February 1, 2023

Why companies are eager to strike massive music catalog deals

3 min read

New York

Music superstars are cashing in on the red market.

Justin Bieber on Tuesday joined a growing list of famous singers who have inked big deals selling their music catalogs — or in some cases, their masters — for hundreds of millions of dollars.

Song management company Hipgnosis said it Acquired the rights to Bieber’s entire music catalog In an acquisition that “counts among the biggest deals for an artist under the age of 70.” While terms were not disclosed, Billboard Reported that The price tag was $200 million.

The news comes amid a wider trend – which has been on the rise since Merck Mercuriadis founded Hipgnosis in 2018 – to buy the rights to legendary tracks. “What I wanted to do on behalf of the entire songwriter community is establish music as an asset class and create a market,” Mercuridis said Tuesday, likening the value of hit songs to gold or oil. “I wanted to demonstrate to the financial community that these great proven songs have very predictable, reliable income and are therefore worth investing in.”

Mercuriadis has certainly helped lead the way in doing so. Over the past few years, ethnic stars have struck nine-figure deals to hand over the rights to their catalogs. Bruce Springsteen sold his masters and publishing rights. A reported $500 million.. Bob Dylan sold his catalog. A reported $300 million.. And, younger artists have gotten in on the action, too, with singers like John Legend and Iggy Azalea scoring stellar deals.

A version of this article first appeared in the “Reliable Sources” newsletter. Sign up for a daily digest chronicling the emerging media landscape here.

So why have these deals been happening in the last few years? For a few reasons.

The age of streaming has made music more valuable than ever. In the early days, top 40 stations had a strong hold on music sales, sending fans to stores to buy physical CDs of their favorite artists. Now, services like Spotify and Apple Music have revolutionized the music industry. And it’s a business that’s still thriving.

“The streaming market, especially if you think globally, is constantly growing,” says Serona Elton, a former recording executive who now teaches as a music industry professor at the University of Miami’s Frost School of Music. “It’s expanded into new markets as cell phones and Wi-Fi and cell services come down in cost.”

At the same time, the pandemic has deprived artists of touring revenue, forcing them to look at other money-making opportunities to expand their income streams. And the bad economic situation caused by the pandemic helped business people realize that music is a “recession asset,” Elton explained, “If somebody loses their job, then They are also listening to music.”

“Our emotional barometer as human beings is married to music. If we’re living our best lives, we’re doing it to a soundtrack of music,” Mercuridis agrees wholeheartedly. If we’re being challenged, whether it’s through pandemics or inflation…we find comfort in these songs and survive. Songs are always a part of our lives.

Finally, there is the more recent TikTok factor. Short-form video apps have accelerated music discovery as they signal older tracks go viral, driving streams and increasing downloads. Which means that songs from the past are experiencing a new surge in popularity.

All these factors are heating up the market. The Wall Street Journal Reported that Investors and music management companies are “buying catalogs for 30 times their average annual royalties.”

Elton indicated that there is some risk for these artists to sell to relatively new companies, such as Hipgnosis. Unlike legacy companies, these new businesses don’t have a long track record of managing music. “Those of us who aren’t involved in buying and selling, but are watching, wondering: How is this going to play out over time?” Elton asked.

But Mercuriadis argued that not only was he “handling these songs with great responsibility” but that his boutique-style firm was a better steward than legacy record labels. Labels often have different goals, including creating new hits, which can distract them from the sole mission of managing old music, he said. And, Mercuriadis notes, they manage large libraries — not a narrow library of highly focused films.

“We are focused on handling the proven songs of the past,” he said.

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *