Music publishers today – The greatest job in the music industry?

by Emmanuel Legrand

(This piece was initially written for Midem's blog)

Don’t tell my mother I am a music publisher; she thinks I'm a pianist in a brothel. Or so went the joke in the 1980s.

Once derided as the least interesting (read “unsexy”) sector of the music industry, music publishing has been subject to a significant re-appraisal in recent years with growing appreciation for its contribution to the music food chain, and with increasing interest for the various aspects of publishers’ activities.

As it happens, Music Publishers’ Associations around the world report a surge in new companies, with new entrants of all types, from the strongly financed players such as Imagem (backed by the Dutch pension fund) or BMG Music Rights (operated by Bertelsmann and financed by equity fund KKR) to the one-person operations. All this activity suggests that if the recorded music business is shrinking, the publishing side is as buoyant as ever and attractive to investors and entrepreneurs.

The positive state of the business is confirmed by the good performances of the music publishing arms of all four majors – EMI Music Publishing, Universal Music Publishing Group, Sony/ATV Music Publishing and Warner/Chappell – and by the overall good financial reports from the main authors’ rights societies (see CISAC’s 2009 annual report, showing a return to growth with collections worldwide topping €7.2 billion, despite a significant drop in mechanical revenues).

It is quite telling that one of the main management changes at the top of one of the four majors in 2010 saw the promotion of an executive from the music publishing side – Roger Faxon, now CEO of EMI Group, and who made most of his career at EMI Music Publishing.

In his organisational memo to employees sent a few weeks after his appointment, Faxon said he wanted the company to focus on two areas, one was A&R, as he knows that without a proper roster of contemporary acts, EMI would be nothing but a catalogue company, and the other was shifting the recorded music business from one of selling products to one of services, in order to create a true global rights management company for the 21st Century.

Faxon’s semantics are certainly a product of his music business upbringing, because, overall, music publishers are at the crossroads of two of the most important aspects of the music business touched upon by Faxon – A&R and deals.

On the A&R side, music publishers know the importance of good songs – that’s the backbone of their business – and they are usually the ones who nurture the relationship with songwriters and performers from the start. They are also in there for the long haul. Artists may be dropped by labels; they rarely lose their publishers. At an industry panel a few years ago, a songwriter/performer explained to the audience that while he had been a recording artist for most of his career, he was label-less and did not see it as a hindrance as he had kept solid the relationship with his publisher and managed to secure, through his publisher, significant streams of revenues.

One of the reasons publishers and authors seem to get eye to eye on a long-term collaboration is that publishing deals with songwriters are more balanced financially for everyone. For sure, there are sometimes big advances, but nothing of the sort you’d see on the recorded music side, which tend to put undue pressure on acts and on labels in order to recoup. As a result, the relationship between publishers and songwriters is far more stable. Publishing deals can be recouped quite easily (sometimes a good synch could do the trick), and everybody can benefit from it.

In addition, if you consider that labels tend to finance less and less artists’ recordings, that role is now also often fulfilled by publishers (which in turn gives them both master and publishing rights).

All publishers will tell you that there is something eminently pleasing in picking up the financial rewards for their efforts, but they have an even bigger sense of elation when they see one of their protégés reaching success. And sometimes it comes after long years of underground work, multiple recordings of demos, songs written and re-written.

You often hear publishers highlighting the talent of their new signings, only to see them getting commercial viability and media visibility years later. French publisher François Millet signed young songwriter/performer Jena Lee to his publishing company Vital Song on the basis on a demo he heard when she was 14 in 2001 and waited until she had the right songs to cut an album. Eventually, in 2009, her song ‘J’aimerais Tellement’ topped the French singles charts for 11 weeks. Millet knew he had to wait for her to be ready, and provided her with the proper environment to let her songwriting skills blossom.

This type of timeframe is usually unheard of in the recorded music business. Labels do not have the interest, nor the patience to wait that long. Publishers know that time is of the essence in this business.

