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What is the fund? The rights to the first six albums by Taylor Swift, arguably the world’s most commercially popular artist, were recently sold to a private equity firm for $ 300 million. Was it a fair price?
Experts have mixed opinions. While the value and likely longevity of Taylor Swift’s music is unquestionable, the artist’s vow to thwart the value of these releases has led industry watchers to question whether Shamrock Capital overspended during the launch. recent drop of $ 300 million, according to sources, for the rights to these recordings. .
Swift has complained bitterly about the acquisition of his former label, Big Machine Records, by Ithaca Holdings, manager of artist Scooter Braun, since it took place in June of last year, in part because ‘she says she had no viable option to purchase the rights. to the main recordings of her first six albums, but also because of the deep personal animosity she maintains for Braun, whom she describes as a “tyrant”. Since then, she has resisted cooperation with the exploitation of these assets, even committing to re-record each of these albums, as soon as she is contractually able to do so, in an effort to diminish the value of the originals. (She wrote in a social media post this week that she had already started re-recording.)
So what exactly can Shamrock do with these masters? Are Braun and Big Machine still benefiting from it? How soon, if at all, will Shamrock be able to recover its investment or sell it at a profit? Will Swift’s commitment to re-register its back catalog deeply devalue Shamrock’s investment, or will fans favor the versions they already know and love?
While there is considerable debate over whether Shamrock’s offer makes economic sense, all parties agree on a few points.
Even those who think Shamrock’s play will pay off agree that $ 300 million is a surprising number, while those who find the price too high say they are sure Shamrock has incorporated Swift’s friction into the valuation. And neither side questions the appeal of Swift’s music.
“It’s an outrageous price,” says Daniel Ives, managing director of equity research at Wedbush Securities. “This just speaks to a scarcity of content that is found in the Taylor Swift area code: on the one hand, you can count on content that offers these kinds of tracking, streaming and syndication capabilities.
“It’s a risk,” he continues, “but I think it’s a manageable risk from an investment perspective. I just named Taylor Swift, I think there are a lot of ways to monetize this.
A partner at a large music law firm said, “I think Shamrock could probably turn around and sell it on time to raise those funds and make their mark. [internal rate of return] projections. I don’t think it’s a bad deal for them.
More dubious is veteran music lawyer Jacqueline Charlesworth. “From their public statement, it appears Shamrock knew that Taylor might not want to participate in their Masters property and factored that into the purchase price,” she says. “The multi-million dollar question is whether they did the right math regarding the impact of re-registrations.
“And then there’s Taylor’s exceptionally loyal fan base,” she continues, “who can pay attention to which version of a song they’re playing. Overall I think it’s a risky proposition to bet against Taylor Swift.
Another prominent lawyer is also skeptical. “I think all the buyers, and there are legions of them, operate under the same assumption that streaming hasn’t matured yet and that penetration will increase two or three times what it is now, then suddenly. what looks like an overpayment becomes minus an overpayment – like a multiple of 20 looks like a multiple of 12, ”the lawyer says. “I don’t know enough to give an opinion on whether it seems like a reasonable price, but my gut tells me it’s too much.”
While many questions remain about the logistics of buying Shamrock, whether the Swift Masters will land outside of Universal Music Group’s orbit may have been settled by another development: Three Sources informed say Variety that around the same time the Shamrock deal was struck, Big Machine extended its distribution deal with Universal, with its pre-2019 recordings remaining with the label.
Even though she lost Swift to Republic Records and her parent company, Universal Music, after her contract expired in 2018, Big Machine remains attractive, with a roster that includes Florida Georgia Line, Thomas Rhett, Tim McGraw, Sugarland and Sheryl Crow. Sources also claim that it is unlikely that UMG was not aware of the Shamrock transaction when she re-engaged with the label, leading sources to believe that Swift’s first six albums will continue to go through Big Machine. (Big Machine, Universal and Swift representatives did not immediately respond Varietyrequests for comment on this article.)
And if the $ 300 million price tag is right – something some sources question – with the Shamrock deal, Braun essentially bought the label for less than the price of a postage stamp. “You can’t hit Scooter on this one,” says Peter Paterno, partner at King, Holmes, Paterno & Soriano. “If nothing else, he’s still playing with the house money. I mean, he now owns a label he didn’t pay anything for, more or less, and he’s a good label.
