🎶 T Swift’s “Red” rebellion

Tuesday, November 16, 2021 by Robinhood Snacks | Disclosures
“Trouble, trouble, trouble” for record labels [Catherine Falls Commercial/Moment via Getty Images]

“Trouble, trouble, trouble” for record labels [Catherine Falls Commercial/Moment via Getty Images]

Yesterday’s Market Moves
Dow Jones
36,087 (-0.04%)
S&P 500
4,682 (-0.001%)
Nasdaq
15,854 (-0.05%)
Bitcoin
$63,864 (-2.22%)

Hey Snackers,

Big Gulp moment: A customer is suing 7-Eleven, alleging that its “Wasabi Delight Flavored Snack Mix” contains zero wasabi. Almost as disappointing as when the Coke Slurpee machine is broken.

Stocks jumped today after strong October retail sales numbers and earnings beats from Home Depot and Walmart, which signal a holiday spending boom.

Red

1. T Swift’s rerecording crusade paves the way for artists, but threatens major labels

"You belong with me"... Taylor Swift to her own music. This weekend, T Swift dropped “Red (Taylor’s Version),” a rerecorded album of her hit 2012 breakup anthems, plus never-released tracks. Some background: Taylor doesn't own the "masters" (aka: original recordings) from her first six albums. When she was 15, those were signed over to record label Big Machine, later sold to Scooter Braun (Kanye’s ex-manager).

  • In 2018, Taylor signed a new deal with Universal Music, which gave her ownership of her new masters. But she couldn’t buy back her first six albums.
  • Taylor has bad blood with Braun. Even more, she’s passionate about artists owning their music. So she started rerecording.
  • Last year, private-equity fund Shamrock paid $300M for Taylor's old tunes, but Braun still got a cut of the deal. Then Taylor announced she would rerecord all the albums they’d bought.

I knew you were trouble... Many fans are choosing Taylor's version over the OGs, which could undercut earnings for Shamrock. Earlier this year, Taylor released a rerecorded version of her album "Fearless.” It's racked up 3X as many streams as the 2008 original. The “Red” rerecording is also outperforming the OG, and was #1 this week on Spotify and Apple.

  • Taylor is profiting: As the owner, Taylor is scoring lucrative licensing deals for her music (think: movies, ads, TikToks).
  • She’s also getting paid more streaming $$, which makes up the bulk of revenue for labels like Universal, Warner, and Sony. Artists can keep more than 80% of streaming revenue for masters they own, compared to 20% if the label owns them.
  • Ctrl + Swift: Now Universal, the world’s largest label, is scrambling to protect its rights with other artists who might want to rerecord too.
THE TAKEAWAY

The "T Swift Clause" is a threat to labels… because it lets artists keep more control and more money. That’s why Universal is reportedly doubling the amount of time that artists are restricted from rerecording. But as streaming platforms and social apps make it easier for artists to distribute music, leverage is shifting in creators’ favor. Labels including Universal are also making concessions, like increasing royalty payments.

Kondo

A little less Royal, much less Dutch… Yesterday, oil titan Royal Dutch Shell said it planned to move its HQ from the Netherlands to the UK and to shorten its name to Shell, ditching “Dutch” after 114 years. Dutch officials were “unpleasantly surprised,” but investors seemed pleased: Shares jumped 3% yesterday on the news.

  • Marie Kondo meets big oil: Shell’s move will simplify its dual share structure (it now has A and B shares) and make it easier to pay taxes, buy back shares, and attract investors.
  • Cleaning up: The reorg could also make it easier for Shell to sell “dirty” business lines and invest in greener ones, though Shell said it had no active plans to split.

A Shell of its former self… Shell’s under pressure from investors and courts to transition to renewable energy. Last summer Dutch courts ordered Shell to reduce emissions. Last month activist investor Third Point asked Shell to split its oil and renewable energy businesses to facilitate greener investment. Shell’s not the only oil bigshot feeling pressure:

Exxon is spending $1B+/year to develop emissions-reducing tech after activist investors joined its board. BP spends $5B/year to develop low-emissions fuel alternatives. 450 finance firms including JPMorgan Chase, Citi, and BlackRock committed to hitting net-zero emissions in their investments by 2050 at the UN climate summit last week.

THE TAKEAWAY

Corporate transitions can be messy… and sometimes it helps to draw cleaner lines. Shell’s reorg could make it easier for backers to invest in its transition to renewables, even if Shell hasn’t committed to splitting. As shareholders demand increasingly specific ways to invest, some companies have started splitting up to attract focused funding. Just last week: General Electric, Johnson & Johnson, and Toshiba announced plans to split into smaller companies to spur more targeted investment.

What else we’re Snackin’

  • Heads: Biden held a virtual meeting with Chinese President Xi last night in an effort to ease tensions on issues from nuclear proliferation to Covid and climate.
  • Nuggies: Tyson’s sales jumped 12% last quarter after the meat giant majorly hiked prices for its beef, chicken, and pork products, with the company citing rising costs.
  • Cardi: Warner Music, which represents stars like Cardi B and Ed Sheeran, saw sales jump 22% last quarter, thanks partly to tunes on TikTok and Peloton.
  • Sued: Ohio officials, seeking $100B+ in damages, sued Facebook parent Meta, alleging it misled the public about its efforts to protect kids.
  • Settled: Amazon reached a settlement with California after a lawsuit alleged it concealed worker Covid cases from health agencies and employees.
  • Gaffe: Tesla shares fell 2% yesterday after CEO Elon Musk sold $7B worth of shares last week and ridiculed Bernie Sanders over the weekend.

Snacks Daily Podcast

Direct-to-consumer mattress company Casper was a unicorn before going public last year. Now it’s going private at one-fourth of its former valuation.

Tune in to hear why the spooky tale is D2C companies’ nightmare.

Apple podcast button
Google podcast button
Spotify podcast button

Snack Fact of the Day

California gas prices hit $4.68 a gallon yesterday, a record for the Golden State

Tuesday

  • October retail sales
  • Earnings expected from Walmart, Home Depot, Aramark, Dolby Labs, and Advance Auto Parts

Authors of this Snacks own shares of: Apple, Spotify, Warner Music, Tesla, Amazon, and Walmart

ID: 1923304