Music Publishers Are Driving A Full Stack Music Revolution
As the value of music publishing catalogs have multiplied, so have the ways in which forward-thinking companies like Downtown, Round Hill, Kobalt, ole/Anthem, Primary Wave and Create Group monetized those catalogs, says MiDiA entertainment industry analyst Mark Mulligan.
Guest post by Mark Mulligan of MIDiA from the Music Industry Blog
Music publishing catalogs are gaining momentum fast as an asset class for institutional investments, with transactions ranging from large catalog mergers and acquisitions (M&A) through to investment vehicles for songwriters’ shares such as the Hipgnosis Fund and Royalty Exchange. Since 2010 the number of publicly announced music catalog transactions – across recordings and publishing – totaled $6.5 billion, with a large volume of additional non-disclosed transactions.This growing influx of capital has implications far beyond publishing, however, as ambitious publishers are using the access to debt and investment to reverse into the recordings business.
Streaming, the change catalyst
As with so many music market shifts, streaming is the catalyst for these changes. Streaming represented 27% of publisher revenues in 2018 and is set to near 50% by 2026. However, songwriter-related royalties – incorporating publisher and CMO payments – from streaming are less than a third of what labels get. Small-but-important increments such as the US disputed mechanical royalties rate increase are a) difficult to push through, and b) will not get publishing royalties to parity with label royalties. This means that publishers will underperform compared to labels in the fastest-growing revenue stream. The alternative is a ‘if you can’t beat them, join them’ strategy.
BMG Music Rights and Kobalt set the precedent with label services divisions alongside their publishing businesses, enabling them to play on both sides of the streaming equation. Now a wide range of publishers, both traditional and next-generation, are expanding their non-publishing businesses. – from ole/Anthem buying production music companies Jingle Punks and 5 Alarm Music, through Reservoir Music buying Chrysalis Records to Downtown buying CDBaby parent AVL. All have the common theme of publishers diversifying away from their core businesses to ensure they compete across a wider strand of the music business value chain.