Since 2020, more than a few companies have paid bloody sums for song rights, with multiples savaged and billions thrown away. But now, following deals with some of music’s biggest names, the catalog sales boom may be cooling off.
It’s no secret that the past 27 months or so has delivered a string of high-profile catalog sales, including, but certainly not limited to deals involving the work of legacy acts like Bob Dylan, Bruce Springsteen, David Bowie , Sting, Alice in Chains, Fleetwood Mac, Neil Diamond, James Brown, the Red Hot Chili Peppers, Paul Simon and the Beach Boys.
On the heels of these high-profile deals, the first quarter of 2022 seemed to usher in something of a pivot to music IP from relatively young acts, with Swedish House Mafia, Killer Mike, Jason Aldean, Luis Fonsi, Murda Beatz and Bryson Tiller. cash in on their catalogs during the three-month period.
In addition, companies ranging from major labels to investment firms got into the song rights action, and earlier in the year catalog appraiser Massarsky Consulting was sold to Citrin Cooperman.
However, the multi-year catalog sales trend may be coming to an end, according to reports The Wall Street Journal and Bloomberg.
In a recent article titled “Music Fans Drown the Fed,” the former outlet pointed to the possibility that catalog investors could “change their tune” as the Fed continues to hike rates. Amid unprecedented inflation, JPMorgan Chase CEO Jamie Dimon expressed his belief that upcoming rate hikes “could be significantly higher than markets are expecting.”
“As the capital to purchase music catalogs becomes more expensive, the royalty returns will inevitably not be as attractive,” reads the WSJ article on the subject, also acknowledging the double-digit growth of the music industry at large and emerging markets in particular. “For now, however, enthusiastic music fans are keeping catalog ratings on a high note.”
Bloomberg developed the idea, stating, “Higher interest rates, inflation, and a war in Ukraine have forced future [catalog] buyers to be a little more cautious, according to a dozen people involved in music trading. Financial institutions like Blackstone and KKR are also showing a bit more restraint than some of the other buyers.
Additionally, the publication also cited Concord’s seemingly stalled sale talks – reports from October 2021 relayed that the company’s owners were considering takeover offers – to illustrate the possible chill in the catalog sphere. . Several private equity firms and one of the major labels have expressed interest in the company, which turned down offers of $4.5 billion and $5 billion, according to the same source.
Going forward, with catalog releases (referring to tracks that debuted at least 18 months ago) accounting for three-quarters of music consumption in the United States, it will be interesting to see whether sales song rights decrease in quantity and/or value. Of course, several artists have been open about the financial difficulties they faced before selling their work.
The aforementioned increase in music industry revenue is worth considering on this front, as is the fact that BMG’s parent company – which has catalog deals with John Legend, Tina Turner, ZZ Top and Mötley Crüe – said in its earnings report. last week: “BMG is focused on growth by signing new contracts with artists and authors, in particular the acquisition of music rights and their monetization.”
Finally, even if investors start investing less capital in music IP, the corresponding decline in catalog sales will likely take some time, given ongoing negotiations and unspent billions that Warner Music Group and BlackRock, Kobalt and others have already booked song rights.