Tuesday, July 2, 2019

Carlyle Group Bullies Taylor Swift

Star musician Taylor Swift is "sad and grossed out" by Scott Borchetta and his deal with The Carlyle Group, a politically connected private equity underwriter (PEU).  Music Mayhem Magazine reported:

Ithaca Holdings LLC., a media holding company led by SB Projects founder Scooter Braun, and Big Machine Label Group, a leading independent record label founded by Scott Borchetta, announced today a finalized contract under which Ithaca Holdings will acquire Big Machine Label Group

The Carlyle Group, which initially invested in Ithaca in 2017, is supporting the transaction, alongside Scooter Braun and Ithaca Holdings, through an additional equity investment by way of its Carlyle Partners VI fund. Carlyle will remain a minority shareholder in Ithaca and continue to support the combined company’s growth strategy with Jay Sammons, Head of Carlyle’s Global Consumer, Media and Retail team, remaining on Ithaca’s Board.
Taylor Swift shared her concern that she had no opportunity to buy her music from Big Machine Label Group.  Her rich music library was valued and sold as part of a package deal.

Swift isn't alone in this regard.  The City of Missoula got stiffed by Carlyle on its public water system.  It took a court to rectify Carlyle's bullying of that municipality.

PEUs are ubiquitous in America today.  They own many a failing retailer.  Bain Capital and KKR ran Toys R Us into bankruptcy.  Lawyers earned $56 million and employees got a mere $2 million severance, which amounts to $60 per workers.

Taylor's recent PEU smear followed other music deals.  Billboard reported:

Ithaca’s action follows other Nashville moves by private-equity firms including Blackstone’s purchase of music rights organization SESAC in 2017 and Round Hill’s acquisition of publishing company Big Loud Shirt Industries in 2014. 
Greed is slimy and Swift should be grossed out:

"You hit those hurdles, earn-outs, what have you, and less people in the fund ask you questions or lean on you about where their returns are.  If you don’t hit those hurdles, you will be asked for more reports and more questions will come from an army of MBA’s and finance folks.” 
The PEU beat goes on.

Update 7-15-19:  Kelly Clarkson advised Taylor Swift to re-record her old works.  That would hurt Carlyle, which sold Getty Images for less than it initially paid.  In between Carlyle loaded Getty with debt which likely went mostly to the PEU owner.

Update 8-22-19:  Taylor Swift announced she would re-record her first six albums, potentially denting Carlyle's PEU investment.  Her aim is to "regain artistic and financial control of her material after her former record label sold it in a reported $300 million deal."

Update 11-17-19:  Bloomberg reported "Taylor Swift’s feud with her record label reveals a little-known fact about the entertainment business: the outsized role private equity plays in funding its biggest stars.Swift asked Carlyle Group in a tweet on Thursday to help her as she battles to secure ownership of albums she recorded with her previous label.  The pop star didn’t criticize Carlyle, only appealing for its help. But her conspicuous mention of the company put a spotlight on an industry her legions of young fans normally wouldn’t have reason to pay attention to. Google searches for Carlyle Group surged after her tweet."