Eamonn Forde identifies the 20 themes that defined a huge year in music publishing, from a pandemic-resilient acquisition market to an ever-evolving set of deals and investments.
1. The global pandemic changed everything
The devastating impact of the global pandemic has been felt across every aspect of our lives this year. It is the lens through which 2020 will be understood. In publishing, it had a profound effect on parts of the business that were relied on – from live shows and festivals being cancelled to TV and film productions put on hold, meaning synchronisation deals were mothballed – but it also shaped and directed artists’ willingness to cash in and sell part (or even all) of their rights. The pandemic did not create this “sell now” mindset – but it did accelerate a trend that has been building for years. What the pandemic has done is to give a whole new urgency to deals.
2. A blockbuster year for publishing sales closed with a blockbuster deal
“Money doesn’t talk,” sang Bob Dylan in ‘It’s Alright, Ma (I’m Only Bleeding)’, “it swears.” It is a quote that has chased his every business dealing since he first sang the line in 1965. Never one to be second-guessed, however, he pulled off the deal of the year (maybe even the deal of the century) by selling his entire publishing catalog of 600+ songs to Universal Music Publishing in a transaction that, while not public, has been estimated at anything between $300m and $400m. With live music on hold, the mythical Never Ending Tour that Dylan started in 1988 ground to a halt this year and, given he sold his archive to the University of Tulsa in 2016 for upwards of $20m, there was a sense of looming finality here – that he was cashing out when his stock was at its absolute peak. But it is always worth remembering that Dylan is a singular artist and this was a singular deal. Where Dylan leads, others might try to follow, but often with inferior results.
3. The boomer and post-boomer boom: Sixties and Seventies acts cash out
Dylan might have commanded the blockbuster headlines, but the deals happening this year show that acts that came up with Dylan or in his slipstream were also using the interest in buying rights to sell up a part or all of their catalogs. The viral impact of ‘Dreams’ being used by Nathan Apodaca on TikTok can only have benefitted Stevie Nicks’ stock and it coincided with Primary Wave taking an 80% interest in her publishing (the totality of which was estimated at $100m) to give it a renewed push in marketing and licensing terms. Other big deals this year included Debbie Harry and Chris Stein of Blondie selling 100% of the writer’s share and neighbouring rights (via SoundExchange) royalties from their catalog to Hipgnosis.
Musically pre-dating Dylan, however, was Ray Charles and his heirs sold a majority stake in his pre-1964 US publishing catalog to Primary Wave. In sharp and painful contrast to the Dylan sale, however, was David Crosby (whose first big hit with The Byrds was a cover of a Dylan song) saying that a steep decline in recorded music income (coupled with the inability to tour) forced his hand and saw him announce his plan to sell his catalog. He said the reason behind his decision was that “streaming stole my record money”, showing that some writers are selling not to avail of an investment boom but rather out of financial necessity.
4. Competition for catalogs has never been higher – and it is new entrants and indies driving this
Universal might have pulled off the single biggest deal of the year in terms of value when it bought the Dylan catalog, but it was the new generation of companies and powerhouse indies who were doing the biggest deals in terms of volume. There was barely a week that went past this year where Hipgnosis did not announce a significant acquisition or a new funding round to power even more purchases. It ended the year with a market cap of £1.25bn and is creating a new centre of gravity for catalog acquisition.
Equally, companies like Round Hill, Primary Wave, Downtown and Reservoir were all busy signing a flurry of deals this year. The major publishers, of course, were also buying up catalogs, but the core of their business was about signing and developing new writers. It is erroneous to think of the market in black and white terms of indies versus majors, but a handful of well-funded and highly prescient smaller players were busy setting a new agenda for the industry this year.
5. The new bidding wars make more writers less resistant to sell
The net result of more competition is that bidding wars become increasingly normalised. While some publishers argue they will step back if they see multiple interested parties circling around the same catalog, the reality is that, should they wish to grow their market size, they are having to enter bidding wars from time to time. The sheer number of deals Hipgnosis has done this year did not happen in a vacuum and the company is winning so many for two main reasons: it is often offering the best price; and, where it comes in as a partial owner of rights, is selling the best plan for the catalog’s growth.
That means that, across the board, deals that were based on single-figure multiples even as little as five years ago are (for the superstar acts at least) sailing well past 20x calculations. As these numbers sky rocket, writers who were hesitant about selling up are now understanding this might the best opportunity to sell in their lifetime. So more catalogs come into the market, more bidding wars ensue and then more writers start to warm to the idea and the virtuous circle (or vicious cycle, depending on where you stand) continues.
