Learn more about the complex issues involved with Taylor Swift's dispute with Big Machine, Scott Borchetta, & Scooter Braun over ownership of masters from a music and entertainment attorney.
July 3, 2019
As an entertainment and music attorney, I've been receiving quite a few questions and reading incorrect statements from people misunderstanding the details involved in Taylor Swift's dispute over ownership of the masters of her first six albums with Big Machine Records, Big Machine CEO Scott Borchetta, and new Big Machine owner Scooter Braun and Ithaca Holdings.
Let me start by saying that I don't represent any of the parties involved in anyway, including Taylor Swift, Scott Borchetta, Scooter Braun, Big Machine, or Scooter Braun's Ithaca Holdings. I also don't know the details of any past deals, contracts, or agreements between the parties, nor their personal or business relationships or histories beyond what they've said publicly. Finally, I am not writing this to take sides, necessarily argue for or against one side or party, or call out or question the truthfulness or integrity of anyone involved.
With all that being said, we're going to start by discussing Taylor's masters and how the masters differ from Taylor's publishing. Next, we'll go through Taylor's ability to recover her masters in the future. Then we'll discuss what ownership of Taylor's masters by Big Machine or another party means for her ability to perform the songs live, Taylor's ability to potentially re-record the songs, and Taylor's financial interest and receiving payments for the masters. We'll then address the realities of the dispute from Scott Borchetta's perspective, then from Taylor's side, and finally, what's likely going to happen next.
Taylor's masters vs Taylor's publishing, what are we talking about?
I've been seeing a lot of misunderstandings and incorrect use of the terms masters and publishing as it relates to Taylor owning her music, songs, or creations.
First, understand that ownership of masters refers to ownership of the copyright of the sound recordings, but not the copyright of the songs themselves. The copyright of the song consists of the lyrics and melody of the song, and is typically owned by song's music publishers or the songwriters. The copyright of the song is different from the copyright of the sound recording of the song that you hear on albums, Spotify, the radio, etc. The copyrights of the sound recordings are often referred to as masters, and in this case the masters from Taylor's first six albums are owned by her former record label Big Machine Records.
Taylor's songs are currently published by Sony/ATV Music Publishing, where she likely has either a co-publishing or publishing administration deal in which she retains a large portion of the ownership of the copyrights in the songs she writes or co-writes and is paid a royalty or fee (likely 75% to 90% of the publisher's net profit) for every sale, use, or stream, etc. of her songs.
For more information on the differences between the copyrights in the song and music publishers versus the copyrights in sound recordings and record labels, see my recent post on music publishing deals vs record label deals.
Can Taylor get her music back?
The answer to whether Taylor can get her music back is long and complicated, and the answer is, it depends.
Taylor can always offer to buy the copyrights of her music back. This is true whether we're discussing her masters owned by Big Machine, or her songs currently being published by Sony/ATV. This route, however depends upon both sides coming to an agreement on price, and of course, the current copyright owners being willing to sell them back to begin with.
In addition, there's also the possibility of Taylor obtaining the copyrights to her music back under U.S. copyright law with what's known as termination of assignments or transfers via Section 203 of the U.S. Copyright Act. In basic terms, Section 203 essentially states that after 35 or 40 years (depending on circumstances) and with proper and timely written notice to the then copyright owner, a copyright creator who previously assigned or sold their copyright to another party can reacquire the ownership of that copyright.
Under the law, Section 203 definitively applies to any copyrights of her songs that she's assigned to Sony/ATV or other music publishers. However, Section 203 may not necessarily apply to her masters if her masters are found to be what are called "works for hire". Section 203 reversion or termination does not apply to copyright creations that are works for hire.
Most record deals with major and major affiliated labels require the artist to agree that the masters the artist creates or records under the deal are works for hire. Having not seen Taylor's label agreement with Big Machine, I can't say for certain that Taylor's deal includes this, but it almost definitely does, especially given the standards at the period which it was signed. If it does, than Taylor cannot likely currently recover her masters from Big Machine under Section 203 of U.S. copyright law.
