catalogs, the new grail of majors and funds

Music publishing is enjoying a new lease of life with streaming and the new circulation of music in a wide variety of contexts. It also generates regular income, so many advantages that encourage catalog price inflation.

On TikTok, old songs are picked up by teenagers because they heard them in an advertisement. This sudden popularity is suddenly inflating listening on YouTube or Spotify. On all these broadcasts, rights are paid. The rights of songwriters, managed by publishers, are invoiced in advertising and to TikTok with which licensing agreements have been made. They are also included in the remuneration provided for on YouTube and Spotify, but this remuneration now also includes the rights related to the interpretation – this is the so-called recorded music and the rights of the performers (those who sing do not necessarily compose and vice versa). Suffice to say that for an old title, already amortized for a long time, this type of enthusiasm is a source of income that is similar to an almost pure margin. On a very rich catalog of rights, its owner is guaranteed to benefit from these sudden online successes and the substantial associated remuneration: with star authors, old mythical titles in shambles, even old ones, there will be, at a moment, a return of planetary enthusiasm. Ultimately, these catalogs are a recurring and substantial source of income and supplement the royalties collected by labels, those from recorded music. Here, it is above all the new releases that generate the most revenue, but the risk is higher, as the label has no guarantee that the artist it produces will quickly meet its audience.

This new interest in publishing, but also in the exploitation of recorded music when it concerns already old titles, results in an unprecedented inflation of the cost of catalog rights. The majors are on the move, as are funds and companies specializing in the valuation of these rights. Catalogs of stars from the 1960s to the 2000s are popular, as well as more recent catalogs, in the making, for the most prominent artists of the moment. In December 2020, Universal Music Group bought back some 600 Bob Dylan songs for $300 million. The following month, Hipgnosis Songs Fund seized 50% of the rights to the catalog of Neil Young, 75, who then counted 1,180 titles as a songwriter. The transaction was valued by the press at $150 million. A year later, in December 2021, Sony Music spent half a billion dollars to buy Bruce Springsteen’s catalog. In January 2022, David Bowie’s widow sold her catalog to Warner Music for $250 million. This frenzy of acquisitions recalls the mid-2010s when the majors had bet on publishing in the face of the piracy of recorded music. In 2016, Sony seized 50% of the Beatles catalog, then owned by Michael Jackson, for 750 million dollars and, in 2018, invested in publishing with the acquisition of EMI Publishing for 2.3 billion. of dollars. Other transactions underline the very strong valuation of the catalogues, because certain artists, far from the end of their career, also agree to cede their rights. In 2020, Shakira sold 145 titles to Hipgnosis when David Guetta, in June 2021, sold his entire catalog to Warner Music, as well as the titles he will produce in the future, for 100 million euros.

Omnipresent in recent transactions, the Hipgnosis company is headed by Merck Mercuriadis, who was the manager of planetary stars such as Beyoncé, Guns N’Roses and Elton John. The company is like an investment fund that invests in catalogs, often stars of the end of the xx^e century, in order to enhance them. Listed on the UK stock exchange in 2018, it has spent more than $2 billion to build a giant catalog and announced, in October 2021, that it had partnered with the private equity (private equity) Blackstone to have an additional $1 billion to invest. If the founder of Hipgnosis can claim a historical proximity with artists, this is not the case for all funds which are interested in catalogs first for the income they can generate. Thus the Carlyle fund teamed up in 2019 with Ithaca Holdings, in conflict with Taylor Swift, to buy Big Machine Record, the label that produced Taylor Swift in her early days. In 2020, the six masters of Taylor Swift’s first albums were sold to another fund, Shamrok Capital, when Taylor Swift wanted them back. Now at Universal Music, she began to re-record her first albums, unable to buy back her masters at reasonable prices. Investing in creation can sometimes be dangerous, if not counterproductive, when it arouses the ire of creators.

Sources :

• “Bob Dylan, symbol of a booming music publishing sector”, Nicolas Madelaine, The echoesNovember 18, 2020.
• “Taylor Swift’s catalog is changing hands again”, Nicolas Madelaine, The echoesDecember 8, 2020.
• “Warner buys David Guetta’s catalog”, Raphaël Balenieri, The echoesJune 21, 2021.
• “Private equity is interested in music catalogs”, Pauline Verge, Nicolas Madelaine, The echoesOctober 14, 2021.
• “Bruce Springsteen, the rock star who was worth half a billion dollars for Sony Music”, Caroline Sallé, Le FigaroDecember 17, 2021.
• “Springsteen sells his music to Sony for nearly 500 million dollars”, Yann Rousseau, The echoesDecember 18, 2021.
• « The Calculators Behind the Music-Catalog Megadeals », Anne Steele, 19 janvier 2022, wsj.com.