Deals that were based on single-figure multiples even as little as five years ago are (for the superstar acts at least) sailing well past 20x calculations.
6. Data allows for more precise bidding
It is not new (and there are still huge holes in the system), but the explosion of data around catalogs (specifically around streaming and the resulting mechanicals) makes the value of them much easier to pin down than was the case even a decade ago. As covered in our article in August, due diligence on an acquisition will involve looking at the streaming royalty statements for previous years and using that to model what income in the coming years could look like. This past earning is how the sale multiples are arrived at with higher levels of certainty and precision than in the past. How far up the sliding scale of multiples the buyer wants to go is, of course, a whole other matter (see point 5), but they can do so with incredibly precise data at their fingertips and not feel like they are taking a complete leap in the dark – as may have been the case when data took years, rather than minutes, to come through.
7. The touring hiatus has made writers think again about selling – or it has forced their hand
This is an issue specific to writers who are also performers, but the disappearing of touring (and touring income) this year has made many people think again about selling up (or selling part) of their catalogs. This has been the existential (and financial) conundrum of the year for many. Money they were banking on in 2020 and (it appears) at least the first half of 2021 has now gone and, in extreme cases as with David Crosby, they have no other option but to start to sell. Others, however, started to use lockdown to think about their professional lives and their estates (more of which below), seeing this as a way to ease themselves into a full (or even partial) retirement – getting a final (and hopefully significant) final payday or early pension that is a lot more attractive and certainly more valuable than a carriage clock.
8. Streaming as a pandemic-proof platform
In diametric opposition to the problems facing the live business, streaming has been generally unaffected by the pandemic. Streaming subscriber numbers continued to grow this year and the emergence of ticketed livestreaming as a genuinely mainstream activity – certainly for fans of BTS, Niall Horan and Dua Lipa to name just three – created a whole new revenue category. “You hear the words ‘non-correlated assets’ – meaning that if the economy goes down, music doesn’t necessarily go down as much as other types of income,” Alaister Moughan, founder of music consultancy Moghan Music, told Synchtank earlier this year. “In some ways, [the pandemic is] almost a test of that theory.”
He added, “Because of the nature of the royalties, people are always looking at wider forecasts rather than two- or three-year forecasts. There is a weird paradox that, oddly enough, is making this asset class more attractive because people are saying that non-correlated assets are quite important when stuff like this [the pandemic] happens. So in a weird way there is a positive spin to it.” In short, streaming has proven itself highly resilient in terms of overall industry income and that all will feed into how investors dissect streaming numbers when calculating their bids for catalogs. This has been one of the few shafts of light in a very dark year and will help define the shape of acquisitions in 2021 and beyond.
9. Beyond publishing: buying into recorded rights and more
As a market matures, so must it evolve. Buying up a cocktail of rights is nothing new, but it has all taken even more of a step forward this year. So alongside publishing rights, buyers are also increasingly looking to take a share of recorded music rights at the same time. Hipgnosis has done blended recording and publishing acquisition deals this year with the family and estate of Rick James. It also did a deal with Barry Manilow to buy up 100% of his worldwide recording royalties (excluding SoundExchange royalties). Meanwhile, Primary Wave has bought into the publishing and master income streams of rock band Disturbed and did similar hybrid deals with Air Supply and Devo.
This streamlining of assets makes things like synchronisation deals more straightforward if all rights can be cleared in one fell swoop – meaning that purchasers will be more able to put the catalog to work. It is not quite investing in all parts of an artist’s work – or an estate’s as Primary Wave has done in recent years with Whitney Houston and BMG has done with Buddy Holly – to cover recording and publishing alongside name, image, likeness and associated trademarks. There are still the sporadic deals happening here and there with catalog and associated rights, but just as 360-degree deals (or 270-degree if publishing was left out) for new artists was a trend in the early 2000s for record labels looking to offset the decline in CD sales, so this could become the next phase for investors here. The more rights they own, the more power in the market they can have. This all feels like a natural next phase.
The more rights they own, the more power in the market they can have. This all feels like a natural next phase.
10. Tax facts: the race to sell before tax laws change
Another factor in the plethora of sales here relates to a possible tightening of tax laws in the US that may be the result of the incoming Biden administration. A feature in Rolling Stone in November, just after the US election, made this issue clear. Under the Trump administration, the one-time capital gains tax that someone would have to pay after selling an asset was pegged at 20% of the sale price, but the sale of music catalogs (due to the way royalties flow) could have been higher than this. Suggested tax reform details on Biden’s campaign website proposed that capital gains taxes for sales of assets over $1m in value could be moved up to be in line with personal income tax – meaning that a capital gains tax of upwards of 37% could be imposed here.
