Taylor Swift pulled her entire catalogue from Spotify. Mario Anzuoni / Reuters
Taylor Swift pulled her entire catalogue from Spotify. Mario Anzuoni / Reuters

Taylor Swift calls the tune in the US music industry

Scott Borchetta, the 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 for US$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. Mr Borchetta says the Polaroid gimmick, created by Swift’s marketing team, led to a flurry of online love between Swift and her fans. On Octover 27, the day of the album’s release, Mr 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!’ ” he says.

It’s a Friday afternoon in early November, 11 days after the debut of 1989, 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 per cent of all album sales in the US, 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.

Swift’s success is an anomaly in an ailing industry that has been in decline since 2000. Last month the Recording Industry Association of America (RIAA) reported that sales of CDs for the first half of 2014 were down 19 per cent from the year before, to 56 million. In 2002 total album sales in the US hovered at 681 million (down from 2001’s 763 million). The top 10 albums of 2002, after The Eminem Show and the 8 Mile soundtrack, included Nellyville (4.9 million albums sold), Avril Lavigne’s Let 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 per cent in the first six months of 2014. Meanwhile, revenue from streaming services like Spotify rose 28 per cent. 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 per cent 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, Mr 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,” Mr Borchetta says. “If they work, fantastic, but it can’t be at the detriment of our own business. That’s what Spotify is.”

On October 29, Spotify released a statement suggesting that Swift was giving the back of her hand to her followers on the service.

Swift and Mr Borchetta then pulled her entire catalogue from the service. Mr 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.)

The impact of pulling the catalogue isn’t yet clear – although it may have helped move some physical CDs – but other artists and managers are paying close attention.

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. Mr 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 is more than 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.

Mr Borchetta and Swift both describe themselves as outsiders. Swift, who splits her time between homes in New York, Nashville, Los Angeles 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. Mr Borchetta, for his part, casts himself as a country music outlaw. He often speaks of getting “respect”.

Over Turkish fish tacos at Etch, a restaurant in Nashville’s gentrifying downtown, Mr Borchetta tells his story. After playing in country bands in the city, he landed a job in promotions at Universal’s MCA Records label.

MCA fired him in 1997, but he soon landed at the Nashville division of DreamWorks Records. It was fun until Universal bought DreamWorks in 2004 and Mr 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, Mr Borchetta made an offer to her 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, Mr 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, the chief executive 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 realise this, but that’s a pop record. I can cross that over,’ ” Mr Lipman remembers.

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 US. This was a good start for a new label.

Swift’s next two albums – Fearless (2008) and Speak Now (2010)– sold a total of 12 million copies in the US. Swift helped Mr Borchetta lure the actual Tim McGraw to Big Machine in 2012.

Meanwhile, Swift was working on her fourth album, Red, and moving away from her country roots. When some of her long-time Nashville producers struggled with her new material, Mr Borchetta says he recommended she bring in Max Martin, a Swedish producer known for crafting career-defining hits for Britney Spears, Katy Perry and Kelly Clarkson. “After a couple of conversations, she agreed,” Mr 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.

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

A source familiar with Swift’s thinking says it was the singer’s idea to pull her songs from Spotify, not Mr Borchetta’s, and that the Big Machine CEO is exaggerating his involvement because he is looking to sell the company for $200m. Now would be the time. Swift owes Big Machine only one more album under her contract.

Mr 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.

Mr 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 November 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.”

* Bloomberg Businessweek

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