The group's four members will receive a reported $80m (pounds 53m) for their next five albums from Warner Bros. Already in their mid-to-late thirties, they will be nearing 50 when the last album is delivered. Thousands of Warner employees at a company summit in Anaheim, California, applauded when the chairman, Russ Thyret, announced REM had agreed to the deal.
But despite their enormous album sales of 30 million, industry analysts were left to wonder how the company will recoup its vast outlay. Formed in 1980, REM have grown from cult status into a mature band whose audience runs from teenagers to the thirty-somethings who grew up with them.
Guitarist Peter Buck, 39, singer Michael Stipe, 36, bassist Mike Mills, 37, and drummer Bill Berry, 37, have won four Grammys and despite their success remain based in Athens, Georgia, a small college town.
Environmentally and politically engaged, REM played at President Bill Clinton's inaugural celebrations in Washington DC four years ago. They have been prominent supporters of MTV's Rock the Vote campaign to encourage young Americans to register to vote.
The deal broke the $70m record set by the singer Janet Jackson earlier this year. Warner Bros saw off bids from five other companies and sees the signing as a huge coup.
The company is struggling to recover from a series of corporate power battles in the last two years said to have alienated top artists. Several had threatened to jump ship, including REM.
The terms of the deal are thought to be $10m signing bonus, $10m per new album, and $20m advance on sales of their existing Warner albums. Music's silly season, page 11