Taylor Swift Is the Music Industry

By Devin Leonard  November 12, 2014

     

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Getty Images(12); Reuters(2)

Scott Borchetta, founder of Big Machine Records, Taylor Swift’s Nashville-based label, picks up a deluxe edition of 1989, the singer’s current hit record. He carefully slips the white case off the special edition CD, which fans can buy exclusively at Target (TGT) for $13.99.

Inside, in addition to an actual CD, is a packet of Polaroid pictures of Swift in various states of dreamy repose. There’s one of her riding the ferry in New York Harbor, another in which she’s lounging wistfully in bed, and a third of her posing in a purple long-sleeved shirt, a version of which (the shirt, that is) fans can buy on her website for $60. At the bottom of each shot there’s a handwritten line from one of the album’s songs. Borchetta says the Polaroid gimmick, created by Swift’s marketing team, led to a flurry of online love between Swift and her fans. On Oct. 27, the day of the album’s release, Borchetta says Swift called to say she’d been retweeting fans’ pictures of the Polaroids. “She said, ‘Oh, my God! We’re just having so much fun!’ ” Borchetta says.

It’s a Friday afternoon in early November, 11 days after the debut of1989, which Swift, who came up in Nashville’s country music scene, described in an August Yahoo! Live stream as “her very first, documented, official pop album.” In 1989’s first week, 1.29 million copies were sold. That was 22 percent of all album sales in the U.S., according to Nielsen SoundScan. It’s the largest sales week for a record since Eminem’s The Eminem Show in 2002, and the biggest release in the past two years by far, topping heavy hitters such as Beyoncé, Coldplay, and Lady Gaga. That week, Swift had five songs on the Billboard Hot 100, including Shake It Off, the album’s first single, which was, and still is, sitting comfortably at No. 1. She also had two other albums on the Billboard 200—her 2012 album, Red, at No. 84, and her 2008 release, Fearless, on the chart for its 221st week, at No. 117.

Photograph by Evan Agostini/Invision/APBehind this week’s cover

Swift’s success is an anomaly in an ailing industry that’s been in decline since 2000. Last month the Recording Industry Association of America reported that sales of CDs for the first half of 2014 were down 19 percent from the year before, to 56 million. In 2002 total album sales in the U.S. hovered at 681 million (down from 2001’s 763 million). The top 10 albums of 2002, after The Eminem Show and the8 Mile soundtrack, included Nellyville(4.9 million albums sold), Avril Lavigne’sLet Go (4.1 million), and the Dixie Chicks’Home (3.7 million). Compare that with this year: Before 1989, the year’s biggest album was Coldplay’s Ghost Story, which did a piddling 383,000 copies in its first week and has sold a total of 737,000 since its release in May. That’s roughly a third of Swift’s first-week sales, and 1989 is expected to sell another 400,000 copies in its second week. Swift is so far ahead of the pack that they can’t even see her.

For a while, there was hope that digital downloads would make up for low album sales, but the RIAA reports that sales for this format declined by 14 percent in the first six months of 2014. Meanwhile, revenue from streaming services like Spotify rose 28 percent. But artists are often paid a fraction of a penny each time users stream a song. “For a digital download, Taylor Swift will probably take home 50 percent of retail,” says Alice Enders, a London-based music industry analyst. “So that’s 50¢ or 60¢, a lot of money compared to a fraction of a penny,” she says.

For that reason, Borchetta and Swift chose to initially withhold 1989 from Spotify. They did the same thing with Red in its early weeks. “We’re not against anybody, but we’re not responsible for new business models,” Borchetta says. “If they work, fantastic, but it can’t be at the detriment of our own business. That’s what Spotify is.”

Spotify released a statement suggesting that Swift was giving the back of her hand to her followers on the service. “There are over 40 million music fans on Spotify, and Taylor Swift has nearly 2 million active followers who will be disappointed by this decision,” a Spotify spokesman told Mashable on Oct. 29.

Swift and Borchetta then pulled her entire catalog from the service on Nov. 3. Borchetta says it was a short conversation: “I went to her and said, ‘If we’re going to make a statement, let’s be very specific and bold. All of your music has value.’ And she agreed.” (Swift declined to comment for this article.)