On the deals aspects, publishers have been making licensing deals since the dawn of times. That’s their bread and butter. And no deal is too small for publishers, as they also know that it’s a “crumbs” business, to use the terms of Sony/ATV chairman/CEO Marty Bandier.

For newly established publishers, getting a kick-start in the business can take some time. You have to build a relationship first with authors before being able to earn revenues from their works. However, publishers do not necessarily need thousands of tracks in their catalogues before they can generate cash flow. Last year at MIDEM’s International Music Publishing Summit, Canada’s Patrick Curley of Canada’s Third Side Music, suggested that the first thing to do for any music publishers to “mine the hard drives”.

Basically, he was inviting publishers to dig into their composers and songwriters’ hard drives and check for embryonic songs, unfinished instrumental pieces, musical loops, etc on the basis that even a five seconds piece could find a use somewhere. That’s typical of a music publishers’ mentality – nothing in itself should be discarded on principle and anything could be used and licensed.

Curley also added that for most publishers, and especially young ones, any deal is better than no deal at all. If there is a sync deal available and it only pays $300, just take it (of course, only if the terms are reasonable). And then multiply the deals. It requires to be driven and to search for opportunities, but this is part of today’s requirements for any publishers.

The playground for publishers has expanded with new licensing possibilities that have significantly broadened the scope for deals. At last year’s Summit one publisher explained how lyrics could be a growing source of revenues, including by licensing lyrics on mugs, while another stated that partnering with brands could deliver hefty returns.

Publishers tend to boast that the great thing about their business is that it covers so many aspects that there is little chance to get bored. It certainly is. And by the simple virtue of this diversity, and from their ability to make the best of the current environment, music publishers are back at the heart of the music business, like they were a century ago. Who said that music publishing was unfit for this century?

In other terms, it is now sexy to be a publisher and it is no wonder why many young aspiring executives chose to start in this field.

Time to tell your mum about your real job!

Day 1 at Midem -- The cloud, Vivendi, a global database and Barnier

by Emmanuel Legrand

A review of things that happened, were seen or heard today in Cannes at Midem, the music industry’s annual trade show and conference.

MidemNet:

The digital music conference offered its usual mixed bag of good and interesting (and sometimes off-base or boring) stuff about the state of today’s digital music business. There were a few inspirational speeches (Terry McBride, Saul Klein, Mark Mulligan, Tim Schaaff), a little bit of politics (European Commissioner for Internal Market Michel Barnier) and some showbiz attitude (French DJ David Guetta).

Most of the contributions focused on the notion that the online and mobile worlds offer lots of opportunities to artists to get known, build a fan base and to expose their music, but there were still very few avenues to make money in the digital eco-system.

It’s frustrating to hear that ten years after the launch of Napster, we are still talking about new business models and monetisation, while only a few services seem to be able to break even, and digital revenues seem to have reached a plateau, according to figures released this week by the IFPI.

Many sessions were offering hopes (yes, there are tools at the disposal of artists and labels) and cold showers (but no one has found ways to really make money from them).

Several discussions focused on the cloud and the shape of the said cloud (and its benefits to the music industry) remains an even bigger question mark. How can it be monetised? And how do you make it legal? And as usual, no one seems to have the answer!

There were also a few positive announcements. For example, Vodafone has registered over 100,000 people to its paid music subscription service in the UK, with a target of a million by the end of the year, according to Vodafone’s content services director Lee Epting.

Meanwhile, Sony Network Entertainment president Tim Schaaff announced that Sony’s Qriocity project, which will allow content to navigate across all of Sony’s consumer devices (350 million of which are available in the world) is starting to take shape. He said that Sony’s Music Unlimited, which launched in December in the UK and Ireland, was now available in France, Germany, Spain and Italy.

Reports on MidemNet can be found on Music Ally’s web site.