There are a number of hypotheticals here: firstly, this was just a policy point and would have to be pushed into law, something that perhaps might not happen until a year or more into the Biden presidency; secondly, musicians set to land a significant windfall will surely avail of top-tier tax planners to lower what they might have to pay the government; and thirdly, it would only apply to artists domiciled in the US. Even so, this could be likely to spook those wavering on a sale to actually get it closed before any new tax laws are passed.
11. Writer-producers are as attractive as writer-performers when buying up rights
A Bob Dylan or a Debbie Harry will make the headlines when they sell part or all of their catalogs precisely because they are household names. But increasingly successful producers and writers – perhaps only known to A&Rs and artists – are proving to be major acquisition targets here. No ID (aka Ernest Wilson) sold 100% of his copyrights and publishing royalties to Hipgnosis in August, Darkchild (aka Rodney Jerkins) also sold assorted tiers of shares in his songs to Hipgnosis in July.
Brian Higgins had also done a major deal with Hipgnosis in January and in the same month Hipgnosis closed a deal with Emile Haynie. It was not all Hipgnosis here, with Primary Wave buying a majority share of the late Alee Willis’s publishing in September and Downtown Music Publishing buying the catalog of Chris Braide in December. Many of these names might not ring a bell with the general public, but the songs they had a hand in writing will and, really, that is all that matters here.
12. The deals are increasingly pan-genre
It might feel like classic rock from the 1960s/1970s and the enormous pop hits of the last decade have been the catalogs triggering the biggest bidding wars, but the headline deals being done are encouragingly across a multitude of genres. There has been funk (Rick James), hair metal (Nikki Sixx), hip-hop (RZA), classic pop and soft rock (Barry Manilow), pop-punk (Tom DeLonge from Blink 182), alternative rock (Johnny Rzeznik from Goo Goo Dolls), art rock (Devo), soul (Donny Hathaway, William “Mickey” Stevenson) and doo wop (Four Seasons). Eclecticism is all.
13. Four Seasons’ total landscaping: acquisitions give way to strategic partnerships
Talking of The Four Seasons, their deal with Primary Wave is in keeping with the latter’s moves to buy into a wider business entity that goes far beyond the publishing rights, meaning it can work a catalog in a variety of ways. Primary’s investment in the Whitney Houston estate is starting to feel like a template for the company to follow – buying into all her revenue streams so that they can be exploited concurrently. Primary Wave called the Four Seasons deal, signed in October, “a multi-million-dollar, ten-year strategic partnership” and said it would cover licensing, synchronisation, film and TV production as well as name and likeness rights. This is distinct from a 360 or multiple-rights deal in that there is a time limit on it (in this case a decade). It would be wrong to regard it as a halfway house to a full 360 buy out, but it is indicative of the types of deals being tabled now that go across all the IP associated with an act, even if it’s not one of permanent ownership.
It is indicative of the types of deals being tabled now that go across all the IP associated with an act, even if it’s not one of permanent ownership.
14. Entire publishers are being bought out
It was not just writers and producers that publishers were targeting this year in their buying sprees – it was also other publishers. Of course, major publishers only became major publishers by steadily acquiring other publishing companies and that did not slow down this year. Sony/ATV Nashville snapped up the entire catalog of River House Artists, a company that only opened its doors in 2016. Staying in Nashville, Reservoir bought up synchronisation specialist Sorted Noise’s entire catalog, covering publishing and recording.
In May, Downtown bought up Good Soldier Songs (whose marquee signing is The 1975). Also in May – and showing how Africa will be a major target for the music industry in the coming years – Downtown bought up Sheer Music Publishing, the biggest independent music publisher in the continent. “The rapid penetration of broadband services along with lower data price points makes the African continent a rising star in the music business of tomorrow,” said David Alexander, the MD of Sheer, on why investors and purchasers are flocking here. To top it all off, Hipgnosis acquired independent publisher Big Deal Music in October, forming Hipgnosis Songs Group in the process. “This is an important move in the evolution of Hipgnosis Songs in our ability to deliver on the promise of Song Management,” said Hipgnosis CEO Merck Mercuriadis.
15. Warner turns to Asia
It was not all about selling catalogs this year but was also about international expansion. Warner Chappell turned its focus heavily towards Asia this year. It began 2020 by finally settling its differences with Spotify in India – a situation that curdled at points in 2019 as legal shots were fired and bullish court cases dragged on – by signing a new global licensing deal with the streaming service. The major publisher also opened a new office in Shanghai, its second office in mainland China. “We’re committed to growing the presence of Warner Chappell Music in Asia, and our new office in Shanghai is a significant milestone on that journey,” it said in a statement. “There are so many exciting publishing opportunities in China, and we’re looking forward to better connecting local songwriters and brands with our global network.” We can expect things to pick up pace in the region in 2021 for all music publishers, not just Warner Chappell.
