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A $300 Million Feud

Many up-and-coming artists dream of signing with a big record label, and some also hope to add a publishing deal. But in today’s era of music streaming and complicated contracts, those dreams can turn into nightmares.

The world of entertainment is rarely dull, but July started off with fireworks. Entertainment mogul Scooter Braun’s company, Ithaca Holdings, acquired Big Machine Label Group for more than $300 million at the end of June. Braun has already built a behemoth portfolio. Through Scooter Braun Projects, Braun manages major artists including Ariana Grande, Justin Bieber, Dan + Shay and Tori Kelly. Ithaca Holdings also includes Mythos Studios, Schoolboy Records, Sheba Publishing, Silent Labs, and projects in development across major film studios, broadcast and cable TV networks, and digital and other new media platforms.

Shomari Hearn previously wrote in this space about Taylor Swift’s potential choices as a free agent after the end of her deal with Big Machine. In that post, he also discussed Swift’s history with that label. Since then, Swift has released two new singles (“ME!” and “You Need To Calm Down,” both of which currently occupy slots on Billboard’s Hot 100). She has also announced her new album, “Lover,” which she is set to release in August.

Despite speculation that she might go independent, Swift signed with Universal Music Group’s Republic Records under the stipulation that proceeds from any sale of Universal’s stock holdings in Spotify Technology SA are to be distributed to the label’s artists at a better rate than the other two major labels (Sony and Warner Music Group) have previously paid. She was also able to bargain with Universal to retain ownership of her own masters on future recordings.

As others have observed, Big Machine and Swift rocketed to success side-by-side. The label’s founder, Scott Borchetta, signed Swift when she was only 15 years old. The label launched in 2005 with the debut of her first single, “Tim McGraw.” While Swift took the lead in fame (and earnings) over the last 14 years, Big Machine has also done well and likely will continue to succeed. Before Braun stepped in, industry professionals had speculated that Universal – which distributes Big Machine’s music – might acquire the indie label following Universal’s signing of Swift. Swift’s first six studio albums – which Big Machine still owns – have sold a combined 32.7 million copies and moved another 14.1 million album consumption units (a measurement used to track both physical and digital sales) for a total of 46.8 million, according to Billboard. Even after Swift’s departure, Big Machine still has a roster of talent including Florida Georgia Line, Rascal Flatts, Lady Antebellum, Danielle Bradbery and more.

Until now, Big Machine has focused on success in country radio, which involves a very different approach from the pop crossover genre. Some hope that the partnership of Braun and Borchetta will help Nashville’s talent branch out into avenues that are already second nature to pop artists. (Borchetta is staying on as Big Machine’s chief executive post-acquisition.) Braun’s current clients employ strategies including cross-promotion between artists, heavy online campaigns, a focus on streaming and surprise album drops, all of which have led to success. Some industry insiders have speculated whether he will now bring this approach to Big Machine. The fact that Braun has relationships outside the music industry also looks to be a promising opportunity for the label’s artists.

As of this writing, Braun has yet to comment publicly on the deal. It is too early to guess the specifics of Big Machine’s future. But from Braun’s entrepreneurial perspective, this deal makes sense in a lot of ways. His approach seems compatible with Borchetta’s; he is no stranger to Nashville; and he continually looks for ways to expand his entertainment enterprise and had the cash to make it happen.

From Swift’s perspective as a singer-songwriter, however, this deal is evidently an example of how labels exploit artists and writers to fatten their own wallets. In a post on Tumblr, Swift lamented that she was never offered the chance to buy her own master recordings. She called the deal with Braun her “worst case scenario” and added, “When I left my masters in Scott [Borchetta]’s hands, I made peace with the fact that eventually he would sell them. Never in my worst nightmares did I imagine the buyer would be Scooter [Braun].” Her fans and celebrity supporters have created a #WeStandWithTaylor movement on social media over the following weeks. Without going into all of the history and personal animosity between Swift and Braun, it is worth noting this involved a lot of backlash against Braun personally. Matters did not improve when Braun reposted a friend’s Instagram story that characterized him as “owning” Swift after acquiring Big Machine.

Although Ithaca Holdings now owns Big Machine, the company remains under the same contractual agreement that originally bound Big Machine and its artists – meaning Ithaca Holdings will now be responsible for collecting all earnings of the masters and paying contractual royalties to Swift. In other words, Swift will still receive all mechanical royalties for her songs from her initial six albums, as she would have if Big Machine had stayed independent. But she is unlikely to get control of her masters from those recordings, possibly ever.

Artists trying to change the music business landscape when it comes to label deals is nothing new. Many artists feel that they, not the labels, should own their art. In the era of “360” style label deals, signing with a label can be a fraught prospect, especially if the label will make money off your recordings for decades after your contract ends. But it is rare for any but the biggest stars to have enough clout to negotiate owning their own masters.

The Braun-Swift feud seems to have opened a Pandora’s box of issues in the entertainment industry that will not be fixed overnight. Most musical artists will never reach Swift’s level of fame, but they can still learn from this dispute. Swift herself has urged young artists to learn to negotiate and advocate for themselves, even early in their careers.

If you are a young artist, you are the brand. It is important to keep your mission, mantra and goals (both short- and long-term) clear as you pursue commercial success. Many artists have signed the first deal a label offers without fully understanding all the terms and details involved. This is why it is important to have the right people in your corner. Artists – and I can say this, because I am one – are often taken over by emotion and excitement. We can believe that we’ll “make it work” if we just sign any given deal. Sometimes we’re right, but not always. Beware of making binding decisions without the advice of experienced and level-headed people who have your best interests at heart.

It will be very interesting to see what becomes of Big Machine post-acquisition, but I don’t see any big changes coming in the immediate future. Swift will release her new album, and it will be hugely successful. Braun will continue expanding his company. Entertainment industry feuds, including theirs, will continue. And the rest of us will continue to watch it all unfold.

If you enjoyed this article, be sure to check out Palisades Hudson’s book, Looking Ahead: Life, Family, Wealth and Business After 55, now available in paperback and as an e-book.

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