There is currently litigation and questions as to whether sound recordings are, or can even be, works for hire, even if the artist and label agree that the masters are works for hire in a record deal. Work for hire copyrights must be created by an employee at the direction of an employer, or the copyrights must fall into one of nine types of creative works. A sound recording is not one of those nine types, and an artist is never an employee of the label under the terms of their record deal.
As a result, there are numerous court challenges to whether an artist's masters are valid as works for hire. I expect it's likely the law will change in the not too distant future and masters will not be eligible for classification or even agreement as works for hire copyrights. If that happens, Taylor would most likely be able to get back the masters she created for Big Machine.
Can Taylor perform her songs that she recorded under Big Machine?
The short and simple answer is yes. I've seen quite a few questions or comments that Taylor would have to pay or get Big Machine Record's permission to perform those previously recorded songs live at a concert or event. I suspect this comes from the misunderstanding regarding live public performance publishing royalties for songs.
Music publishers and songwriters are paid when their songs are performed for the public in various venues, including arenas, music venues, bars, and restaurants, etc. The U.S. has no public performance royalties for masters. Either way, permission is not required once the songs have been released for broadcast or sale to the public. As a result, nothing can stop Taylor from performing the songs she recorded for Big Machine Records at any concert or live event.
As the current owner of the masters though, Big Machine could prevent Taylor or anyone else from using or placing the existing masters in any movies, television shows, advertisements, etc.
Can Taylor re-record any of the 6 Big Machine albums or songs recorded under her Big Machine record deal and release the new recordings?
It's not likely that Taylor will be able to re-record and release any of the songs or albums she recorded while under contract with Big Machine Records, at least not anytime soon.
This is because most record deals contain what is known as a re-recording clause. These re-recording clauses usually limit an artist from later re-recording or re-releasing the same songs that they recorded or released while under contract with the previous label, at least for a limited amount of time and without the previous label's written permission.
This restriction usually includes the time during the previous label deal, during any later deals with the same previous label, and for a certain amount of time after the same or any later deals, regardless of whether the artist signs with another label or self-releases under their own label, etc. This time period is typically at least 5 to 10 years after the release of the prior recording or the expiration of the last deal with the previous label, whichever is longer.
While I don't know for sure that Taylor's previous record deal with Big Machine Records included a re-recording clause, because most deals do contain the same provision or clause, her record deal with Big Machine most likely did. If it did, she'll either have to wait the minimum number of years, likely at least 5 or 10 years, or she'll have to obtain Big Machine's permission to re-record and release the Big Machine songs or albums.
In addition, Big Machine and Taylor would have little incentive to agree to waive the re-recording clause, as Big Machine would potentially lose revenue from having a competing master. In granting permission to re-record, Big Machine would also likely require Taylor or Taylor's new label to pay Big Machine a royalty from the earnings from the "new" re-recording.
As a result, it's unlikely that Taylor Swift will be able to re-record and release the same songs she previously recorded or released for Big Machine anytime in the near future.
Is it true that Taylor won't be paid for anymore streams or sales of her previous Big Machine recordings?
No, this is not true. Taylor will continue to receive the same royalties that she's always received from Big Machine from any sales or uses of the recordings and albums she made under her Big Machine record deal.
Taylor's royalty rate and any other payment terms, as well as Big Machine's and their new owner's (now Scooter Braun/Ithaca Holdings) obligation to pay her royalties, etc., will remain the same even though her deal with Big Machine is over and Big Machine is under new ownership. Taylor's royalty rate or any other terms of payment Big Machine owes Taylor would only change if Taylor and Big Machine renegotiated and agreed in writing to different term. Big Machine's sale will also not impact the royalties they must pay to songwriters and music publishers, including Taylor, so Taylor will also continue to receive the same music publishing royalties through Sony/ATV that she would have otherwise.
This means that Taylor will continue to receive the same royalties and payments she was due prior to the expiration of her deal and prior to any sale to Scooter Braun and Ithaca Holdings or any other future sales.
