Some 17 months after Scooter Braun’s Ithaca Holdings LLC acquired Big Machine Label Group and all of its recorded music assets, sources tell Variety the veteran manager and entrepreneur has sold the master rights to Taylor Swift’s first six albums. The buyer, an investment fund, is as yet unknown but the deal is believed to be north of $300 million and closed in the last two weeks. Some insiders speculate the value could be as high as $450 million once certain earn-backs are factored in.
Ithaca purchased the Nashville-based independent record label Big Machine, founded by Scott Borchetta in 2005, in June 2019 for just over $300 million, of which Swift’s catalog — from her 2006 self-titled debut to 2017’s “Reputation” — was believed to be worth some $140 million. The acquisition encompassed all aspects of BMLG’s business, including its client roster, distribution deals, publishing and owned artist masters. Swift signed with BMLG at the beginning of her career. Her contract with the label expired in fall 2018, after which she signed a deal for future recordings with Universal Music Group.
Swift is free to re-record songs from her first five BMLG-issued albums as of this month. While most contemporary recording contracts have provisions prohibiting the artist from recutting material for a period of years, Swift likely had favorable terms in her contract that would make her songs eligible for re-recording at a certain point after the end of each album cycle, not the end of her overall contract.
In Aug. 2019, she declared publicly that it was her intent to do. What does that mean for the assets sold by Braun? Master recordings earn revenue through multiple avenues, including streaming and consumption, sampling, public broadcast, use in television, film and commercials. They’ve also become a hot property on Wall Street as funds like Merck Mercuriadis’ Hipgnosis Songs have snapped up catalogs from the likes of Timbaland and Eurythmics’ Dave Stewart to Jack Antonoff and Jeff Bhasker. Between March 2019 and March 2020, the company spent nearly $700 million to acquire 42 catalogs. As recently as last week, Hipgnosis purchased a 50% stake in Rick James’ catalog — across both publisher and writer’s share — and an additional 50% stake of his recorded music masters. James’ “Super Freak” is one of the most referenced and sampled riffs in modern music.
Publishing assets are currently running at multiples well over 12, with master rights slightly lower but increasing in value. Says one insider privy to such deals: “In five to 10 years, it might be 20x — the value continues to rise.” While this investor advises against selling IP right now for this very reason, others are eyeing an incoming Biden administration as reason to divest of such property anticipating “a major change” to capital gains taxes come 2021.
What’s the advantage of Swift re-recording her catalog? Snatching income from the buyer by making sure that her new versions, and not the ones previously owned by her former label, are the ones played by fans and used in any number of commercial ventures, such as advertisements, TV shows, movies, games and other uses. The company buying master rights would still need clearance from a song’s publisher in order to license it for commercial sync use going forward.
As for Big Machine, the label remains in the hands of Braun and Borchetta with a current roster that includes Sheryl Crow, Florida Georgia Line, Thomas Rhett, Rascal Flatts and Lady A, the trio formerly known as Lady Antebellum.
Carlyle Group is a minority shareholder in Ithaca, which in recent years has launched Mythos Studios, in partnership with Marvel Founding Chairman David Maisel, acquired Atlas Publishing, and partnered with Jason Owen’s Sandbox Entertainment. Ithaca also has a long-standing investment in and partnership with Aubrey “Drake” Graham and Adel “Future” Nur. In 2019, Ithaca launched Raised in Space, an investment fund led by former BMG President Zach Katz.
The deal is viewed as a big win for Braun, who profited handsomely from his initial investment. Braun was also harshly and publicly criticized by Swift, who labeled him a “bully” and said just under a year ago that Braun was “the definition of toxic male privilege in our industry.”
Speaking of the sale of her masters, the Grammy winner contended: “This just happened to me without my approval, consultation or consent. After I was denied the chance to purchase my music outright, my entire catalog was sold to Scooter Braun’s Ithaca Holdings in a deal that I’m told was funded by the Soros family, 23 Capital and that Carlyle Group. Yet, to this day, none of these investors have bothered to contact me or my team directly — to perform their due diligence on their investment. On their investment in me. To ask how I might feel about the new owner of my art, the music I wrote, the videos I created, photos of me, my handwriting, my album designs.” She added: “The fact is that private equity enabled this man to think, according to his own social media post, that he could ‘buy me.’ But I’m obviously not going willingly.”
Speaking to Variety in January, Swift elaborated: “Well, I do sleep well at night knowing that I’m right, and knowing that in 10 years it will have been a good thing that I spoke about artists’ rights to their art, and that we bring up conversations like: Should record deals maybe be for a shorter term, or how are we really helping artists if we’re not giving them the first right of refusal to purchase their work if they want to?”
For his part, Braun has been reluctant to address the clash publicly, but he did tell Variety during an interview last year: “I don’t know where we got messed up along the way that we decided being politically correct is more important than having conflict resolution. … People are allowed to grow as human beings. They’re allowed to have conversations. They’re allowed to change their mind. They’re allowed to go from not liking to each other to liking each other, and vice versa. But you don’t find that out just yelling at each other. You find that out by showing each other respect and having a conversation.”