Jean-Bernard Levy

In his MidemNet keynote, France’s Vivendi CEO was very casual and open in his responses to the soft questions put to him by FT chief media correspondent Ben Fenton. Yes, he said, the music business is down but Universal Music Group has always provided the profits expected, usually in the region of 10% year on year. Even for a challenging 2010, the leading music company in the world should post a two digit profit rate. As a shareholder, Levy says he is satisfied with UMG’s performance and has re-asserted that music is “key” to Vivendi. “We are very happy to own and operate UMG,” said Levy. That should come s a vote of confidence for Lucian Grainge who took over from Doug Morris at the top of UMG.

Another interesting topic touched upon by Levy is his faith in the growth of the music business in emerging markets like China, Brazil, Indonesia, etc. He believes that, mostly thanks to mobile phones, these countries will add lines to the bottom line where there was nothing before. 

Francis Gurry

The director general of Geneva-based World Intellectual Property Organisation Francis Gurry has positioned his organisation, in his MidemNet keynote speech, as the potential depository and operator of one of the hottest potatoes in the music industry: the Gobal Repertoire Database. This Babylonian project consists in creating one single database for all the music works, listing the various rights owners for each work. The GRD is believed to offer greater fluidity for the digital market in enabling works to be identified and rights owners to be remunerated. Gurry invited the industry to gather at WIPO to discuss the issue. It is the start of a process, but it remains to be seen if a consensus could be reached on the GRD when so many stakeholders have conflicting views on how to get there.

Michel Barnier

For the European Commissioner Michel Barmier, in charge of Internal Market, and thus overseeing intellectual property issues, MidemNet was the opportunity to outline some of his views regarding some crucial issues for the industry such as copyright legislation, collective rights management in the single market, and the development of Europe’s digital economy. He confirmed that his department is preparing a Directive on collective management that will be presented for discussion this spring. He said this piece of legislation should ensure a more fluid system that would help develop a true single European digital market. Barnier did not give any details of the proposed Directive, leaving many, especially rights societies, in the dark about his real intentions. Without any doubt, this initiative will focus the attention of many stakeholders for the months to come.

Quotes from MidemNet speakers:

“Music in the digital age is ones and zeros. Lots of zeros.” – Terry McBride, founder, Nettwerk

“In five years from now, downloads will be over, or at least generational… People will be pulling music from their smart devices, and they will consume the music that way. They won’t own it, they’ll just pull it.” – Terry McBride, founder, Nettwerk

“What bits of EMI would I like to pick up? Not the debt! But if some artist contracts are up for renewal, we’ll take our chances.” – Jean-Bernard Levy, CEO, Vivendi

“In the music industry, the model is so badly broken that there is a lot of pressure on artists. They do feel they have to rise up to the expectations and replace what has been lost and I do not this is a reasonable and meaningful expectation.” – Eric Garland, CEO, BigChampagne

“Music’s got to be available whether it’s audio or video across all these devices. We need to get to complete ubiquity.” – Ted Cohen, founder, TAG Strategic

“Our studies show that about 85-90% of the consumers aren’t really involved in the digital music revolution at all.” – Tim Schaaff, president, Sony Network Entertainment

“Digital is just not working at the moment. Music products don’t yet meet consumer demand, and that is the crux of the problem.” – Mark Mulligan, analyst, Forrester

Fred Goodman takes on Edgar Bronfman in 'Fortune's Fool'

By Emmanuel Legrand

For anyone in the music industry, a new book by Fred Goodman is a must-read book.

Fred Goodman

He is part of a small club of writers who have documented the evolution and changes in the modern music biz and portrayed with talent its powerbrokers. 

The senior member of the club is Fred Dannen whose ‘Hit Men: Powerbrokers and Fast Money Inside the Music Business’ (Vintage), published in 1990, remains to this day the reference upon which all the other books about the music industry are judged. It combined impeccable research and amazing access to sources with a rare narrative talent. (BTW, how long will it take for Hollywood to turn ‘Hit Men’ into a TV series?)

Another brilliant piece of writing was Fred Goodman’s 1998 book ‘Mansion on the hill: Dylan, Young, Geffen, Springsteen and the Head-On Collision of Rock and Commerce’ (Vintage), in which the American journalist described the rise and rise of a new generation of executives, managers and artists who would re-define the music industry in the 1960s and 1970s and turn what was a cottage business into a global, multi-billion dollars industry.

