Published on October 7th, 2017 | by Alan Cross0
How Tom Petty Beat his Record Label by Declaring Bankruptcy
Hundreds, thousands of young artists have been misled, swindled and outright robbed by the record labels that signed them. All contracts are written to benefit the label and not the artist. They can be structured in such a way that while the artist makes pennies, the label makes millions. All too often, the artist doesn’t find out he/she has been duped until it’s too late.
This is what happened with Tom Petty. When he signed his first Heartbreakers deal in the 1970s, all he wanted to do was make music and tour. He got to do that–but the contract he signed ripped him off bigly. But rather than just give up and take the abuse, he fought back. Hard. And in the end, he won. Billboard has the story.
Petty was first signed to Shelter Records — a boutique label co-owned by Leon Russell and producer Denny Cordell — as a member of Mudcrutch. After releasing one single, Shelter opted to drop Mudcrutch but keep Petty. His initial singles with The Heartbreakers, “Breakdown” and “American Girl,” failed to chart, yet he quickly built up a strong following in England, and the band’s popularity as a live act helped his two albums for Shelter go gold.
That first flush of success proved far less lucrative than Petty expected. Particularly irksome was the realization that he had signed away all of his songwriting and publishing rights for $10,000. “I had no idea I’d never make money if I did that,” he told Rolling Stone in 1980. When Shelter’s distributor, ABC Records, was sold to MCA in 1979, Petty sought to break the contract. He said he was motivated by the idea that “I could work my ass off for the rest of my life, and for every dime I saw, the people that set me up would’ve seen 10 times as much.”
MCA and Shelter sued Petty for breach of contract, and Petty and his managers, Tony Dimitriades and Elliot Roberts, ratcheted up the stakes by having the rocker file for bankruptcy protection — a move that could force a court to re-adjust all of Petty’s business arrangements, including the recording contract.
Keep reading to see how it all turned out. No wonder Petty was so admired by other artists.