This was originally an editorial for Synchtank.
If you watched the American Music Awards Sunday night, you’d never know that honoree Taylor Swift remains locked in a contentious battle with her former label, Scott Borchetta’s Big Machine Label Group, and its new owner, Scooter Braun’s Ithaca Holdings. Instead, the performance, and her acceptance of several awards—including a special Artist of the Decade award—was merely a brief pause in a very public and acrimonious battle.
At issue is her catalog of sound recordings. These records, the first six albums of her career, once generated as much as 80% of Big Machine’s revenue, and represent the jewel in the crown of Braun’s $300 million-plus private equity-backed purchase.
The dispute took a new turn last week when Swift used social media to air her grievances. In a post on Tumblr, the singer accused both Borchetta and Braun of preventing her from performing her older music. She said that they had denied clearance for her to perform in connection with the American Music Awards, and that they were unwilling to license any of her previous sound recordings or live performance footage to Netflix for a documentary about her. She also explained that these denials were being used to silence her and prevent any future re-recording of her previous material.
While it is not unusual for Swift to speak her mind about artists’ rights, it is very unusual for a record label to take such drastic steps as to deny them in this way. Clearance in connection with an awards show performance or for a documentary about their own artist are easy gives: the label and the artist both get a marketing opportunity, to say nothing of a license fee. And while Billboard reported that Big Machine ultimately agreed to issue licenses for the AMAs, the New York Times has since reported that investor The Carlyle Group has intervened in an attempt to get the parties to come to a longer-term agreement.
This story has multiple attention-grabbing plotlines, including money, power, and celebrity, but begins with the more mundane aspects of music licensing.
In order to use music, one must obtain permission from the copyright owners. Every use of a piece of music involves two different copyrights, one in the sound recording (the master), and one in the underlying musical work (the song). Record labels typically own sound recordings, and a master use license is required to clear them. Music publishers (and/or songwriters) typically own musical works, and a synchronization (or synch) license is required to clear them. However, two copyrights owned by different parties can complicate licensing requests. In order to use an existing sound recording, both owners must grant permission: the music publisher must okay the use of its song, and the record label must okay the use of its recording.
Each copyright owner has the ability to deny the proposed use entirely—that’s his or her prerogative. Should the publisher say no, that music can never be used. If the publisher says yes—even if the label says no—it is still possible to license the music, as long as the licensor can find a different recording to use or hire musicians to cover the composition, thereby creating a new sound recording.
This explains how that, even though Swift and her music publisher might approve the use of her compositions, Netflix remains unable to use her music. Film companies understand that these issues can arise, and it is not uncommon for them to create new recordings of existing songs in order to get around clearance issues. But biopics can create their own problems, and Big Machine has put Netflix in a bind by denying the use of Swift’s recordings. How can Netflix create a documentary about Taylor Swift if it cannot use any of her records?
From a music licensing standpoint, this is all straightforward. Copyright law and music licensing practice dictate that copyright owners must give permission when third parties wish to use their music. Therefore, Big Machine is well within its rights to deny clearance in connection with the documentary.
But Swift also says that Big Machine won’t license any live performance footage to Netflix. If Big Machine, as the copyright owner of the sound recordings, has control over their usage, how can they also block the usage of live performance footage created by a third party?
During the term of a recording agreement, a label may prevent an artist under contract from recording for anyone else. Because of this exclusivity, it is safe to assume that every recording (whether audio or video) made during the term of Swift’s contract with Big Machine is subject to the label’s control, even after she is no longer under contract.
Again, the issues here are straightforward: a non-exclusive contract could mean that Big Machine might lose revenue to another company that did not make an investment. To prevent this, exclusivity language is used to keep the artist from recording elsewhere, thereby protecting the label’s investment.
Now let’s turn to the American Music Awards. The clearance issues in this situation are more complicated, as they involve so-called “ephemeral uses” and public performance rights in addition to sync licenses.
Live shows (or shows that take place live, but are broadcast with a tape delay) may take advantage of provisions in US copyright law related to ephemeral uses. Such uses don’t require advance permission, as the nature of a live show dictates that music may be included spontaneously.
The AMAs could rely on those provisions to be fully licensed. Performance of any composition would fall under blanket licenses negotiated by performing rights organizations so that songwriters and music publishers could receive payment. And those performances would be different from the original recordings, so no permission from a label would be necessary, and no payment due.