Insight into Scott Borchetta's Rationale
Scott Borchetta as the founder and CEO of Big Machine Records and the Big Machine Label Group, has a job to run and operate the labels as a business to generate the most profit for the labels and their shareholders (of which he's a also a shareholder). That also means it's his job to minimize risks and losses as much as possible.
Approximately only 5% to 10% of label artists are successful enough to generate a financial profit or return on investment for the label. In other words, at best, approximately 1 out 10 artists signed to labels make a profit for the label. In addition, it costs at least $500,000, but usually $1 million to $2 million, to properly develop and release a new artist and album. In exchange, due to the financial risk involved, essentially every artist is required to give up the ownership of the masters they create under a major label deal. This was especially true at the time, although other options and arrangements are certainly becoming more common.
As a result, when Big Machine signed Taylor Swift, just on her first album alone the label likely spent at least $500,000, if not $1 million or more. This spending amount likely increased for most of her following albums on Big Machine, especially when her previous albums were so successful. In exchange for Big Machine taking the risk and making the financial investment, Taylor, like every new artist before her, especially at the time, was required to give up the ownership of the masters she created under her deal with Big Machine. This is still pretty common industry practice, and Taylor willingly agreed to it in writing.
There have been some arguments or claims made that Taylor was only a young teenager at the time she signed her record deal with Big Machine and because of her age she didn't know what she was signing or was somehow mislead. While possible, there are a few reasons why this is likely not the case.
First, Taylor likely had her own entertainment attorney who advised and represented her in negotiations of the record deal. Taylor's parents, and Taylor herself (even at a young age) were, based on all reports, incredibly intelligent and sophisticated business people who surely hired or knew they should hire a qualified entertainment attorney. In addition, given both Scott Borchetta and Taylor's sophistication and intelligence, Taylor likely had the contract reviewed and approved by a Tennessee judge. This would ensure that the contract and its terms was understood by Taylor and was fair and reasonable to her since she was a minor, but would otherwise prevent Taylor from getting out of the contract prior to or after she turned 18. Finally, if she did not get the label deal approved by a Tennessee judge or court, she would have ability under the law to terminate the Big Machine contract either prior to or not long after she turned 18 if she thought it was unfair or simply wanted out. Though in that event, any masters created up to that point would've likely have stayed under Big Machine's ownership regardless. While it's possible that Taylor received no, poor, or unethical legal advice and representation, this is not likely all things considered.
Finally, it's no secret in the music business and especially in Nashville, that Scott Borchetta has been looking for buyers and listening to offers to buy Big Machine for the last several years. It's also no secret that Taylor was far and away Big Machine's most successful, highest selling, and profitable artist. As a result, it makes sense that Scott and Big Machine would want to hold onto her masters for as long as possible in order to get the best offer to purchase possible. Despite this, some have argued that Taylor should have been offered the chance to buy her Big Machine masters or the label.
Unfortunately, absent a contractual agreement that created this obligation upon Big Machine or Scott Borchetta, Taylor has no legal right to be given an opportunity to purchase or make an offer to purchase her Big Machine masters or the Big Machine label as a whole. It's unlikely there was any contractual agreement or terms in Taylor's Big Machine label deal that granted her the right to make an offer or purchase her masters or the label before other parties, including Scooter Braun. In addition, its even more unlikely that Taylor had any legal right to learn that Big Machine or Taylor's masters were being sold or who was buying the label or her Big Machine masters.
Insight into Taylor Swift's Rationale
Taylor Swift put years of her time, hard work, and emotions into creating her masters. In doing so, she certainly helped put Big Machine Records on the map, and helped to raise Scott Borchetta's career and reputation as a hit maker, entrepreneur, and music business executive to new heights.
In addition, while most artists (and essentially all new artists,) who sign with a major or similar sized record label give up their masters to the label, other successful artists have often been given the option or the right to purchase their masters from their former labels. Artists like Garth Brooks, Rihanna, Frank Ocean, U2, and Toby Keith own some of all of their masters. This is due primarily to the level of financial and career success and the leverage and bargaining power these artists have earned. As one of the most successful music artists of the last decade or more, Taylor has certainly reached a similar level of success in comparison and arguably earned the same or more bargaining power and opportunity to purchase her masters.
