Explained: What is music acquisition and why is it now so popular among the financial giants of the world?

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On Wednesday, the entire musical catalog of French DJ and producer David Guetta was bought by the American conglomerate Warner Music Group. The deal marks a defining moment in the career of Guetta, who is currently the eighth most-listened to artist in the world on Spotify.

While the exact terms of the deal, which also includes some of Guetta’s future plans, have not been made public, many music industry analysts say it can be worth more than $ 100 million.

The arena of music acquisition is suddenly the nerve center of a lot of activity. After almost decades of great instability due to piracy and free access issues that have reduced demand for new music purchases, the music industry is suddenly seeing billions of dollars injected.

But what is music acquisition and why is it so popular now?

What is the acquisition of music catalogs?

Acquiring a music catalog refers to the process of huge deals whereby artists sell their music and its copyright – either a particular section or their music in its entirety – to a particular company.

Traditionally, the rights to record music were signed with a label and the performers. The publishing rights generally went to another company and the songwriters.

In the new era of music acquisition, the two have been merged – everything is now bought by another company or a collaboration agreement is made with the recording or publishing company. This tends to include all other assets, with the artist’s brand value in tow.

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What are some of the notable musical acquisitions that have occurred in recent times?

In 2020, Universal Group acquired Bob Dylan’s entire music catalog for nearly $ 400 million. The catalog, comprising more than 600 songs from six decades, featured iconic tracks like “Blowin in the Wind” and “Like a Rolling Stone”.

Months after Dylan, singer-songwriter David Crosby announced he wanted to sell his catalog as well. His music was finally acquired in March 2021 by US entertainment executives Olivier Chastan and Iconic Artist Group of Irving Azoff just after the company acquired a controlling stake in the Beach Boys’ intellectual property, including recording, l edition and brand name.

Colombian pop star Shakira followed suit, selling her catalog of 145 songs, including her Olympic anthem “Waka Waka”, and popular tracks like “Hips Don’t Lie” and “Whenever, where” to the Hipgnosis Songs Fund, a public body. British based in UK. publicly traded investment firm that has also acquired music catalogs from Canadian singer-songwriter Neil Young, former Fleetwood Mac singer Lindsey Buckingham, English musician Steve Winwood and Grammy-winning producer Andrew Watt, among others. The company is valued at $ 2.21 billion.

While Young sold a 50 percent stake in its music to Hipgnosis, the company paid popular group Red Hot Chili Peppers between $ 140 million and $ 150 million for their music publishing rights.

Then there’s Tempo Music Investments, another private equity firm, which together with Warner Music Group bought the rights to Jonas Brothers and Wiz Khalifa. Round Hill Music, a former hedge fund management company, now has a catalog of over 20,000 songs, including songs from The Rolling Stones, Frank Sinatra, The Beatles, Billie Holiday, Ella Fitzgerald, Miles Davis, Aerosmith, Katy Perry , Bon Jovi and Céline Dion, among others.

However, many financial details of these agreements are withheld.

“The value of music catalogs will continue to rise, attracting more and more capital into the space,” writes in her company’s report on the music industry Lisa Yaung, managing director of Goldman Sachs in London (Media & Internet). year.

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Why is there a sudden interest from the big financiers in the recording industry?

Financial companies are suddenly interested in acquiring other possible assets in addition to what they already have. The influx of large sums of money, excessively low interest rates and the extent of the intangibility of music as an asset, which will always be played by people in good times and in bad times, has attracted various companies, including the greats of Wall Street.

For example, global private equity giant Kohlberg Kravis Roberts (KKR) partnered with BMG Rights Management and bought OneRepublic frontman Ryan Tedder’s 500 song catalog with songs featuring Beyonce and Adele for $ 200 million. dollars in 2021.

In 2019, Morgan Stanley bought the music catalog from Indo-American producer Jeff Bhasker for an undisclosed deal that is expected to be worth around $ 65 million. The chord includes the famous song ‘Uptown Funk’ by Mark Ronson and Bruno Mars.

The streaming platforms and their increased revenue possibilities are one of the main reasons here. Streaming services such as Spotify and iTunes, among others, have created an atmosphere that encourages many businesses, large and small, to want to invest in music. They understand that GenZ and millennials spend big on streaming platforms.

Despite the investment risks involved, what companies see in the future is an opportunity to make money through licensing, games, merchandise, and music on a variety of platforms outside of movies and movies. emissions.

Bob dylan In 2020, Universal Group acquired the entire Bob Dylan music catalog for nearly $ 0 million. (PA)

For example, whenever Bob Dylan’s “Farewell” is played in Inside Llewyn Davis or “The Man Who Sold the World” by David Bowie is played on Gilmore Girls, there will be constant revenue in the form of royalties from various platforms for the companies holding the rights. The royalty due must be paid each time the music is streamed or incorporated into a medium.

Why is it lucrative for musicians?

With tours and concerts having ceased due to the pandemic, these deals have worked well, especially for older artists like Crosby and Dylan, who may not be able to perform much in the days ahead. Musicians can earn their money all at once rather than waiting for the royalty money to continue pouring in bit by bit.

But there have been opposing voices as well. Last December David Crosby tweeted, “I can’t work… and streaming stole my record money… I have a family and a mortgage and have to take care of it so it’s my only option…” I’m sure others feel the same. “

What is a “deep catalog” that some companies prefer when acquiring music?

Guetta has to his credit two sacred golden gramophones and numerous prestigious awards, in addition to a vast body of work which has accumulated 50 million record sales and 14 billion streams.

An important name in the electronic music and dance circuit, Guetta’s work is considered by many to define the genre. In addition, he has the extremely recognizable piece – “Titanium” (with Sia) – which is played daily by many people.

However, Guetta’s catalog of music, like a few other artists of the past decade, has been characterized as a shallow catalog, subject to “decomposition,” meaning that it is modern pop with songs that are appeared only over a decade ago and may not work after 10-20 years. This is why some companies prefer “in-depth catalogs” which are relatively more iconic and have stood the test of time. Dylan’s catalog falls into this category.

But at the end of the day, each business draws its own conclusions when deciding to bet on performers based on its own requirements and predictions of future profits.

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