Her decision prompted a long and impassioned essay by Daniel Ek, Spotify’s chief executive officer, who said his service was on track to pay Swift $6 million in 2014 (and has already paid $2 billion in total royalties) and argued that she was encouraging music piracy by not sharing her songs via the accessible and popular Spotify. “In the old days, multiple artists sold multiple millions every year. That just doesn’t happen anymore; people’s listening habits have changed—and they’re not going to change back. You can’t look at Spotify in isolation,” wrote Ek.

Borchetta isn’t swayed. He says that if he had his way, he would take another of his big acts, Florida Georgia Line, off Spotify, but he can’t because of a deal withUniversal Music Group’s (VIV:FP) Republic Records. “That’s a side conversation we’re having,” says Borchetta. (Spotify pays 70 percent of its revenue to record labels and music publishers, a large part of which goes to three major companies,Sony Music Entertainment (SNE), Warner Music Group, and Universal.)

The impact of pulling the catalog isn’t yet clear—though it may have helped move some physical CDs—but other artists and managers are paying close attention. Clarence Spaulding, a prominent Nashville manager, says his client Jason Aldean, one of the biggest-selling country music acts, is one of them. “He is very seriously contemplating the same thing right now,” he says.


All of that is a pretty good week of work for the 52-year-old head of a record company most people haven’t heard of. Borchetta has a ruddy complexion and a mass of black, curly hair that makes him look like the bad guy in an ’80s movie. Swift, who’s over 6 feet tall in heels, towers over him. In pictures of them together, she’s often bending down, a look of mild exertion on her face. Today Borchetta’s clad all in black—he grew up in Los Angeles playing punk rock and likes to wear leather—and is standing at his workstation in his office on Nashville’s Music Row. In the hallway, portraits of Big Machine’s artists, including Tim McGraw and Reba McEntire, hang from chains. Light fixtures dangle from tire rims and exhaust pipes, in honor of Borchetta’s passion for expensive cars.

Photograph by Alex Welsh for Bloomberg BusinessweekBorchetta (center) and wife, Sandi (left), in Big Machine’s Nashville office

The week of 1989’s debut, the Big Machine Label Group had eight songs on Billboard’s Hot Country Songs chart, more than its better-known competitors, including Capitol Nashville and MCA Nashville. Big Machine bills itself as an indie label, but since launching in 2005 it has evolved into a company with 88 employees who work in music publishing, management, and merchandising, and occupy four buildings. The business has multiple record labels. Two of them, Big Machine and Valory Music, are controlled entirely by Borchetta and his partners. (Borchetta owns 60 percent of Big Machine; other reported equity holders include the Swift family and country singer Toby Keith.) Two other labels, Republic Nashville and Dot Records, are joint ventures with Republic Records, a division of Universal, the world’s largest record company. In 2012, Borchetta struck a deal to market and distribute the original music from Nashville, ABC’s hit prime-time soap opera. “He started as a Valley boy and now is running all of Nashville,” says Dawn Soler, senior vice president for music at ABC Television.

Despite their respective success, Borchetta and Swift both describe themselves as outsiders. Swift, who splits her time between homes in New York, Nashville, L.A., and Rhode Island (her estate there has eight fireplaces) and has a net worth of $200 million, according to Forbes, still presents herself as a former high school nerd. Much has been made of her aw-shucks persona, including an entire Internet meme dedicated to the singer’s “surprised face,” the shocked look she gets when she wins yet another award. Borchetta, for his part, casts himself as a country music outlaw. He often speaks of getting “respect.”

Photograph by Lloyd Bishop/Getty Images

“There’s a little bit of an underdog complex in Nashville,” Borchetta says. A little later the underdog is driving to lunch in his black Ferrari, bopping along to Pharrell’s Happy. The valet parking attendants at Etch, a restaurant in the city’s gentrifying downtown, say, “Welcome, Mr. Borchetta,” as he eases his car into the space in front of the entrance.

