The Music Industry (Taylor’s Version)

The Music Industry (Taylor’s Version)

Tanzim Rashid is an IP Innovation Clinic Fellow and a 2L JD/MBA Student at Osgoode Hall Law School & the Schulich School of Business. This article was written as a requirement for Prof. Pina D’Agostino’s Directed Reading: IP Innovation Program course.

Taylor Swift’s dispute with Big Machine Records shines a spotlight on the legal and business considerations artists should keep in mind when making decisions about how to manage their catalogue. 

Sparks Fly

In 2019, Ithaca Holdings acquired Big Machine Records for an estimated $300 million, including the master recordings for one of the most popular and successful musicians in the world: Taylor Swift. Swift, in being denied an opportunity to bid for her masters, announced in late 2020 that she would re-record her entire pre-2019 catalogue in order to regain control of her music and limit the profitability of Ithaca’s asset. Over the next year, Swift released re-recorded versions of both her Fearless (2008) and Red (2012) albums, receiving widespread commercial and critical success.

Look What You Made Me Do

At the heart of Taylor’s decision was an often overlooked but significant legal distinction in the copyright law governing the music industry. All music can be subdivided into three categories of copyright: lyrical, compositional, and sound. The former two (‘recording rights’) are generally retained by an artist, while the latter (‘master rights’) – as part of a record contract signed by musicians in the formative stages of their career – is owned by the record company (including prohibitions on re-recordings for a set number of years) with certain vetoes the artist can assert with respect to how they are licensed. Swift, in deciding to re-record her albums, ensured that her new (Taylor’s) versions gave her all three types of intellectual property right over her catalogue, guaranteeing full ownership.

While many artists both past and present have record contracts that follow this same structure (and provide for a legal avenue by which to circumvent the record company’s ownership of the master recordings), it was Swift, at the height of her popularity, who decided to invest the time, energy, and cash in order to take advantage of this technicality. These circumstances are noteworthy: artists in similar positions to Swift often either lack the time, the financial resources, or the industry power to pull off a move like this. It is in Swift’s confidence in her fans adopting the newer versions of her recordings, and thus giving effect to the technicality she is leveraging, that her decision was made and her temporal and financial investment was put forward.

Everything Has Changed

Shamrock Investments, who acquired Swift’s master recordings from Ithaca in 2020, are in an increasingly tenuous position: Swift has precluded them from licensing to ad agencies, films, and tv shows, and where they do license, Swift receives royalties in those cases. On top of all that, their investment in the original recordings depreciates in value every time Swift releases another one of her re-recordings or a company licenses them instead of the originals.

Major players in the music industry (including Swift’s own Universal Music Group) have responded in light of Taylor’s shrewd business moves, doubling or tripling the length of re-recording prohibitions in their most recently signed record contracts. Artists are now barred for up to ten years after commercial release before re-recording their music, which also happens to be the period when their works are at their highest monetization potential. The music industry is now acutely aware of how digital streaming platforms provide artists with a never-before-seen ability to sidestep large traditional record companies when attempting to publish their re-recordings, creating a much-heightened potential for Swift’s precedent setting move to be seized upon by other successful artists looking to take back control of their creative output. From a legal perspective, Swift’s ability to resolve this dispute without reliance on costly, time intensive litigation or a protracted negotiations process has also put the music industry on notice, including their in-house counsel, who will be much more meticulous in drafting new agreements to best protect their company’s investment.

End Game

Looking to the future, it appears that beyond her personal dispute with the owners of her original masters, Swift is looking to inaugurate a major shift in the music industry at large, relocating bargaining power to artists from record companies. However, in capitalizing on the legal technicality available hitherto her dispute, with the unique power she wields in the industry, it may be the case that Swift’s maneuver may end up disempowering less powerful artists, who will now face stricter terms on their freshman record deals and an army of legal counsel prepared to respond to strategies similar to those deployed by Swift. As record companies fortify their defences, most upcoming artists may not be in a position to fight back against The Man.