Swift Trajectory

Gut instinct, hard work and a fierce independent streak make Scott Borchetta our CEO of the Year [From the May/June issue of Nashville Post magazine]

The music business, says Scott Borchetta, "drives business people crazy." It's an industry in which the certainty of numbers is often trumped by things unquantifiable: aesthetics, emotion, serendipity. "It's really alchemy, magic. It's not science," says Brian Philips, president of Country Music Television.

So in 2004, when Borchetta drew up a business prospectus for a new country label, he factored in magic. His plans for Big Machine Records hinged on luring an established female singer from her major label to his startup. And he banked heavily on the success of someone he'd just met, a 15-year-old singer-songwriter who had been turned down for a record deal by every major label on Music Row.

"Now, when I go back to look at that original prospectus, it's almost like Nostradamus," Borchetta says with a laugh. In 2008, Reba McEntire dropped her 25-year relationship with MCA to sign with Borchetta. The resulting album, her first solo studio album in six years, hit No. 1 on the Billboard all genre album chart. Far more significant has been the phenomenal success of Big Machine signature artist Taylor Swift, who for two years has been the best-selling musical artist in the United States. Her album sales topped 10 million in 2009 – magic numbers in the music industry, which has suffered a decade of steadily declining sales.

Good magicians are also dexterous. For Borchetta, that meant adjusting to hard economic truths, embracing new media, and ditching the decades-old notion that music sales alone can sustain an industry.

Jockeying for Position

But really, racing is Borchetta's metaphorical material of choice when describing Big Machine's founding and growth. After all, he races cars, and he uses racing analogies to describe what he does. Part of his strategy with Big Machine was asking, "What lane is everybody else not in?"

Maybe that's what happens when you grow up on Music Row in the most competitive area of a competitive business – what Borchetta calls the "zero-sum game" that is music promotion.

His first record business job was in the mailroom of the independent promotion company owned by his father, Mike. He launched his own promotion company in 1984, then signed on with Mary Tyler Moore's country label in 1985, then went solo again from 1989 to 1991. His break into the major labels came when as an independent promoter he wore down Shelia Shipley, then vice president of promotion in Nashville for MCA, by offering to work two of her newer artists for free. One was Marty Stuart, who with a push from Borchetta earned his first Top 10 single, "Hillbilly Rock."

By the time Tim DuBois met him, Borchetta had climbed the ranks at MCA, helping propel the careers of artists like McEntire, George Strait and Vince Gill. DuBois, now senior vice president of ASCAP Nashville and a clinical professor of entertainment and media management at Vanderbilt University, was head of Nashville's Arista Records, home of Alan Jackson, Brooks & Dunn and Brad Paisley. DuBois and Borchetta often jockeyed for the limited radio space that would make or break a hit. "I fought him for years when I was at Arista and he was the head of promotions for MCA, while we were the number-one and number-two labels in town for most of the '90s," DuBois says. "We fought hard, bare-knuckles competition out there."

The fighting was fierce at the corporate level, too. Music sales were beginning to decline, the industry was consolidating, and major labels were becoming increasingly risk-averse.

A Dream Refined

In 1997, DreamWorks Records opened a Nashville label with legendary producer James Stroud at the helm. Stroud had known Borchetta since his Mary Tyler Moore days and was eager to take him on as senior vice president of promotion and artist development.

"He's one of those rare guys who could put together a radio promotion plan along with a marketing plan and marry them in a way that made the artist a little bit larger than any of his competition," Stroud says. "I knew that when we put a record out, it was going to have the best shot of anybody in town."

Stroud, who was most at home in the studio, let Borchetta handle jobs well beyond the promotion realm – notably signing and developing artists. Among his successes there was a double-platinum album with Toby Keith, who came to DreamWorks after having been pinballed among major labels on Music Row. Borchetta's work with Keith foretold the strategy he would later apply to his artists at Big Machine, particularly Taylor Swift: Trust the artist's vision, and develop a story to go with it.