The AMAs are rebroadcast later (via both TV and internet transmission), and simultaneously webcast. Though the initial performance is covered under copyright law as an ephemeral use, any additional uses would definitely require synch licenses.
If a synch license granted by her music publisher is the only permission necessary to license Swift’s earlier songs in this situation, how can her label still block her? Like with the live performance footage, Big Machine can invoke Swift’s old contract and take the position that her AMA performances—because they are to be recorded—would violate the re-recording restrictions she is under. (Without seeing the actual language, it’s difficult to know whether they could succeed in court should things get that far, but this would increase any leverage that the label is trying to use.)
I wrote about re-recording restrictions previously. Their original intent was to prevent an artist from leaving his or her label and immediately creating new versions of their old work. However, the language was designed to prevent competing recordings for sale, not to prevent the artist from performing on TV or radio.
Performance rights are increasingly valuable. Can you think of a live performance that doesn’t show up later on YouTube, or any other streaming service for that matter? While such opportunities were once meant to be single-use, now they can be monetized in multiple ways. As a result, re-recording restrictions are now being written to prevent sound-alikes, not just new productions. Whereas previously they were meant to prevent competition with studio recordings, now they are being used to prevent anything that might compete with the label.
What makes this entire situation so extraordinary is the stakes. Control over her artistry is important, and Swift wished to own the sound recordings she worked so hard to create. (After leaving Big Machine, unable to take her old sound recordings with her, she negotiated with Universal for ownership of the new ones.) Scott Borchetta wanted to sell Big Machine and fully realize his investment knowing that Swift’s success was a major component in his company’s value. Scooter Braun has wanted to cement his status as an industry mogul, and leveraged his connections to convince The Carlyle Group to underwrite the incredible sum of money needed for the transaction. Each party has a lot riding on their involvement.
Yet Swift’s previous material remains at issue. Over the summer, Swift turned to Tumblr to express her frustration and anger over Big Machine’s sale to Braun’s company. She claimed that she had never been consulted on the deal, and that it came after her own attempts to purchase her sound recordings were rejected. Even though she walked away from negotiations with Big Machine, she remained disappointed at losing out on the opportunity to own her old material. Realizing that, she admitted, “I made peace with the fact that eventually [Borchetta] would sell them. Never in my worst nightmares did I imagine the buyer would be Scooter.”
Soon thereafter, she announced that she would re-record her Big Machine material as soon as her re-recording restrictions expired. Given her outspokenness about the purchase of her previous label and her inability to take control of her old sound recordings, it was easy to foresee this attempt to compete directly with Big Machine. That competition poses a major threat to Braun and The Carlyle Group. Having just spent at least $300 million on the purchase of her previous material, they’d be quite unwilling to allow their investment to be devalued.
With so much at stake for both sides, these competing interests clashed over simple and straightforward licensing requests. With so much money and power involved, both sides attempted to use all of their leverage to try and find a resolution. It’s no wonder that the requests were initially denied.
Yet Swift had one last card to play by going public. Publicizing the dispute allowed her to leverage her fan base and turn public opinion against Big Machine (despite what copyright law and licensing practice might dictate). Doing so highlighted how Big Machine’s denials were undoubtedly an attempt to get her to compromise, and—given how quietly private equity likes to operate—also designed to get Swift to negotiate behind closed doors.
All of this came to a head after her second post, followed soon thereafter with Braun’s response detailing the death threats his family had received due to the bad publicity. This was a particularly dark moment in the negotiation, but shows the power of Swift’s celebrity, and how much Ithaca Holdings’ investment is tied to her fans. It might have also served as a moment of clarity, as Braun asked that everyone be open to finding a deal.
At the height of the feud, both Senator Elizabeth Warren and Representative Alexandria Occasio-Cortez weighed in negatively on the involvement of a private equity firm in the deal, suggesting that their business practices were a bad influence. But given how messy this situation has become, maybe they can be a moderating factor. After all, The Carlyle Group’s involvement signals how Swift’s catalog represents a safe investment opportunity.
Unfortunately, the music business often gets personal, with artists unable—or unwilling—to see how their business decisions affect their art (and vice versa). Maybe Braun’s sudden willingness to find a deal comes from his investors. Private equity firms like The Carlyle Group want stable investments, and this situation shows that while catalog sales may be booming, so are artist voices.
For insider tips about the music business, subscribe to my newsletter and get a free ebook: Listen Up! A Simple Guide To Getting Heard On Spotify.