A Legal Case Study, produced with our friends at Music Legal

In June 1994, after 74 days in the High Court, one of the biggest selling artists on the planet lost his fight to walk away from his record deal. George Michael had argued that his contract with Sony Music left him tied to a company he no longer trusted, for a term he could not control, on terms he called professional slavery. The judge disagreed on every point.

Thirty years on, the case still sits on reading lists for music law students. It deserves a place on the reading list of every working musician too, because the reasons he lost have nothing to do with fame. They are about what happens when you sign, renegotiate, accept money and only then decide the deal is unfair. Those are decisions function band musicians, session players, tribute acts and original artists make every year, usually with far less advice than George Michael had.

How a teenage pop deal became a fifteen year commitment

The story starts in 1982, when Wham! signed to Innervision, a small label distributed by CBS. Michael was 18. Within two years the duo was in dispute with Innervision, arguing that their deal was an unreasonable restraint of trade, the legal principle that stops a contract from unfairly preventing someone earning a living.

That dispute was settled in March 1984. As part of the settlement, Wham! signed directly with CBS on what the court later described as an eight album deal: an initial period followed by a series of options that the label, not the artist, could choose to take up.

Then came Faith. Released in 1987, it had sold around 4 million copies by the end of that year and more than 14 million by the end of 1992. Michael was now one of the most valuable artists in the CBS stable, which Sony had bought, and his deal was renegotiated. The new agreements, dated January 1988, replaced the 1984 terms, kept the eight album structure and capped the total term at fifteen years. That year alone, Michael and his companies received more than £11 million. In 1990 the financial terms were improved again.

So by the time the relationship soured, the contract on the table was not the one an inexperienced teenager had signed. It was the third version, negotiated by a global star with expert lawyers around him.

What went wrong

In September 1990 Michael released Listen Without Prejudice Vol. 1. It was a deliberate move away from the image that had sold Faith. He kept his face off the cover and stayed out of the videos. The album sold well, but nowhere near its predecessor, and Michael came to believe Sony had held back on promoting it because it disagreed with his direction.

In October 1992 he issued proceedings, asking the court to declare the contract unenforceable as an unreasonable restraint of trade, or void under European competition law. The trial began in October 1993 and ran until April 1994. Judgment was handed down on 21 June 1994 by Mr Justice Jonathan Parker.

Why he lost

The judgment rejected his claims in full, and the reasons are where the real lessons sit.

He had already settled once. The 1984 deal was the result of a genuine compromise of an earlier restraint of trade dispute. The court held that public policy supports people settling their disputes, and that allowing an artist to reopen a settlement would undermine every settlement in the industry. Because the 1988 contract grew directly out of that settlement, it could not be attacked in the same way.

He had taken the money. In February 1992, while he was already unhappy and knew he could challenge the contract, Michael asked Sony for a $1 million advance. He repaid it that August, before suing, but the court treated the request itself as a clear act of affirming the contract. In law, you cannot treat an agreement as binding when it suits you and unenforceable when it does not.

He had good advice and had renegotiated twice. The judge placed weight on the fact that Michael had expert legal advice throughout, had renegotiated in 1987 and again in 1990, and had been paid very substantial sums.

The terms were judged as a whole. Even setting the settlement point aside, the court found the contract reasonable. A label investing heavily in an artist has a legitimate interest in an exclusive deal of some length so it can recover that investment. The fifteen year cap, the exclusivity, the label owning the masters and the three year restriction on recording the same songs again after the deal ended were all found to be justified.

The competition law argument failed too. The court found the relevant market was the UK, so European rules on trade between member states did not apply.

One more finding matters to anyone signing a recording or distribution deal today. The court accepted that Sony had no contractual obligation to promote or even release Michael's records. Commercially it obviously would, the judge said, but the contract did not require it. The grievance at the heart of the whole case, that the label had not pushed the album hard enough, was not something the contract gave him any right to.

What happened next

Michael said he would not record for Sony again. The standoff ended in July 1995, when Sony agreed to release him and his contract was taken over by Virgin Records for the world and DreamWorks Records for the United States and Canada. His next album, Older, arrived in May 1996, almost six years after Listen Without Prejudice. He eventually returned to Sony in 2004 for his final studio album, Patience.

He was free, but the way out was a commercial deal brokered between record companies, not a court ruling.

What this means for working musicians

Very few of the musicians we work with will ever sign a fifteen year recording deal. But the principles in this judgment apply to the agreements working musicians sign all the time: agency and representation agreements, band partnership agreements, residency contracts, management deals, publishing deals and session buyouts. Here is what we would want every artist to take from it.

Read the term, then read the options. The length of a deal is rarely one number. Look for who controls any extensions and what triggers them. If only the other party can extend, you need to know how long you could be committed for at the outside, not just at the start.

Treat every renegotiation as a fresh signature. A renegotiated contract is not a tweak to an old one. It is a new agreement you are choosing to enter, often with better advice than you had the first time. The better your position when you sign, the harder it will be to argue later that you were treated unfairly.

Be careful what you accept while you are unhappy. Taking an advance, a fee, a booking or a new benefit under a contract you want to challenge can count as confirming it. If you are in dispute, take advice before you accept anything that flows from the deal.

Get commitments in writing, not assumptions. If promotion, release dates, a minimum number of bookings or a marketing budget matter to you, they need to be obligations in the contract. Goodwill is not enforceable.

Settlements are meant to be final. If you settle a dispute, assume you will be living with the result. Make sure the settlement gives you what you need, including a clean exit if that is what you want.

Litigation is a slow and expensive way to leave. Michael lost in court and still got out, through negotiation. For most musicians, a well drafted exit clause, a notice period and a fair buyout mechanism are worth far more than a strong argument you might have to fight for years to win.

Our take

At Artist Republic we see the consequences of poorly understood contracts far more often than we see court cases. A singer locked into an exclusivity clause they did not notice. A band member who left a partnership with no agreed way to value their share. A function act tied to an agency on terms that only ever run one way. None of these needed a lawyer to go wrong, and most would have been avoided by reading the agreement properly and asking the right questions before signing.

George Michael's case is a reminder that a contract does not become unfair just because you have outgrown it. The time to make sure it works for you is before you sign it, and again every time you agree to change it.

This case study draws on the Music Legal bitesize case study on George Michael vs Sony Music, available at musiclegal.co.uk. It is general information, not legal advice. If you are facing a decision about a contract, speak to a qualified adviser before you sign.