Over Turkish fish tacos, Borchetta talks about how he got to Nashville. His father, Mike Borchetta, was a country music record promoter who spent much of his time driving around to radio stations and trying to get them to play albums he carried in the trunk of his car. He moved to Nashville after divorcing Scott’s mother and marrying an aspiring country singer. Scott stayed in Los Angeles with his mother, played bass, and, to hear him tell it, acted out.

In 1981 he visited his dad and his stepmother in Nashville and never left. He played for a while in country bands, and when he wasn’t touring, he worked in the mailroom of his dad’s company, sending out bulk orders of records and making calls to radio stations on behalf of acts like Ronnie Milsap and the Oak Ridge Boys. He was better at peddling music than playing it. In 1991 he got a job in promotions at Universal’s MCA Records label, home of Nashville icons like Vince Gill and McEntire, the singer and future WB sitcom star.

Photograph by Rich Polk/Getty Images

Borchetta worked with McEntire, and the singer introduced him to his future wife, Sandi Spika, who styled McEntire’s hair and designed her dresses. Sandi thought Borchetta could use her help, too. “He needed some tweaking,” she says. “I helped tighten him up in some classier suits and changed the shoes he was wearing and things like that.” More recently, Sandi Borchetta designed Big Machine’s offices.

At MCA, Borchetta was an involved manager, choosing singles and dispensing advice. He could be overbearing, and still can be, according to colleagues. “There are days when I would like to choke Scott Borchetta,” says Spaulding, the Nashville manager whose clients include Rascal Flatts, now with Big Machine, as well as Aldean. “But it’s hard to be upset with the guy. When Scott truly believes in a record, he’s able to turn the tide at stations that might not have believed in it.”

MCA fired him in 1997, but he soon landed at the Nashville division of DreamWorks Records, where he hawked records by Toby Keith and Randy Travis. It was fun until Universal bought DreamWorks in 2004 and Borchetta found himself working for his old bosses from MCA. So he decided to start his own label. Before he left, he struck up a relationship with Swift, then a teenage singer-songwriter shopping songs around town. One night that year, when Swift was performing at Nashville’s Bluebird Cafe, Borchetta made an offer to Swift and her parents. He said he was leaving DreamWorks to start his own label. He didn’t have an office, and he still needed financing. But he promised Swift that as soon as he was set up, she’d have a deal with him. “They all looked at me like I was crazy,” he says. Two weeks later, Borchetta got a call from Swift. “She goes, ‘Hey, Scott, it’s Taylor. I just want to let you know I’ve made up my mind, and I’m waiting for you.’ ”

In June 2006, Big Machine released Tim McGraw, Swift’s first single, a tangy track about a guy with a Chevy truck who shares her love for the country star (“When you think Tim McGraw/ I hope you think my favorite song,” she sang, strumming a flat-top guitar). That summer, 16-year-old Swift sat in Big Machine’s office, stuffing review copies into envelopes. “With every envelope that I would seal I would look at the address and the station on there and think, ‘Please, please just listen to this one time,’ ” Swift told Billboard in 2010. “I would say a little message to each envelope: ‘Please, whoever gets this, please listen to this.’ ” Monte Lipman, CEO of Universal’s Republic label, noticed Swift’s mainstream potential in her next single, Teardrops On My Guitar. “I called Scott up and said, ‘I don’t know if you realize this, but that’s a pop record. I can cross that over,’ ” Lipman remembers. “He said, ‘Bring it.’ ”

In October 2006, Big Machine released Swift’s self-titled debut. It went to No. 5 on the Billboard 200, selling 5.4 million copies in the U.S. This was a good start for a new label. “It meant we were never in debt,” Borchetta says. “We never had a year when we lost money.” The success of Taylor Swift also established Big Machine as a force in Nashville. The following year, Borchetta added a second imprint, Valory (“the name stands for fierceness,” he says), and signed another blond singer, Jewel, to her first country album. It went to No. 1 on the Billboard Country Charts, although she’s since left the label.

Luckily for Borchetta, he still had Swift. Her next two albums—Fearless (2008) andSpeak Now (2010)—sold a total of 12 million copies in the U.S. Swift helped Borchetta lure the actual Tim McGraw to Big Machine in 2012. “When you look at the success that Scott’s had with Taylor, it makes you stand up and pay attention,” McGraw says.