"We wanted to show Toby's sense of humor, like we did with "How Do You Like Me Now?!'" Borchetta says. "We wanted to show that he was more of a bad-ass – because he is. We weren't so concerned about having big radio ballads just to get radio airplay. We [knew we could] win on the merits of things that are closer to who he is."

DreamWorks Nashville was Borchetta's first, unofficial taste of running an indie label – taking risks and trusting his gut to try to make the magic happen. But in 2004, when Universal Music Group swallowed up DreamWorks Records, he knew if he was going run a label his way, he'd have to start one himself.

When the magic did happen, it came in the form of a package that landed on Borchetta's desk. It was fall of 2004; he was still at Universal, considering the jump. The package was from Taylor Swift. A family member followed up with a phone call, and a few days later, Swift sat with Borchetta at Universal and played a few songs, including one called "Picture to Burn."

"I said, 'That's a hit song,'" he remembers, "and she looked at me like, 'I've never heard that before.'"

"I had played that song around town and for other labels," Swift says, "and nobody had ever said they thought it was a hit before. I remember thinking that he was really listening to my songs. I would finish playing a song, and he would say, 'Can you play me another one?' That went on for about an hour."

Borchetta watched Swift sing again two days later at the Bluebird Cafe, and then met with her family at their home, where she played more songs for him. He said he'd sign her, but he would be leaving Universal and didn't have a label yet. She said she'd wait.

"I knew Scott wanted me to make an album of songs that I had written; that was critical to me," Swift says. "I was willing to wait for Scott because it was more important to me to be with a label that got my music and would give me a lot of creative freedom."

Thus Taylor Swift became part of the prospectus for Big Machine Records. Having seen other indies fail due to inertia and indecision, Borchetta developed three contingency business plans based on the label's early momentum. Thanks to Swift, he didn't have to worry about plans B or C.

"Taylor took it to the aggressive plan," he says.

A Swift Trajectory

As Brian Philips describes it, what happened next was pretty straightforward: "It's unprecedented, but it's simple. He heard hits, he saw potential, he imagined an outcome, and here we are."

Magic happened, and just like that, the Big Machine had shifted into high gear: "It starts out as an online buzz," Philips says, "and it winds up walking away with an armload of Grammys."

Borchetta was banking on Swift breaking big, but he knew that launching a label with a 15-year-old unknown would relegate her – and the label – to novelty status. He opened instead with singles from up-and-coming singer Jack Ingram, whose "Wherever You Are" hit No. 1, and former DreamWorks artist Danielle Peck. Then, Borchetta says, "[Swift] became my personal priority."

Like most teens at the time, Swift already had a MySpace page, which saw limited traffic. She also had a Web site. Over the next several months, as Borchetta pored over Swift's prolific collection of songs, his team seeded her Internet presence, posting content on every online outlet they could find. In May 2006, before Swift had a single or even a video, she had three one-minute vignettes airing about 15 times a week on cable's GAC Shortcuts.

"That's when [her MySpace following] started to blow up," Borchetta says.

Five months later, her album Taylor Swift debuted at No. 3 on Billboard's country chart – a first-album start bettered in 2006 only by American Idol winner Kellie Pickler, another artist whose audience predated her album. The trajectory since has been both steep and upward for Swift and for Big Machine Records. Swift's debut album and her 2008 sophomore release, Fearless, went multiplatinum, winning multiple awards. By March 2010, Fearless was officially named the most awarded album in country music history – but Swift's popular appeal had long since outstripped the genre. Both the Billboard Music Awards and the American Music Awards named Swift 2009 Artist of the Year, and in January 2010, she took home four Grammys (despite fierce media criticism of her singing ability). Borchetta became her very public defender, saying the critics did not get Taylor Swift. It wasn't about her voice, he said, it was about her, and how she connects with her fans.

Dan Daley, author of Nashville's Unwritten Rules: Inside the Business of Country Music, agrees: "People are jumping on the bandwagon – she can't sing, she needs Auto-Tune – but that's not stopping the phenomenon that's Taylor Swift because she connects with her demographic."

Taylor Swift's fans don't just buy her music. They flock to her concerts, clamor for her merchandise, and buy what she endorses. And while Swift certainly isn't the first artist to profit from touring and product endorsements, Big Machine was among the first labels to profit from the "360 deal," the sort of multiple-rights arrangement that drew industry-wide attention two years later, when Madonna signed with Live Nation.

