The time Tom Petty declared bankruptcy

In the record business, it used to work like this.  You sign a contract with a record company and they advance you the money to record your first album.  Typically that’s a hefty sum.  And if you’re lucky and your album sells well, you’ll bring in enough to pay the record company back, and then and only then start earning money for yourself and your bandmates.  In Tom Petty’s case, even though his first two records were successful, he and his band had little to show for it.  And he blamed it on the deal he’d signed with his label, Shelter Records.  So when Shelter Records was being spun off from its parent company to a new corporate owner and Petty saw the publishing rights for the songs he’d written falling into new hands, he fought back.  He refused to release his third album and took full responsibility for the cost of recording it himself.  The move put him $500,000 in debt.  But it also allowed led him to declare bankruptcy in order to get that onerous contract declared null and void.  

The strategy worked.  The record company released Petty from the deal.  And then re-signed him to a more rewarding $3 million contract with a brand new subsidiary label created specifically for the occasion.  It was a win/win situation.  When it came out, that new album, Damn the Torpedoes, immediately sold more than 2 million copies and went double platinum—so you know the record company was happy—and Tom Petty and his band went on to find both fame and fortune.  

You’d think the record company would have learned its lesson.  Just a couple years later Tom Petty had to stand his ground again when they wanted to release his next record, Hard Promises, as one of the first at the newer, higher price point of $9.98 an album.  But that’s a topic for another story.