Taylor Swift has shown is that it is possible to do business without record labels
Taylor Swift is shaking up the record industry once again with the release of a re-recorded version of her fourth album, 1989, something the singer has already done twice before. The re-recording of so-called “masters” means that Taylor Swift has full control over the use, production and release of her songs, significantly devaluing the original releases of these same songs.
So powerful is the ripple effect of the singer-songwriter’s move that it caused major labels such as Universal Music Group, Sony Music Entertainment and Warner Music Group to review the terms of their contractual agreements for new artists for fear of more singers following suit.
In a classic example of a balance of power in negotiation, Taylor Swift has shown is that it is possible to do business without record labels. In return, the labels are now imposing major restrictions on the ability of new artists to re-record their material Swift-style.
The inclusion of re-recording restrictions in label and production agreements is standard practice. Typically, labels will own rights in sound recordings, but not the rights in compositions embodied in these recordings, which in principle allows artists to re-record compositions with someone else.
Until recently, a standard restriction period has been around five years from the release date of the original. The labels now seek to impose restrictions of 10 or 15 years or more.
We’re yet to see whether Swift will shift the balance of power away from record labels across the industry. Ultimately, the final contractual position between an artist and the label will be down to their individual circumstances. Like any other commercial transaction, the outcome of negotiation depends on many factors, such as the size, market position and brand influence. Lawyers for either side will have to take into account the bargaining position of each party in order to negotiate the best possible outcome for their client.
For obvious reasons, the lawyers for the artist will push back on the length of the restrictive period. While Taylor Swift has become bigger than record labels, by far not every artist will have the weight behind his or her name (and purse) comparable with Taylor Swift’s. It is extremely expensive to record masters, which gives labels a major advantage at the negotiating table with smaller artists who have less ambitious goals. For most artists, it will possibly be their first ever deal and an opportunity to get their foot in the music industry.
From a record label’s perspective, it is understandable that labels are worried about the prospect of an artist competing with them by recreating records. A record label will invest a lot of money in creating the artist’s brand and in most cases it will not be able to get its money back. Wanting to protect their initial investment is a legitimate concern of any business that needs to manage its risks.