Private Equity Rolls Its Eyes At Taylor Swift's Plea For Deal Do Over

Begging the backers to change their mind clearly isn't working. A different strategy would get better results.

David Rubenstein, head of the Carlyle Group, has finally responded with a shrug to pop star Taylor Swift's social media plea to get her old master recordings back from a promoter she hates.

After all, the contract dispute is barely a blip for the $22 billion private equity complex, which might have pushed $200 million in capital to help buy the recordings. She signed away the rights a decade ago. It's just an asset now.

And moral hazard really doesn't enter into his sense of the role of intellectual property. It exists to make money. People invested time and effort to create it. After that, as long as the cash is flowing, nothing is broken.

Even if Taylor Swift interferes with that cash flow by steering her fans away from the songs, it's still just a single small bet on the Carlyle board. As Rubenstein told FOX a few days ago, his hands are tied.

"Hopefully, [Swift] can continue to do very good music, but it's something that is more complicated than my being able to resolve it right here."

So what are her options? She's always free to make this a business proposition instead of a plea from the heart.

Private equity has a lot of dry powder. Put together a business plan, capture a little of that cash and make a competitive bid for the recordings. That would get Rubenstein's attention.

And if the value of the assets (which sold for $300 million last year) has been impaired in the meantime, the current owner may get a little more motivated to sell, giving the would-be buyer a better price.

Swift can always drive her fans to boycott the albums she doesn't want them to buy. A year from now she'll apparently have copycat recordings that she owns outright. Endorse them and the market for the original material evaporates.

That's the real threat. If Carlyle bought a depreciating asset, they'll strongly suggest flipping it to recoup their cash.

However, if management at the record label objects, Rubenstein's team can fume but their hands are still tied. Best estimates indicate that Carlyle owns 30% of the company. Management still calls the shots.

And management is enjoying making Taylor Swift suffer. The artist hates them and it's mutual.

Whether paying $300 million to play out what amounts to a grudge is a smart business decision remains to be seen. I think these deals are extremely overpriced.

Swift is not dumb. She could put up her own cash or seed a similar partnership with private equity. The fact that she hasn't done it yet indicates that this is more drama than anything else. 

She just doesn't want these albums that badly right now at this price. Could she convince one of Rubenstein's rivals to make a deal? It's unlikely.

But it would be nice if this experience has gotten her thinking. Most of her investments are tied up in her own personal infrastructure: private aviation, recording studios, tour management and logistics.

If she were to take outside capital to create her own label and nourish other artists, she'd have a much broader industry position. 

She could court talent away from her enemies then, starve her old label and ultimately buy the assets back at a deep discount. That's something Rubenstein would take seriously. He might even help.


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