It's also true that Taylor may have had no legal right to receive an advanced warning of the Big Machine sale, ultimately who Big Machine is sold to, or purchase or make an offer to purchase the masters or label. However, Taylor certainly has an interest in who will own and control her masters going forward, and certainly a right to speak out about her concerns, opinions, and experiences with the current and former Big Machine owners.
Scott Borchetta has claimed that Taylor was told via text message prior to the sale that Big Machine would be sold to Scooter Braun's Ithaca Holdings. Others have claimed that the fact that Taylor's father was a shareholder of Big Machine, and that he was allegedly told the details of the sale, negates any legal or other obligation owed to Taylor. Finally, Scott Borchetta posted a deal memo outlining terms appearing to show that Taylor had the opportunity to purchase back her masters.
Taylor being informed via text message, if true, does not negate her ability and right to speak out about the Big Machine purchase as she sees fit. In addition, the fact that Taylor's father was a shareholder of Big Machine, and if true, his alleged knowledge of the details of the sale to Scooter Braun is not proof that Taylor was made aware of the same details of the sale, nor does it invalidate her feelings on the sale or her right to express them.
Finally, the document that Scott Borchetta posted is a non-binding deal memo and is not a contract. It's not even an offer that could be accepted, which is legally required to have a legally binding contract. It's a routine, but by itself, meaningless document that is used by attorneys for discussion purposes before any binding offer or draft of a contract is made. It's certainly possible that the terms in the deal memo ended up in an offer or contract signed by Taylor and Big Machine. However, any details of the final offer to Taylor are unknown, and the document posted proves nothing in terms of Taylor's actual legal right to purchase or make an offer to purchase her masters.
Taylor also has a right to speak out about the need for young music artists to educate and protect themselves, their creations, and to have adequate and independent legal advice and representation. Perhaps Taylor did receive poor or insufficient legal advice and representation when she was young. Perhaps Taylor simply wants to help to educate and provide additional opportunity to the next generation of music artists, or be a part of helping to change or shape the future of the music industry. There are certainly more opportunities for artists to sign various types of label deals than there were when she was young, including joint ventures, partnerships, or profit sharing arrangements, labels and label services companies who don't take ownership of their artist's masters, and much more.
So, what's likely to happen next?
Regardless of what their personal feelings or previous histories are, I believe that Taylor and Big Machine will ultimately come to an agreement over the ownership of the masters for Taylor's six Big Machine albums.
Will either side get exactly what they want? Probably not. However, despite any current hurt feelings or issues, they could eventually come to a reasonable compromise to get a deal done that ensures that both parties get most of what they want. That may include Taylor purchasing the previous masters outright, or it could mean a renegotiation of her royalty rate on the previous masters with Big Machine retaining ownership at least for a number of years, and Taylor eventually getting the option to purchase them.
No matter what, I'd be pretty shocked to learn that they aren't already having discussions or negotiations behind the scenes between their attorneys and legal teams. I'll also be shocked that if by speaking out now, Taylor doesn't once again go on to play a major role in helping shape the future of the music business for the better, especially for future generations of artists.
If you want any additional information on the Taylor Swift and Big Machine situation, or if you need legal assistance or advice with your own masters, or a music publishing or record label deal, please contact us at The Fruitful Firm anytime.
Zach Scott Gainous is an entertainment and music attorney in Nashville and the founder and managing attorney of Nashville music and entertainment law firm The Fruitful Firm. Zach regularly provides legal expertise, advice and representation to clients across many industries or professions, including music, entertainment, sports, media, technology, and more.
Disclaimer: This article or post is not and should not be considered or used as a substitute for legal advice or the hiring of an attorney. You should always carefully seek out legal advice and representation from a qualified attorney to assist you with your legal matters and issues.