16. Data deals (1): buying a metadata analytics firm
Publishers will – in some cases begrudgingly – admit that they lag behind the labels somewhat in terms of the data tools they have at their disposal and how they use them. The major publishers, as they sit within major music organisations already, have a structural and investment advantage here, but Downtown pulled off two major deals in this space in 2020 that suggests where its ambitions for 2021 (and beyond) could lie. In 2019, Downtown bought digital rights management company AdRev (via its acquisition of parent company AVL Digital Group, which also included CD Baby) and in April this year AdRev bought metadata analytics company Simbals. As covered in a Synchtank blog post earlier this month, metadata is still something the industry as a whole (not just music publishers) is grappling with, but buying up specialists to fast-track your operations is a deft move and a way to get a clearer roadmap for the future.
17. Data deals (2): buying a distribution and tech services company
The Simbals deal came after an equally significant deal for Downtown at the start of the year when it acquired distributor and music/tech services company FUGA. “Following our acquisition of AVL, integrating FUGA is a natural next step for Downtown in developing businesses that support a more equitable and innovative music ecosystem,” is how Justin Kalifowitz, the CEO of Downtown Music Holdings, put it in a statement. FUGA and CD Baby under the Downtown roof gives the company whole new strings to its bow and indicates its bolder ambitions far beyond copyrights. As the major labels start to see themselves more as broader entertainment companies and each have their own distribution arms, so what were once straight publishing companies are looking at new ways they can evolve as well as the types of rights they are acquiring. All of this means they are starting to think of themselves as something approaching full-service operations.
18. Data deals (3): writer portals mean transparency will become a selling point for publishers
Last year we wrote about why data apps for publishers should be a bigger priority, citing what AWAL as well as DSPs like Spotify and Apple Music have done for writers to help them track their digital earnings. In February, things moved up a gear when Universal Music Publishing launched a new portal that it said would provide “unparalleled earnings data, insights and analytics” for the writers on its books. This arrived just before the pandemic and the fact that it offered the option of “no-fee advances based on both current period earnings and international pipeline earnings” to writers will have proven a lifeline this year for those who saw revenue streams suddenly dry up. This was sheer serendipity, of course, but greater transparency and flexibility for writers is something that needs to be built on and become the norm. Things like UMG’s move here are encouraging signs that this is all happening at pace.
19. Buying into podcasts
Spotify, Deezer and Apple Music have all been investing heavily in original podcasting content and/or buying up podcasting production companies as a means to hold listeners on their platforms while also extending the range of content they offer. (They are less afraid to do podcast exclusives than they are to do album exclusives as this comes with fewer combustible politics.) The labels too are setting up podcasting teams to help them surf this incredible wave. And now publishers are looking to stake their claim in this expanding market.
Primary Wave Music Publishing taking an equity share in podcasting studio Audio Up in May feels like a sign of where things will go in 2021 as publishers see not only the investment potential here but also the promotional and licensing potential. They can easily clear music rights they own for use in the podcasts they own (or have a stake in). Add in their investments in production music (and podcasting’s need for easy and affordable music clearance) and it all starts to look like a perfect storm for publishers. Or maybe we should start calling them “podlishers”?
20. Sell in haste, repent at leisure?
There is a lot to entice a writer into gathering all their assets together and selling to the highest bidder, enjoying a final (and glorious) payday. But there are both economic and emotional issues at play here that could – in some cases – see a sale become a bitterly regretted action. The story of Paul McCartney’s frustration in not outbidding Michael Jackson for ATV Music (which contained pretty much all the Lennon-McCartney songs) in 1985 is well known. Artists often talk about their songs as being like their children and sometimes they regret handing them over, regardless of the size of the cheque.
“I don’t know a single person that has sold their catalog that hasn’t eventually regretted it,” said Randall Wixen of Wixen Music Publishing in an email to industry commentator Bob Lefsetz about the Bob Dylan catalog sale. “I always try and talk clients out of selling, and when they ignore me I feel more comfortable in making them an offer […] As a person who has built a career out of protecting creators, it just kills me to see people selling their lives’ work in this manner.” Maybe some writers entering the autumn years of their lives may not care, but those with potentially decades still ahead of them might eventually curse themselves for giving in early and taking the money.
