What to Expect From Scooter Braun's Purchase of Big Machine Label Group
The mega music deal "just shows that the music business is growing and opportunities are coming."
As Big Machine Label Group begins its next chapter as part of Scooter Braun’s Ithaca Holdings, leading Nashville music executives expect it to be business as usual at the record and publishing company founded by Scott Borchetta in 2005. At least for now.
In a letter sent Sunday to staffers, artist managers, producers and songwriters following the announcement of the $300 million deal, Borchetta vowed that “the Big Machine Label Group will continue to operate at full power in our current image and completely autonomous in my agreement with the new entity. There will not be any staff changes.”
That matches what Kevin "Chief" Zaruk, manager and owner of Big Loud, has been told in terms of how it will affect Big Loud clients Florida Georgia Line, one of Big Machine’s biggest acts. “Not sure exactly how the partnership will affect us or FGL directly, we have just been told it is business as usual,” he told Billboard in an email.
Clint Higham, who manages Kenny Chesney, as well as Big Machine artists Carly Pearce and Brantley Gilbert, also expects only good to come from the deal. He has experience working with Braun as Ithaca invested in his management company, Morris Higham Management, five years ago. “I still operate very much from an independent spirit. Scooter, being entrepreneurial in his own right, that’s how he wants to operate. Scott being super independent himself, that’s how he operates. They’re not changing. It’s not like Scott’s going to the beach anytime soon," Higham told Billboard. “I think when you bring two entrepreneurial spirits together like that, they just increase the pie instead of splitting the pie up.”
The Big Machine purchase is Braun’s biggest foray into Nashville, which, in addition to the pact with Morris Higham, includes a recently renewed partnership with Jason Owen’s Sandbox Entertainment, management home to Kacey Musgraves, Midland, Dan + Shay and Kelsea Ballerini. As of March 2018, Braun added Zac Brown Band to his roster at SB Projects, which also handles Ariana Grande, Justin Bieber and J Balvin, among others.
Braun’s move pairs him with one of Nashville’s boldest and brashest executives and furthers Braun’s reputation as a highly strategic player who has also expanded into the tech and film and television space. “One thing that Scooter has always done is always align himself with very forward-thinking go-getters,” says an artist manager. “I cannot think of a better operator of a record label than Scott Borchetta. He started that thing from the ground up. He’s not going to lose.”
Speculation about the sale of Big Machine, whose roster also includes Thomas Rhett, Brett Young, Rascal Flatts, Reba McEntire, Lady Antebellum and Taylor Swift’s catalog, first reared its head in 2015, then died down again until last year, when it seemed Universal Music Group, which distributes Big Machine, was the likely buyer. However, a few months ago, Ithaca Holdings emerged as the leading player. “Scott [has] had every opportunity to sell his company along the way, we all heard the rumors,” Higham says. “But Scott wasn’t going to do it unless it was a 1+1 = 5. Scott’s proud of what’s he’s built and his legacy and his company, he was not going to just take the check.”
The June 30 deal included a further infusion of capital into Ithaca by the private equity firm Carlyle Group, which had previously invested in Braun’s holding company.
The deal “just shows that the music business is growing and opportunities are coming — especially into Nashville — so that is a good thing for everyone,” Zaruk says.
Indeed, 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.
Eventually, given Carlyle Group’s expectations, Big Machine may come under closer scrutiny. “There is no question that a private equity firm eventually changes your dynamic,” says prominent Nashville attorney Derek Crownover. “It may take a month, a year or a few years depending on the structure of the deal, but it always does. The fund has return hurdles, exit plans and expectations, that they have baked into the investment. … 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 MBAs and finance folks.”
One manager has no qualms about Borchetta and Braun’s abilities to met any new benchmarks. “These are really smart people,” he says. “They know what they’re doing.”
This story was originally published on Billboard.com.