Tuesday, June 5, 2012

A million copyrights! What is it good for?

By Emmanuel Legrand

At the game 'Who wants to be a millionaire in music publishing' there's a new winner on the block and its name is BMG Rights Management.

The Bertelsmann operation, backed by VC group KKR, announced last week that through its aggressive acquisition policy, it has grown in just a few years from zero to over a million copyrights. They are now part of this very exclusive club of millionaires that includes Sony/ATV + EMI Music Publishing, Universal Music Publishing and Warner Chappell.

So champagne for Hartwig Masuch and his team is de rigueur! Or is it?

BMG Rights Management CEO
Hartwig Masuch
On the one hand, Masuch has impeccably rolled out a strategy devised with his German shareholders alongside KKR, and has now earned the right to be taken seriously. Its success challenges the status quo among the majors. Time will tell if they really manage to build a publishing house for the 21st Century.

But it was done at a cost. There's that incredible business philosophy (not sure the two words go together well but that'll do for now) in music publishing that what matters is scale and volume, and that stacking up compositions will provide huge streams of revenues. Under a million copyrights, you're worth nada. In the capitalistic world of music publishing, there's now an obsession with size and scale.

The only reason why size has started to matter in music publishing was due to the newfound interest from Wall Street and the City in what they saw as assets delivering long term steady returns. The belief in financial circles is that is that catalogues are worth a lot of money because of big numbers. The fact that copyright to compositions is awarded in most countries for 75 years post-mortem gives investors a potential large window to recoup their investments.

But is size all that matters? Music publishing is a strange industry. It is a penny business, as the new market leader Marty Bandier likes to say. But it is also a business with multiple facets. Yes, catalogues are worth money because they deliver steady revenues. But the bulk of revenues come from new works, new songs from new or established songwriters.

Publishers never disclose the breakdown in revenues between recent works and heritage works. And also what is the share of their active works. There is much to bet that most of works on the million-plus catalogues are dormant (sources suggest than less than 10% of the big catalogues are active, with 3-5% accounting for the bulk of revenues).

There's many reason to that: a lot of these compositions no longer fit the times, are too old or not relevant any more (although the concept of relevance can vary: who would have thought that mambo had any value until Lou Bega had a worldwide hit with 'Mambo No.5'?). But there is also a very human reason to that: the lifeblood of publishing is with new signings, and teams prefer to spend time and energy on new writers than dig into the vaults. And there is also the limit to the number of compositions and songwriters that teams can work for and with.

It is fascinating to hear stories about how much these big publishing units are unaware of what constitutes their catalogues. A publisher was telling me last week of the case of an American composer whose royalties were sent by the British rights society PRS for Music to... Australia. There was a homonym Australian composer registered to Australian society APRA, but the British publisher (a major company) of the original composer had not even noticed the snafu since it was only a minor stream of revenues, which mattered to the composer, but was not big enough to fly over the radar of the publisher.

Where scale makes a difference is in the capacity to sign new songwriters. Independent publishers are squeezed out of the deals with the hot new composers and lyricists because they cannot compete with the cheque book. And that's why the big publishing houses tend to also be the publishers of the latest hit-makers.

Another publisher – who sold his company to... BMG – recently told me he had no plans to relaunch an independent publishing company and build it through acquisitions. The reason? “Money too expensive and sellers unrealistic.”

The wave of fresh VC money that fell upon music publishing has allowed companies like Imagem or BMG to grow significantly in a just couple of years, but has also created a rise in the value of catalogues and has almost shut the door to other publishers who were not as significantly capitalised (and also created a culture of selling assets since a lot of publishers prefer now to cash in while there is money and sell their assets).

The growth of BMG is certainly commendable if just for financial reasons (as is the acquisition of EMI Music Publishing by Sony/ATV), but it happened at the expense of market diversity. 

This concentration is extremely dangerous for the music industry's eco-system. There is a need for healthy small and mi-size music publishing companies to play the role of incubators of talent. There is a need for multiple sources of A&R development. And there is a need for some kind of level playing field in terms of investments.

[Typed while listening to a selection of Patti Smith's songs. That's one catalogue that is ageing quite nicely.]

1 comment:

  1. Hi Emmanuel
    Thank you for your feedback last night at City Showcase - I found your blog interesting - I wondered if you'd be interested in a bit of a story ?
    It's a bit of a Susan Boyle type fairytale:
    You may recall I mentioned I recently signed a deal to write the music for a book launch promo video and linked that to having a 16 yr old upcoming "star" from Ireland singing on the song, which she has now released as a single through Indie Label New Atlantic Records. The book promo has now gone to the Google recommended page due to high volume of hits in its first week and the presales of the book have sent it to the Amazon best seller list ( for at least 1 week) All sounds a little less ordinary and on the back of this I have been asked to write 4 more book promo songs, all of which will be released as singles and been asked to write more songs for the label roster in general..but what makes it really intriguing is the background behind it.
    For my own part, I discovered songwirting completely by accident at the age of 47 , after a 25 year management career in a totally unrelated industry , some 3 years ago and decided to go "full time " at it 2 yrs ago after losing everything I had in a bankruptcy; job, house, car, .. you get the picture. Even my blog ( grahamturnerblogspot) has around 12,000 hits and in that two years I have been offered 12 publishing deals, a management deal, have 8 indie cuts and a whole bunch of songs on hold with majors or for films. I've written with #1 hit writers in the states as well as a glttering array of testimonials form Grammy award winners and various collaborations with other less known award winning writers.
    The book author,Jennifer Lorent, was an architect in the US, only decided to write books after she went blind in one eye and lost partial sight in the other. She now has around 12,000 followers on Facebook. The artists, have some 10,000 + FB followers too and some have over 150,000 you tube hits.
    I was recommended to her after someone came to a city showcase in London that I was playing at and followed my songs on Facebook and soundcloud.
    I'm not sure where it will all lead, I'm still not sure how I came to become a songwriter in the first place but I'm certainly having a ball.
    My aim is to keep writing and I have just booked another month in America where I will be taking my "showcase" to NYC, LA and Nashville during November to see if I can consolidate my position so to speak.
    I'm not sure if this is the type of thing you'd be interested in?
    my website is www.gtsongwriter.com , which I'm actually converting to "themusicaviary.com" to give it more collective strength.
    I guess overall, what I'm demonstrating here is, despite my age, the state of the industry and the barriers to entry, you can still gain enough momentum if you have a story to tell and some sort of talent for writing good songs... even if it is slightly accidental.
    Here's my email if you're interested in an alternative view ; gturner2009@live.co.uk
    Best and thanks again for the critique.


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