While Dannen has switched his interest to other industries (Hong Kong, the film industry and the triads!), Goodman has continued to cover the music business. And few people have better documented the transformations of the global music industry than him. With his extensive knowledge of the industry and his ability to access people “in the know”, he has been dissecting the global music industry woes and exposing in details its colourful characters.

He has just added a new chapter in the ongoing saga of this industry with ‘FORTUNE’S FOOL: Edgar Bronfman Jr., Warner Music, and an Industry in Crisis’ (Simon & Schuster). In his latest work, he turned his attention to the heir of the Seagram fortune who so desperately wanted to make it in the music and entertainment industry, first with Universal and later with Warner Music, and whose business acumen has been seriously questioned when he merged Universal with France’s conglomerate Vivendi.

Goodman had access to the main sources, including Bronfman himself. What he pictures is not only the life of a failed songwriter who could have spent his life playing golf while other would have managed his portfolio, but who instead decided to prove the world that he was a cutting-edge businessman and a money-maker. And while doing so, he fully dismantled the family business, built on booze, invested heavily in the entertainment biz by buying MCA and then PolyGram, and almost sank it by merging with Vivendi.

Bronfman’s reputation was in tatters after Vivendi Universal nearly collapsed, brought down by the ‘reves de grandeur’ of its CEO Jean-Marie Messier. To his credit, Bronfman was the one who contributed to oust Messier, but the damage was done.

Anyone going through such times would have probably retired on some Aventine Hill and played golf for the rest of his life. But not Bronfman, who chose to come back, once again, by investing his money and others in the music biz. He bought Warner Music Group in 2004 and since then has been busy re-building his reputation as an entrepreneur and manager.

The book starts with a great paragraph that grabs you: "Edgar Bronfman Jr. is famous for two things; one annoying and the other unforgivable. The annoying thing is that though he was born rich as Croesus, he has opted to work hard every day. The unforgivable thing is that he managed to lose $3 billion while doing so."

And that’s the main conundrum faced by Goodman – how to make this guy that we’d like to love to hate not so hateable. And in some ways he manages to do so because Bronfman does not come across as pretentious or up his arse with his money. But at the same time he does not come across as someone very interesting either (as many commentators and reviewers of the book said, the most interesting character in the Bronfman galaxy is Lyor Cohen, who runs Warner’s recorded music division, and could easily be a character from the Sopranos…).

There are some great moments in the book when Goodman describes behind the scenes battles for the control of MCA, Universal Vivendi or Warner. But there is always the question of why he does it.

It is hard to feel empathy for someone who, as stated by Goodman, not only has decided to work when he couldn’t, but on top is not the boss in his own house – Warner. There is a killer quote from one of his financial backers, stating, “The deal with Edgar is, he does a good job or someone else comes in to do a good job.” Not the warmest of all endorsements, and why, with all the billions on your bank account, do does he have to put up with these kind of comments?

In the end, the Bronfman described by Goodman remains a mystery – it is hard to understand what motivates him, and what is his goal in life. And as far as business is concerned, the verdict is still open. Warner manages to survive, but just about.

The book ends on a reference to Atlantic’s co-founder, the great Ahmet Ertegun, who exemplifies a world that has ceased to exist, but who played a vital part in building the Warner that Bronfman now runs. That same Ertegun once described Bronfman as “a snot-nosed kid who used to knock on my door in the Hamptons with bad demos saying, ‘I want to be a songwriter’.” 

Maybe that’s the answer to the mystery – Bronfman will never be a talented songwriter, and he probably knows it. Life’s a bitch, isn’t it?

PS: Do not miss Fred Goodman’s keynote Q&A session with your truly at Noordeslag in Groningen on Friday, 14 January 2011 at 1.30pm. Expect an hour full of revelations, provocative views and entertaining anecdotes with one of the music industry’s foremost chroniclers. A must-see session!