Music as Alternative Investment (Taylor's Version)
"From collectibles to master recordings, the music industry's investment potential is attracting private equity firms, but with artist exploitation and self-ownership battles in the spotlight, who really owns the music we love?"
Taylor Swift’s struggle to actually gain ownership rights over her own music is the epitome of the power that private equity firms and record labels wield in the music industry. Taylor was a 15-year-old girl in Nashville starting her musical career when she signed a record deal with the businessman Scott Borchetta, the owner of the record label Big Machine Records. According to the agreement, Swift was given limited ownership over her songs with partial royalties. However, in 2018, she joinedUniversal Music Group’s Republic Records when her deal with Big Machine ended.This company gave her exclusive rights and ownership of her masters.
Investing in Music
But why are record labels and private equity firms interested in Taylor’s songs? In recent years music has become a lucrative alternative investment opportunity for investors rather than the traditional buying of a company’s shares. Today music acts as an asset class among others like real estate property, commodities like gold and wheat, and collectables like rare wines and vintage cars.
Historically, music culture has contributed to the investment industry through collectables like vinyl records and musical instruments. For instance, American actress and singer Marilyn Monroe's Baby Grand Piano was sold to Mariah Carey for over $662,500in an October 1999 auction. Likewise, John Lennon's Steinway piano, used to compose his timeless single Imagine, was sold to George Michael for over$1.45 million in 2000. Buyers may pay such eye-opening prices because of factors like rarity, emotional collection, nostalgia or prestige of the artist and the art. But if seen as an investment, buyers are seeking an appreciation in the price of the collectible due to the ‘vintage value’ of the asset.
The other major way music is used as an investment is through the ownership of an artist's masters or music catalogue by an individual or a company, usually a record label. A master recording is the original recording of a song. All the other times one listens to this song, on the internet, CD or on Spotify, they listen to the copy. It is common for record labels to own this master and use it as a financial asset. Most artists we listen to daily, including Taylor Swift, don't completely own their masters.
When artists give up ownership rights of their masters to a record label, the label has the legal authority to licence the sound recording and receive revenue without the artist's approval.In exchange, artists are paid through advance payments (which cover the costs of recording, promotion, distribution, and shooting music videos) and royalties (based on how many times the song is played)
“Incessant, manipulative bully”
After Swift left Big MachineRecords, Scott Borchetta sold his company to Ithaca Holdings in a deal for $300million in July 2019, transferring ownership of Taylor Swift's masters toIthaca. Some of the biggest private equity firms, including Carlyle Group,funded this deal. However, Taylor took to social media to express her disapproval and disdain of this deal for two reasons: first, she believed that she deserved to acquire her master after her exit from Big Machine, and second, she was highly sceptical of the owner of Ithaca Holdings, Scooter Braun.According to Swift, Braun was an "incessant, manipulative bully", and she had been trying to buy her old master recordings for years. Still, BigMachine founder Scott Borchetta had refused to budge. From a business angle, this was an extremely lucrative deal for Scooter Braun as master recordings earn revenue through multiple avenues, including streaming and consumption, [AT1] sampling, public broadcast, and use in television, film and commercials.
Since this deal in 2019, TaylorSwift has started her intent to re-record all her albums to rightfully own her master. As of February 2023, she has already released two re-recordings:Fearless (Taylor's Version) and Red (Taylor's Version). This was also legally feasible as she writes her songs and owns the publishing rights to them. With her re-recordings, Taylor had attempted to replicate the music sensation she created when the original CDs were released. Services such as YouTube andAmazon have prioritised re-recorded tracks by advertising and modifying thealgorithm. But streaming platforms such as Spotify and Amazon music are yet to remark on whether they will make an exception. Nevertheless, they have added new versions to most curated playlists to boost visibility.
Taylor Swift is one of many artists in history to re-record her music. Artists, including Frank Sinatra and JoJo, have re-recorded their music in the past for various reasons, from profit-centric grounds to emotional reasons to avoid exploitation of creativity and hard work.
The concept of "music as an investment"encapsulates the age-old story of artists being exploited in the profit-driven music industry. In some cases, even if artists own rights to their intellectual property, they only have a portion of the ownership of the songs. [AT2] This is important to know because, generally, about four-fifths of recorded royalties go to the owner of the master, which is usually the recording label who are partnered with a private equity firm. This is an unfair and exploitative arrangement for many upcoming artists who depend on music loyalties as their sole source of income.
With prominent musicians such as Taylor Swift, Kelly Clarkson, and Miley Cyrus being vocal about their concerns about the music industry and its shortcomings, many new artists are becoming aware of the self-ownership contracts accessible to them. For example, upcoming artist Olivia Rodrigo has gained complete command over her masters after following the footsteps of her idol, Taylor Swift.
Taylor Swift’s masters’ controversy has sparked numerous discussions, including whether music should have owners other than the people who created it. The unequivocal power that record labels hold over artists is now being challenged as music self-ownership becomes prevalent in industry circles. As these changes transform the entire course of the economics underlying the music industry, we all sit in the anticipation hoping that our favourite artists do indeed benefit from the songs they produce.
Bibliography
https://www.brewin.co.uk/insights/considering-music-memorabilia-as-a-passion-investment
https://www.nytimes.com/2019/11/24/business/taylor-swift-carlyle-scooter-braun.html
https://variety.com/2020/music/news/scooter-braun-sells-taylor-swift-big-machine-masters-1234832080/