The Track Less Traveled

But behind Swift's phenomenal success, or at least interwoven with it, lay Borchetta's refusal to stay in the same lane as everyone else in his industry. To that end, he refused to anchor Big Machine solely to music sales – a figure that's been sinking, and dragging the industry down with it, for a decade.

Tim DuBois attributes that steady decline to a number of factors: online theft, certainly, but also the consolidation of retail and radio, and competition for the leisure dollar. According to the latest figures from the Recording Industry Association of America, music sales have dropped steadily, from $14.6 billion in 1999 to $8.5 billion in 2008 – a disaster for music's legacy labels, which largely have become what Daley calls "rent collectors," leveraging existing music catalogs.

At DreamWorks, Borchetta and Stroud watched that downward spiral and agreed that labels could no longer survive solely on music sales, an ever-diminishing percentage of the value of the careers they helped build. If they launched their own labels, they decided, things would be different.

The 360 deal was a relatively novel concept when Big Machine launched, and it still is, Borchetta says. (Check out our sidebar on the topic here.) But adopting a new business model is easiest when you're a new business, with new clients – in this case, eager young artists who are willing to make a leap of faith for a record deal.

That faith rests on the premise that music sales won't be anyone's primary revenue stream – that the real money, which artist and label will share, will come from touring, merchandise, corporate sponsorships, even songwriting, if everyone does his job right. It's a verbal long-range plan Borchetta says he unveils for each of his young artists before they sign.

"I tell them that when we sit across the table from each other [a few years from now]," Borchetta says, "and your record company income is only the fifth largest part of your income, I want to hear two words from you: 'Thank you.' Because that means it worked. This isn't the place where you're going to make most of your money. This is the machine that will propel you to these other amazing income sources. But if this doesn't work here, nothing else works."

All of that, of course, is contingent on the magic – that connection between artist and fan.

Redefining the Zero-Sum Game

Borchetta says Swift's trajectory exceeded even the most aggressive contingency plan that was part of his original prospectus for Big Machine.

About the label's revenues, he says, "You can do your own extrapolations. You can look at what we've sold."

In other words, forget the magic for a moment; look at the numbers.
To date, Taylor Swift has sold more than 13 million albums, plus 25 million paid digital downloads. (Swift is the top-selling digital artist in music history.) Extrapolations aside, it's clear that Big Machine is, for now, the anomaly among record labels: It's actually profiting from music sales alone.

It's also clear that Borchetta's strategy has paid off handsomely for himself and Swift, who has become ubiquitous with product lines and endorsements (which include Sony Electronics), her own Comcast On Demand cable channel, and star turns on Saturday Night Live and in a 2010 movie, Valentine's Day. As Daley notes, "If anybody would be a great candidate for a 360 deal, it would be Taylor Swift."

So that leaves the question: Where would Taylor Swift and Big Machine be without each other?

"I don't mean to suggest that if there's no Scott Borchetta, there's no Taylor Swift, because, who knows, she may have been a foregone conclusion, and Scott won the lottery," Philips says. "But it's more likely that, on the day that he introduced the idea of Taylor Swift to me, his certainty was based on two things: an intuitive belief and the fact that he had already put an extraordinary amount of work into the project, so he could say with confidence to me, 'This rocket is taking off. Stand back.'"

For Stroud, Swift is proof that Borchetta's business model works. "If it hadn't been Taylor Swift, it would have been someone else," he says.

Full Throttle

Whether Big Machine got where it is through strategy, serendipity or alchemy, its orbit in the stratosphere is secure.

"You can't take away Entertainer of the Year, you can't take away Country Album of the Year at the CMA awards, the ACM awards, the American Music Awards, the Grammys, Album of the Year at the Grammys. That's in the history books," Borchetta says. "So if [people] want to pin that all on one fantastic artist, that's cool. But you know, what's really even cooler is that other artists see that and they go, 'We want a part of that.'"