Meanwhile, Swift was working on her fourth album, Red, and moving away from her country roots. When some of Taylor’s longtime Nashville producers struggled with her new material, Borchetta says he recommended she bring in Max Martin, a Swedish producer known for crafting career-defining hits for Britney Spears (… One More Time), Katy Perry (I Kissed a Girl), and Kelly Clarkson (Since U Been Gone). “After a couple of conversations, she agreed,” Borchetta says. Swift strummed a few cowboy chords on the album, but her songs played more like throbbing top 40 anthems. There was talk at the time that Red might not match the sales of Swift’s previous albums. Instead, it sold 1.2 million copies in its release week in October 2012, making it her biggest opening yet.

The same year, Borchetta signed an agreement to provide the music for Nashville. He also negotiated the first deal with Clear Channel Communications, now IHeartRadio, enabling his record company to collect royalties when its artists’ songs play. Traditionally, radio stations pay only music-publishing companies that represent composers. “Scott doesn’t follow the past,” says Bob Pittman, CEO of parent IHeartMedia (IHRT). “He looks to the future and finds new ways of doing business.” Pittman declined to say how much money has flowed to Big Machine through this new royalty stream, but Borchetta says the numbers are “meaningful. It’s going really well.”

Photograph by Denise Truscello/Wireimage/Getty Image

Borchetta also had another country act that crossed over to pop in a big way: Brian Kelley and Tyler Hubbard, two gym-toned Southern guys who make up Florida Georgia Line. Kelley and Hubbard, who sing about imbibing Fireball Cinnamon Whisky and swig from a bottle onstage, came up with their own methods of engagement. They dragged a gas grill behind their SUV on their early tours and cooked hot dogs and hamburgers for fans. They became poster boys for what music critics refer to as “bro-country.”

Florida Georgia Line’s first album, Here’s To The Good Times, went to No. 4 on the Billboard Country Charts in 2012, thanks in large part to a remix of its party anthem, Cruise, which featured rapper Nelly. For some country music purists, it was bad enough what Borchetta had done with Swift. Cruise was too much. “I call Scott Borchetta the antichrist of country music,” says Kyle Coroneos, editor of the Saving Country Music website. Borchetta says he’s simply letting his artists follow their own muses. When Florida Georgia Line released its second album, Anything Goes, in early October, it debuted at No. 1 on the Billboard Top 200. (“Well played, Satan,” wrote one disgruntled YouTube commenter.)

Fresh from this triumph, Big Machine unveiled 1989 on Oct. 27. And it released that special edition in Target stores and on Target.com, just as it did with Speak Nowand Red. According to Nielsen SoundScan, Swift, who has promotional partnerships with Microsoft (MSFT), Subway, and Diet Coke (KO), sold 647,000 physical copies of the album, and 640,000 digital ones, that first week.

Photograph by Ding Zhenjie/Imaginechina/AP Photo

A source familiar with Swift’s thinking says it was the singer’s idea to pull her songs from Spotify, not Borchetta’s, and that the Big Machine CEO is exaggerating his involvement because he’s currently looking to sell the company for $200 million. Now would be the time. Swift owes Big Machine only one more album under her contract. After that, she could sign with any number of labels, all of which would be overjoyed to have her.

Borchetta says his company isn’t for sale. “Every time we have a Taylor record, they’re like, ‘Oh, he’s selling the company,’ ” he scoffs. But the next minute, he rethinks his stance. “The business is changing so quickly, and if I see a strategic opportunity that’s going to be better for our artists and executives, it’s going to be a serious conversation,” he says.

Borchetta was smart enough to sign Swift when she was 15, but now, at 24, she doesn’t need him. Big Machine, on the other hand, can’t afford to lose her. The company claims to have sold 40 million of its artists’ albums, and according to Nielsen SoundScan, Swift’s total sales have reached 24 million. On Nov. 10, Swift appeared on the cover of the latest issue of Wonderland, a British magazine, looking retro and edgy, with a beachy bob, her normally groomed eyebrows untamed. She spoke about how grown-up she feels and how comfortable she is being single. “I like it,” said Swift. “I’m not willing to give up that independence for anyone.”