MBW Views is a series of exclusive op/eds from eminent music industry people… with something to say. The following op/ed comes from Claire Hoffman, an associate at Michelman & Robinson, LLP, a national law firm headquartered in Los Angeles, with additional offices in Irvine, San Francisco, Dallas, Houston, Chicago and New York City. Hoffman specializes in corporate transactions in the entertainment industry.
In the summer of 1985, Tipper Gore and the Parents Music Resource Center held a Senate hearing to protest rising deviance in popular music. Gore railed against Prince, Madonna, and other headlining acts she deemed Trojan Horses, deceiving parents into buying music for their children that promoted drugs, violence, sex, and the occult.
By fall, the Recording Industry Association of America had agreed to place the now-infamous black-and-white “Parental Advisory: Explicit Content” sticker on selected releases deemed too distasteful. To preserve their “family-friendly” reputations, retail giants like Walmart refused to sell these “explicit” albums, opting instead to carry only “clean,” censored versions.
But what was meant as a scarlet letter quickly became a badge of honor. When the “Tipper Sticker” appeared on an album, it signaled subversion and cultural cachet. In his 1989 song “Freedom of Speech,” Ice-T reveled, “Hey, PMRC…The sticker on the record is what makes ’em sell gold…The more you try to suppress us, the larger we get.” Gore and the PMRC had forgotten the golden rule of the music industry: rebellion sells.
The Price of Rebellion in the Streaming Era
Parental Advisory warnings may have faded in relevance during the streaming era, but the story underscores a persistent tension in the music business: controversy drives sales — but it can also sink value. In the last decade, that tension has played out in the careers of some of the industry’s biggest names.
Sean “Diddy” Combs saw his streaming numbers spike, even as he faced lawsuits and a federal raid. After being shunned from radio playlists for using a racial slur, Morgan Wallen rebounded to score multiple No.1 hits. Kanye West lost a billion-dollar brand partnership after a string of antisemitic remarks — but still commands a massive audience and accompanying streams.
For music investors, this paradox represents a risk — one not easily managed. After all, artists do not have a fiduciary duty to maximize investor value. Left unchecked, misbehavior by musicians can result in a catalog being pulled from the radio, a Twitter campaign tanking streams, or an arrest postponing tour dates indefinitely.
In such cases, the investor’s only protection lies in the purchase agreement. For this reason, many have turned to morals and misconduct clauses.
Two Paths to Protection
Morals clauses are forward-looking. If an artist engages in behavior specified as harmful, the buyer may take action. Remedies can include monetary damages or termination of the contract and release from future obligations. In practice, this clause is more common when the deal includes an ongoing business relationship between artist and buyer.
By contrast, a misconduct clause is narrower and backward-looking. It addresses liabilities existing at the time of the deal, not future conduct. Sellers may be required to disclose pending claims or past settlements involving harassment or assault — or confirm that none exist. If undisclosed issues surface after closing, the buyer may be entitled to compensation or termination of the agreement.
When Bad Behavior Is the Brand
Even with these tools, quantifying and mitigating this risk remains a persistent source of friction between artists and investors.
As buyer’s counsel, when we propose a morals or misconduct clause, the pushback often echoes the same refrain: “He’s a rockstar.” The implication? Rebellion isn’t misconduct — it’s the brand. Sex, drugs, and chaos aren’t risks; they are the product.
Artist representatives argue that such provisions penalize the very qualities that drive catalog value. They also raise concerns about scope: that a vaguely worded clause could be triggered by an unproven allegation, an internet rumor, or a bad-faith claim from a publicity seeker. And in a business built on myth-making, they’re not wrong to be cautious.
Cancel Culture Meets Catalog Value
This debate has only intensified in the age of “cancel culture.” Sometimes public outrage delivers long-overdue accountability. Other times, it’s little more than a fleeting popularity contest.
For catalog investors, the distinction matters. Some scandals spark curiosity streams or galvanize fan loyalty. Others make music virtually unlicensable. Predicting which way it will go is guesswork.
And even when misconduct is clear, quantifying its commercial impact remains difficult. Morgan Wallen’s 2021 use of a racial slur triggered radio blacklists and widespread backlash. But months later, his album stayed at No.1 for eleven straight weeks. As of this writing, two of his songs sit in the Billboard Hot 100’s top 10. Yes, his conduct caused reputational harm — but not a measurable decline in core revenue.
Contrast that with R. Kelly. Allegations against him had circulated since the 1990s, yet his catalog remained largely untouched for decades. It wasn’t until a documentary exposé reignited public outrage that streaming platforms removed his music from curated playlists and licensing deals collapsed. Streams dipped, and his catalog became radioactive.
What’s forgivable today can be unforgivable tomorrow. The market moves with the culture — not the contract.
Balancing Edge and Exposure
The challenge isn’t whether to include misconduct provisions in catalog acquisitions — it’s how to draft them to reflect the tension between artistry and asset value. A few approaches help:
- Tie to Material Impact. Limit triggers to events that demonstrably affect the assets — such as takedowns by streaming platforms, lost licensing opportunities, or measurable revenue decline.
- Set a Time Horizon. Focus on misconduct within a defined period to avoid indefinite reach while still surfacing relevant risks.
- Disclosure Warranties. Require sellers to disclose past allegations, claims, or settlements. Known risks can be priced. Hidden risks cannot be managed.
These strategies reframe morals and misconduct clauses away from abstract morality and toward commercial impact.
Investing in Culture, Investing in Risk
The music business has always thrived on risk — on the push and pull between rebellion and commercial appeal. As catalogs become billion-dollar assets, that risk carries larger consequences. For investors, the goal isn’t to sanitize the art or dull its edge. It’s to write deals that anticipate volatility and guard against scandals that can wipe out value overnight.
Morals and misconduct clauses aren’t about judging artists. They are tools for managing risk in a market where culture moves faster than contracts. The challenge is to draft with clarity — preserving the freedom that fuels creativity while protecting the investment in a business where popularity, morality, and profit are always in flux.Music Business Worldwide
