OS ANGELES, Jan. 27 — At roughly the same hour last Wednesday that the pop star Mariah Carey was being dropped by her recording company with a $28 million payout, an odd collection of music legends was complaining to California state legislators that recording executives treat musicians like indentured servants.
These are unsettled times in the music business, and many executives in the clubby industry — which suffered one of its worst sales slumps ever last year — are rethinking old habits, cutting costs and dropping high-priced artists who do not deliver quick hits. Yet at the same time, musicians sense an opportunity and are banding together to demand more flexible contracts and a greater share of the profits.
The interests of the two camps seem to be colliding as never before. And their struggle comes as the music market has been altered by a proliferation of free online music services and by a disaffected public demanding more, and more easily accessible, music. In the end, analysts say, artists may get the freedom they seek, but not without giving up the hand-holding they have come to expect from music executives.
Over all, music sales dropped 5 percent last year, and recording executives are likely to become even more wary of big contracts for any but the most dependable stars.
"There is going to be this division between the haves and have-nots," predicted Michael Nathanson, a music analyst at Sanford C. Bernstein & Company. "There are going to be those artists which can sell and others who are on the fringe."
As a result, he said, "shorter contracts, more free agents" are likely to become the norm.
At no other company has this been more visible in recent days than at the EMI Group, the ailing recording company that signed Ms. Carey to a $80 million contract for four recordings last spring and then cut her loose after her first album, "Glitter," bombed.
She is leaving with a hefty payout, a total of $49 million, which includes $21 million she received last spring. But she was not the first artist let go by Alain Levy, who replaced the artist-friendly Ken Berry as EMI's recording division chief last fall. In December, EMI opted not to renew the contract of David Bowie, who has started his own label. People close to EMI say Mr. Levy is reconsidering the contracts of others as well.
"It makes sense," Mr. Nathanson said, noting that corporate executives' pay depends on how well they squeeze out the most profits. "You don't want those expensive contracts hanging around when you get your bonus paid," he said.
The industry is rife with rumors that other deals could be renegotiated as the pressure on recording companies grows. Bertelsmann of Germany has run into its own problems recently, most notably its botched acquisition of the online renegade Napster, which Bertelsmann still hopes to turn into a paid service.
Many in the industry are watching to see what, if anything, will happen with the pop diva Whitney Houston, who signed a multirecording contract last August with Arista Records, a unit of Bertelsmann's BMG Entertainment division. The contract, executives say, is one of the richest ever, valued at about $100 million.
Artists, sensing the shift at the record labels and an opportunity to exert their rights, are taking matters into their own hands. Several weeks ago a bill supported by recording artists was introduced in the California Legislature; the measure would change the law that binds musicians to long-term recording contracts. Last week, several artists, including Carole King, Beck and Don Henley, trekked to Sacramento to lobby on their own behalf.
That group is the nucleus for the Recording Artists Coalition, a loosely knit band of advocates for musicians' rights that is led by Mr. Henley and Sheryl Crow. Recently, the coalition hired its own Sacramento lobbyist; it also has a public relations firm.
The issue, Ms. King said, is that artists have little choice but to commit to recording contracts that are often as long as seven years and give them little bargaining power even after they become stars.
Music companies, which can sue artists if they do not deliver an agreed-upon number of recordings, oppose the legislation backed by the musicians group and are lobbying against it.
If the Recording Artists Coalition is successful, it could do for the music industry what the actress Olivia de Haviland did for motion pictures in the 1940's, when she sued Warner Brothers over its contract policy. In that case, a judge ruled that it was unlawful to bind actors to a single studio for years at a time. The ruling turned actors into free agents, bringing about the end of the Hollywood studio system.
"After years of being taken advantage of by the large recording companies, we realize we do have some power," Ms. King said. "We are doing it because now is the time."
Ms. King, whose songwriting career began in the 1960's and who defined a generation of singer-songwriters with the 1971 album "Tapestry," said she had recently started her own record label, Rockingale, in reaction to the corporate way music is produced today. "The fact I'm doing my own record label is liberating," she said. "I don't have someone standing over me saying, `I don't hear a hit single.' "
But while Ms. King's go-it-alone approach may work for more established and perhaps wealthier artists, it is yet to be proved that free agency will be attractive to younger generations. Last September, the country teenage sensation LeAnn Rimes complained at a Sacramento legislative hearing that the contract she had with Curb Records bound her to live in only two states — Texas and Tennessee. Later, after renegotiating her contract with Curb, she decided to stay with the label. Ms. Rimes was not in Sacramento last week.
Several executives, some representing the music companies and others speaking for the artists, predicted that the battle over long-term contracts would be resolved between the two camps whether California's Legislature acted or not. Major recording companies, fearing that new talent will gravitate to more artist- friendly labels and take market share with them, may be forced to give up some control. And many musicians would be satisfied if the record companies were more willing to negotiate artist-friendlier contracts, regardless of whether they were forced by law to do so or not.
At least one industry executive does not consider free agency workable in the music business.
"I don't think you can flip-flop from label to label to label," said Wayne Isaak, a former executive vice president at the music cable channel VH1 who now owns a music management firm. "Artists can be hot one album and cold the next. I don't see them like movie stars, working with an agent. I think there is a lot to be said for working as a team."
