Taylor vs Scooter and Scott
By Hilary Rosen
The value of an artists catalog and who gets to manipulate that value is the core of the problem between Taylor Swift and Big Machine.
When Taylor’s recording contract was up at Big Machine, she was given a choice, re-sign to our label and to our exclusivity over your new work and we will give you back ownership of your old recordings or leave and we will keep your old recordings. In other words, her copyrights were a bargaining chip.
She made a decision that she had outgrown the capability of Big Machine Record company in Nashville to further her career and signed with Universal Music, a global record company to partner with her on the next phase (ironically though. It has been little reported, Universal also distributes Big machine so they get paid not matter what). I am certain that Universal also paid her a large advance for this signing, probably significantly larger than what Big machine was offering.
Nonetheless, that doesn’t necessarily make the choice easier.
Then Scott Borchetta sold the company to a partnership of the Carlyle Group and Scooter Braun.
The question most people ask me is why would Scott Borchetta sell to this partnership and not sell Taylor back her master recordings. The answer is simple. If Borchetta had sold Taylor back her songs, his company never would have been valued at $300 million and he couldn’t have sold it.
(Side note, Borchetta has whined ever since about all the people at the company who feel like Taylor is ungrateful that they made her career. I wonder how much of his proceeds he shared with all of those employees. )
The fact is that valuations are based on the the whole of a catalog and a multiple of the revenue that catalog will generate. Without Swift’s songs, he wouldn’t have gotten the multiple he wanted to sell. In other words if a company generates $30 million dollars a year in profits, you can sell that company for say, 10 times that, because you can guarantee future revenue. So she is right when she says she was never given a chance to buy her music when investors who would be willing to pay up front for the whole company and depend on future revenue were given that chance.
Recordings Artists today make the bulk of their money touring. This is because the value of their recordings is not in the pennies per sale or stream that artists are paid. The real value of their copyrights is the contribution they make to the overal valuation of a whole catalog of a company. Because you can only realize this with scale. And you need to own a lot of copyrights for that scale. ScooterBraun as an artist manager knows this. He has been collecting a parts of pennies. So over the long term he can continue to take a piece of artist recording revenues, their touring or even their sponsorships, but the real wealth is in capital ownership.
My experience with Scooter has always been good. He has done more than most in the music community to give back, to take on tough social ills and to demonstrate a sense of responsibility to our community. His fight for gun control is beyond admirable. I truly think he cares about artists and loves helping them develop their careers. So, it is likely hard for him to say what we all know “ I did this for the money”. There is nothing wrong with doing it for the money, but he shouldn’t participate in a narrative that has tried to make Taylor seem like a petulant or reckless artist for objecting to her art being bought and sold from under her this way. Neither he nor Borchetta are “victims”, they are masters of the system.
Artists today have more options than ever for careers. We all know that. Yet the number of artists who have become “stars” via the Internet alone can be counted on one hand. The record company still plays a significant role. Therefore, nothing still beats ownership of the underlying copyright in an artist’s work. By their nature, music artists are a solitary business. One woman standing up against the system is beyond admirable. Taylor has set a stand for artists who are unafraid to bring fans along with knowledge of both her music and her business. Until there are more opportunitiesfor artists to produce, market and distribute their own work, I don’t see the current system changing.
The writer is the former Chairman and CEO of the Recording Industry Association of America.