Besides Reba McEntire, other established artists have signed with Borchetta, including Jewel and Trisha Yearwood. In 2007, after Garth Brooks made Big Machine his exclusive radio marketer, his "More Than a Memory" was the first single to debut at No. 1 on the Billboard Singles Country Chart.

But emerging artists seem best suited for Borchetta's strategy of using multimedia to both expand their reach and to build an intimate – and, he hopes, lucrative – connection between singer and fan.

Among his latest signees are the duo Steel Magnolia, winners of CMT’s American Idol-style show, Can You Duet, on which Borchetta himself was a judge, and the consummate showman. Last year, the channel's 140 million viewers were invited to watch him watch Steel Magnolia, cheer their weekly successes, and celebrate with them as they won their prize, a Steel Magnolia album – coming soon from Big Machine. By March of this year, Steel Magnolia had garnered two Academy of Country Music Award nominations. At press time, the duo had a single on Billboard's Top 10.

It's all part of Borchetta's strategy to meet country's newest audience where they already are – reality TV, the movies, and especially the Internet and social media. Borchetta turned to YouTube to lend an edge to singer-songwriter Justin Moore, touted as Hank Williams Jr. for a new generation. Moore stars as himself in a series of Cribs-style videos that Borchetta's staff produced and posted on the Web. Wearing overalls and no shirt, the Arkansas native deadpans it as an earnest yokel whose record contract enabled him to build his "crib," complete with plywood floors, an outhouse, and fly-swatter spatulas in the kitchen. Ultimately, the videos lampoon Southern stereotypes and country music as cultural anachronisms, and Moore's young fans are in on the joke.

"People thought, 'You're going to have a redneck artist from Arkansas, and you're doing all this attention online?'" Borchetta says. "And it's like, what makes you think cool redneck kids in Arkansas aren't online?"

And that's significant. For years, technophobia has helped insulate country music from the devastating effects of digital theft. ("Let's face it, they were still making country albums on cassettes when no one else was using cassettes," Daley says.) But those years are quickly drawing to a close, and Borchetta won't join in industry hand-wringing.

"When Napster came out, I thought it was one of the coolest things I'd ever seen. As an industry, we didn't know if it was a flower or a weed. We decided it was a weed, so we exterminated it. We didn't give it a chance, and it taught us some really big lessons. We can't make people buy something they don't want to buy."

In his opinion, the music industry's future lies with the carrot and not the stick: "We have to be great," Borchetta says. "There’s no middle ground."

Lapping the Competition

Like many industries, the music business is cyclical, so the recent resurgence of indies on Music Row is not surprising. Still, Stroud says, "When you look at what Scott's doing, it is the future. It makes a lot of other entities look like dinosaurs."

Since Big Machine opened in 2005, Borchetta has launched two sister labels, The Valory Music Co. and Republic Nashville. The future, according to his model, blends the agility of a small label and the resources of a major one. A 37-person staff runs Borchetta's three indies, with four to five artists per roster. (Translation: low overhead, hands-on artist development, no cumbersome bureaucracy.) But Universal Music Group handles distribution, and through Republic Nashville, Borchetta can "up-sell" potential crossovers to Universal Republic in New York.

Thus far, the Big Machine model's reliance on the 360 deal has been bolstered by plenty of the unquantifiable: the right artist, the right time, the right person to find her – and to imagine what could be. But those who long know Borchetta say that for all the intangibles in play when Big Machine launched – timing, chemistry, magic, etc. – ultimately, the machine is fueled by some pretty down-to-earth qualities: pragmatism and diligence.

"The dirty work, the hard work, the gigantic rock that has to be pushed uphill, is what comes after you imagine," says Brian Philips. "The work ethic that comes after the idea is a huge component of Scott's success."

And with the success have come sacrifices. Borchetta admits he now works almost all the time and has temporarily foregone racing cars. (He won the last event in which he raced on Sept. 3, 2005, two days after launching the label.) But despite the fast pace and long hours, he still finds time to appreciate the magic in Big Machine's milestones.

"That's winning the Indy 500. Our little house has written a page in history. So, hell yeah, we absolutely enjoy those moments."