Subscribe to our newsletter

(Credit: Mark Spowart / Alamy)


How Tom Petty's lawsuit with his record deal changed the music industry forever


The late and great Tom Petty put the beating heart into Americana and made the world a brighter place with his presence. After completing his emphatic arrival in 1976 with his debut LP Tom Petty and The Heartbreakers, over the next 40 years, he would carve out a niche for himself that is incomparable to another artist to have ever graced the planet. This one story about how Tom Petty single-handedly changed the music industry with a lawsuit is an example of why he was a revolutionary figure both off-stage and on it.

Despite being recognised as one of the greatest American songwriters of all time, he always operated from the outside looking in, expertly crafting mainstream hits from the periphery. Like many of his counterparts, Petty had a distinct sound, one he had honed to a tee and religiously stuck with over his career. However, it wasn’t just Americana that he played a part in shaping, but, also making sure that artists got a fair slice of the pie.

This anecdote feels like an integral story to revisit right now whilst streaming services, and significant labels currently find themselves under intense scrutiny. Petty’s story shows that the belly of the beast has always operated in a gruesome manner. When the singer-songwriter first signed a record label in 1976, he opted to sign for Shelter’s independent record label. Once Petty did some digging he discovered that the publishing rights he’d sold to the title for $10,000 were the reason for his lack of income. “I had no idea I’d never make money if I did that,” he told Rolling Stone in 1980. This interview was a year on from when Shelter’s distributor, ABC Records, was sold to MCA in 1979 and Petty began trying to break the contract. “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 ten times as much,” Petty recalled.

Petty hated the idea of being “bought and sold like a piece of meat”. The singer didn’t sign to MCA and felt like he didn’t have to join a label that he didn’t sign with. Petty decided to think outside of the box to get out of his record label. The singer would do anything possible to feel like an artist once more, rather than a nameless commodity.

He then decided to self-financed his next record and made it as expensive as possible. Petty managed to rack up costs of over $500,000 and then refused to release it. The Heartbreakers leader cleverly declared bankruptcy to force the label to void his contract and, under law, they had no choice but to do this. He realised that going bankrupt would allow a court to re-adjust all of his business arrangements, including the recording contract.

The label ran scared, they feared other artists following Petty’s lead, and Shelter’s former owner settled out of court. “It may have been a sham in some ways, the bankruptcy strategy,” Petty admitted to his biographer, Warren Zanes. “But … [Cordell’s] lawyers figured we’d out-lawyered them.”

However, Petty had the last laugh, and MCA couldn’t risk losing him, therefore offered a deal that he couldn’t turn down. They even formed a brand-new imprint for him called Backstreet Records, and Petty’s deal included both a $3 million guarantee, as well as him finally regaining access to his publishing rights.

Petty’s stance showed the music industry that there were real consequences to their actions, and they couldn’t treat artists like a commodity. Without artists like Petty, who sell records and sell tickets, there is no music industry. Currently, it feels like what happened with Petty back in 1979 is happening all over again. The sector once again needs a reminder that the music business is redundant without the music, and without the artistry, nothing else exists.