the history of the music industry, this type of arrangement was rare. “I went to (Bowie’s label) EMI,” he remembers Tim MandelbaumA entertainment lawyer. “For 99% of the artists on the list, the label held the records in perpetuity.”

Bowie once was the exception that proved the rule. But today, many artists ask for license offers at the beginning of their career. “If I have an artist with some different labels that are interested, it is easy for them to keep the copyright,” says Craig Averilla musical lawyer.

This is a relatively recent change, and its long -term impact on the major labels remains unclear. The signing of the artists for traditional offers, in which the labels obtained the property of their records in perpetuity, allowed the record companies to gather great catalogs, which offered them huge power in any subsequent musical license negotiation – with streaming services, for example. “These labels were built on holding these copyrights,” says Larry Katzwho spent more than 30 years practicing law in the music industry. “This is a truly significant transition: the model that will go forward is practically that it rents music for a license period.”

“How durable is this in time?” Mandlebaum miracles. “If most offers become agreements in which the labels do not hold the records and return to the artist at a certain date in the future, what does this mean for the continuous growth of the catalogs that allowed the cheerleaders to remain dominant?”

The songs released in the last five years represented almost 50% of the US demand flows in 2024, according to his Luminati year end report. Licensing offers have also become more and more frequent in the same period of time, so that probably a solid piece of pieces from the fact that 50% could return to the artists who did them, slipping from the major tag control.

Disc companies have been forced to provide license offers for artists, because these acts can build fan bases and can do so much today on their own. The length of the license varies depending on how much the lever the artist has. In many cases, “labels will try to get at least 20 years,” according to Carron MitchellPartner at Nixon Peabody.

But if they want a bad act, they make exceptions – Loren WellsPartner at Wells & Kappel, recently won a 10 -year license as an opening offer from a major label who hoped to win over one of its customers. “I like the license to be as short as possible human,” says Audrey Benoualida musical lawyer. “I try to keep him under 10, if I can.”

This does not usually mean that the artist gets to sign a license transaction and move away, records in hand, a decade later. The license period often begins in nine to 12 months after The act launches its final album under the agreement. If it takes them five years to transform the three records, they owe the label, for example, the license watch does not start to count until around six. This is still a significant improvement in a transaction of perpetuity, but: according to the US Copyright Law, the artists who have signed their life registrations have the chance to regain these rights after 35 years, but only to the state state, not internationally.

In most of the license offers, it is unlikely that the documents with little commercial success will recover their records – the rights return to the artist only if they recover their expenses. Depending on the agreement they negotiated, “they could be able to buy”, says Ray GarciaA partner at Rimon Law, “either paying the non -recovered balance, or 110% or 120% of what is not not recovered.”

Even when labels have to grant licenses, they have ways to keep records longer. “They will try to create options in which at the end of the initial period, they can re-read the rights for another five or 10 years, paying an advance equal to a few years of net profits,” says Jonathan AltschAnother musical lawyer. Also, the labels try to introduce “matching rights” in the initial agreement, according to Josh BinderA partner at Rothenberg Mohr & Binder, “so, whatever the artist’s next business, the original label has the chance to match it.”

Even so, it is safe to assume that more artists have high label license offers now than at any time in the history of the music industry. The high “I do not remember the last time”, he gave up the property of the rights when he negotiated a registration agreement for an artist client.

The major label activity has changed significantly in recent years and the transition to licensing transactions may not matter much for them. “These are public companies now, and their debt is for their shareholders,” explains Wells. “Quarterly earnings reports are reduced. If that means licensing the piece for 10 years (to stimulate these winnings), sure – whatever is needed to keep the shareholders happy. ”

While the songs released in the last five years represented almost 50% of the US demand flows in 2024, this trend was relatively constant since 2020, according to illuminated data. And at that time, the pieces that have appeared in the last 15 years represent almost 80% of the US flows on request. If this model is maintained in the future, and the major continues to obtain licenses that the last 15, 20 or 25 years, the lawyers say that the labels will continue to maintain the most of the catalogs of the premiere artists during the maximum streaming period – that crucial moment in which the music generates the most.

However, record companies could face a challenge, if more successful artists with short-term license agreements decide to take their catalogs elsewhere when their transactions are increasing. Oren AgmanAn entertainment lawyer who worked for a majority before founding their own law practice, believes that “the license offers certainly have a negative impact on the activity of the labels.” He estimates that a registration company could collect “millions” in additional royal revenues from a popular album in a perpetuity business, compared to a 10-year license agreement.

However, as Mandelbaum says, moving a catalog “is a gigantic pain” for an artist, “and some inefficiencies and loss of income occurs during this change” – it is often easier for a star to stay and work with the team that already manages their music, paying producers and composers. In addition, Mandelbaum points out that “the current label can give things to the artist that no one else can offer.” In exchange for expanding the license, for example, the registration company can improve the reduction of the artist’s profits on the music they have already put.

However, as the license offers become more frequent and the license periods decrease, the labels will have to return to the negotiation table earlier and with less lever than they had during the days of perpetuity. “An artist who signed a business when he could barely pay the rent has a second chance to evaluate his music,” says Lulu Pantina musical lawyer. “The artist could have learned how the industry works, have a proven track record of financial success and be able to make new requirements to continue to win on the original songs.”

In a happy license world, the highs predicts that the registered part of the musical activity can begin to look more like the music publication industry. “I have seen a wave of public procurement in the last three -five years,” he says. “In many cases, this was due to the fact that the artists kept the partial property of their publication catalogs, or they obtained inversions.”

“I guess that 10 or 15 years in line, we could see that more with recorded music is happening,” continues the high. “The labels will have to write great checks to carry out the rights.”