Explaining Option Periods
Labels do not commit to multiple albums. They commit to one album (sort of…) and a series of one-sided options.
Twelve to twenty-four month option periods can make it impossible for a recording artist to deliver the required number of albums within seven years (or ever).
Only a fraction of emerging artists are picked up for a second album to begin with. The rest may wait a long time to be told “No.”
In the music industry, recording artists signed to a major label grapple with absurd options periods.
An option period extends the contract and gives the record label a period of time after the first album is released to decide whether or not it wants to commit to more albums with the recording artist. Options are built into the original deal and are irrevocable for the artist. During an option period, time stops for the artist and they must wait for the record label’s decision. The law does not currently restrict how long this option period can be, but the industry standard is 12+ months from the date the album is released.
The FAIR Act (A.B. 2926) restricts these option periods to 9 months.
9 months is more than enough time for a record label to evaluate its relationship with the recording artist.
“Streaming has saved the record companies,
but artists are still stuck in outdated,
onerous contracts. Artists should be freed from unfair contracts."
Dre London, President of London Ent Group.
Who is the most harmed? Emerging artists.
While all recording artists can be harmed by option periods, no one is more impacted than the emerging artist who doesn’t make it big right out of the gate. These talented, often young, professional artists are seduced by record deals and then ultimately abandoned at great personal cost.
Doesn’t the record label need time to evaluate the risk to protect their investment? Time, sure. More than 9 months, no.
These recording artists are held off the market for what can be years to only be told no. Further, labels may start the clock after the release of the album instead of the date the album is delivered to the label. A release the label may delay due to no fault of the recording artist.
Imagine if an employee had to wait for more than 9 months after handing in a big project to know whether or not their employer was going to fire them?
"The film and television industry and the music industry have undergone enormous change in the last decade, and the companies who dominate these industries have found new and novel ways to increase their profits. Unfortunately, their success has come at the expense of the artists who make it all go. The new business models have not come with new contract terms, and artists are now stuck in outdated contracts that restrict their ability to work for unreasonable periods of time. Waiting - sometimes more than 365 days - for a paycheck, while not being able to accept other work while you wait, is patently unfair in any industry, and should not be permitted in ours."
— Gabrielle Carteris, President of Screen Actors Guild - American Federation of Television & Radio Artists
Learn more about the provisions of the FAIR Act that protect actors by visiting the SAG-AFTRA website.
Example of how options add to long-term contracts
January, 2015 - Recording artist signs to a major record label, agreeing to produce 4 albums.
July, 2015 - Recording artist finishes their first album and delivers it to the label.
July, 2016 - After delays, the label puts out the first album. The option period begins.
April, 2017 - The album was profitable for the label, so it exercises its option and agrees to a second album. The recording artist barely made any money from the first album.
August, 2017 - The recording artist submits the 2nd album.
October, 2018 - The label rejects the album.
December, 2018 - The recording artist releases a single track, which streams 250M times. The label profits from the song, but it does not satisfy the contract.
January, 2019 - The recording artist submits another attempt at a 2nd album, hoping they can go on tour. Touring & merchandise is where they make most of their money.
Today - The label hasn’t responded yet to the latest album. The label refuses to release the recording artist from their contract.
4 years, 1 album. If the recording artist tries to end their contract at 7 years under California law, the record label can sue them for the 3 undelivered albums, even though the label is responsible for the delay.