By Eli Levi, Business Editor
One of my favorite podcasts, and the source for many of my company deep dives, is Acquired. Their most recent podcast was about Taylor Swift and her disruption of the music industry. Swift happens to be one of my favorite artists, so when I saw the episode, I was very excited.
Swift was born into an affluent home that afforded her rare opportunities. However, it was her unique drive and ambition that fueled her career more than anything else.
Swift’s first record deal was with Big Machine Records, which Scott Borchetta founded. Borchetta, who, at the time, was leaving Universal to start his own label company, heard Swift sing and convinced her to sign with him as his first deal. In fact, Swift’s parents invested and owned around 3% of the company, a sign of both their wealth and their support for her daughter.
Swift enjoyed massive successes early on in her career. When her third album, Speak Now, debuted, all of its songs were on the Billboard Hot 100, representing the only time in history that seventeen songs from the same artist were listed there simultaneously. Incidentally, she named the album Speak Now so that there was no ambiguity about authorship – her success was because of the work she put in. It was 100% her.
In her next album, Red, Taylor was originally going to follow the tried and true method of giving her fans more of what they were asking for by releasing another album similar to her last. Ultimately, she decided to reinvent herself like the greatest artists of the past. Instead of continuing with country music, like her fans assumed she would, she drifted in the direction of pop.
One of the themes of Taylor’s career was always pushing boundaries. For example, Taylor placed such a high value on her connection with her fans that when writing and producing her 1989 album, she invited some of her fans to her house. After they signed NDAs and she baked them cookies, she played her music for them to receive feedback. Her 1989 album completed her transition to pop and shattered some of her previous records.
Taylor has been vocal throughout her career about artists receiving payment for their work, and her influence has been palpable. One illustrative statistic that demonstrates how terrible the economics of streaming is for artists is that for every 1 million streams, artists earn an average of about $400. A noteworthy example of how much influence Taylor has in the music industry can be seen when Apple Music bought Beats. To jumpstart user growth, Apple Music was to be free for the first three months and meant artists would not be paid for streaming during that time. Taylor publicly stated that there are very few artists that can create value, and those that can should be compensated for it. According to her, no one should work for no pay. Apple reversed its decision overnight and Swift was a major factor in compelling the largest company in the world to do so.
The deal Taylor had signed with Big Machine was for her first six albums. When she was ready to release her sixth album, Reputation, 80% of Big Machine’s revenue was generated from her works.
Without getting bogged down in the details, Taylor managed to negotiate the best deal of any artist with a record label, keeping the rights to her masters (the original recordings) and licensing them to the record label for ten years. At that point, an artist keeping the rights to their masters was unheard of. The label company she worked with also secured a deal with Spotify, which purchased a large share percentage of the label company, which is worth around $1.5 billion today. This incentivizes the label to work with Spotify. I think the most important piece of what Swift negotiated was not her good deal, but also all of the other artists signed to the label who accordingly benefited.
Clearly, Taylor Swift’s successful career has changed the music industry and left an indelible mark on it. It continues to do so.