Watchers differ over whether Swift’s re-recordings will diminish Shamrock’s ability to capitalize on his albums. “Let’s start with the premise that re-recordings are unnecessary except for synchronization purposes,” said a lawyer. “No one is going to want to listen to her re-recorded versions: that’s not how the world works, although she could re-record them and use them for syncs.”
Ives isn’t so sure, noting Swift’s almost unmatched ability to engage her tens of millions of fans. “It’s a Kilimanjaro-like battle to replace old music with re-recordings, based on what we’ve seen over the past 10 or 15 years,” he says. “But she has the golden touch, right?” She could challenge what worked in the past.
For his part, Charlesworth thinks the new versions could be disruptive. “Certainly, streaming is the bulk of the market – and since streaming services licensed for masters can rely on the compulsory Section 115 license to use the underlying musical works, Taylor cannot. prevent services from playing her old recordings, “she says. Major sources of labels also say Variety that streaming service algorithms and playlists tend to favor the original versions. “But,” Charlesworth continues, noting Swift’s staunch fan base, “if even half of those pieces are from her re-recordings rather than originals, it’ll cut Shamrock’s revenue stream by 50% – it’s not a rounding error! “
Swift occupies a significant place in the musical landscape of 2020, with Alpha Data showing that she is the most consumed artist of the year to date, with 3.5 million units of album project (sales of ‘albums, plus the equivalent value of song sales and streams). His recent pandemic-inspired album “Folklore” moved more units than any other in 2020, just over a million – more than double those sold by finalist The Weeknd’s “After Hours.”
Significantly, it’s Swift’s most recent albums, rather than her older ones, that keep her among the top artists in the business. Of the 3.5 million album-projects she won this year, 2.3 million belong to “Folklore”, which also represents all, except 210,000 of the 1.3 million units. album she totals. Likewise, his 2019 album “Lover” accounted for 2.3 million of his 3.4 million units of album projects last year, and all but 285,000 of the 1.3 million album sales that he did. ‘she won. (Swift owns the rights to both ‘Lover’ and ‘Folklore’.) “That’s what I would expect for a current artist who has a sequel like her,” says one lawyer. “It’s not like Journey releasing a new album that no one cares about.”
Shamrock does not own the publishing rights to Swift’s Big Machine Catalog, and the artist’s refusal to further synchronize the opportunities could impact the value of Shamrock’s investment. While a lawyer says, “I doubt that timing is a very large proportion of what she makes money on,” Charlesworth retorts that such investments can be meaningful. “Sync licenses themselves may be a smaller percentage of the market,” she says, “but you have to remember that high-level sync uses – like in a big movie or commercial – also generate feeds, not to mention videos on social media. . Just look at what just happened to Fleetwood Mac, ”which saw flows soar after its 1977 hit“ Dreams ”took off on TikTok this year. (Note: Swift’s 2008 hit “Love Story” recently had a major resurgence on TikTok thanks to an unofficial house remix of DJ’s song Disco Lines, which inspired a host of viral challenges.)
Another lawyer notes that, just as a label might reconnect with an influential but past-their-principal artist in an effort to attract other artists, Shamrock may have made this piece to bolster their musical profile. He characterizes his catalog as “a jewel in the crown of an asset, even if it re-registers.” I think it might help them attract more investors, might help them raise more funds in the future. “
But how effective could this tactic be with a tarnished Crown Jewel? Swift says her reluctance to participate in Shamrock’s management of her albums is at least in part due to her understanding that Braun will continue to profit from those titles. While the details of his claim are unclear and it could be because Big Machine continues to distribute these works, lawyers say it’s not unusual for the seller to continue to benefit from an asset.
“These days you can sell any serving,” says a source. “You can sell a part while keeping some sort of transfer. There are all kinds of ways to stay involved, but historically the most common have been these retrospective layouts, where if the catalog wins X over a five year period, we’ll pay you an extra Y. It’s a bit like schmuck insurance that protects you. “
Indeed, one source says that this is exactly the deal Braun made and that it is indicative of the kind of IP banking we’re likely to see more of in the future. “All the assets related to hit songs are undervalued,” the source says. “Wait and see where this market is going.”
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