The single biggest story of the year in music was unquestionably the rolling and roiling developments around artificial intelligence. As such, we have covered the major developments there in a standalone piece.
Here we focus on other, but no less significant, developments throughout the year.
Center forwards: the new era of user-centric payments
The calls to move away from a pro-rata model for streaming royalties towards a user-centric (or artist-centric, as the exact terminology has not yet been set in stone) have been building for years.
SoundCloud was the first DSP to officially move here, back in 2021, calling it “fan-powered royalties”, the phraseology being important as it was positioning the consumer front and center.
Deezer was pushing to implement something similar as far back as 2019, but label hesitancy (or outright opposition) was stopping that from happening, the issue being kicked again and again into the long grass.
Then came the breakthrough.
In September, Deezer announced it was working with Universal Music Group (UMG) “to implement an artist-centric streaming model to better reward artists and music, while enhancing fan experience”. The trial started in France in Q4 2023 ahead of a planned global roll out (exact date still TBC). Part of the deal was to demonetize “non-artist noise audio” (i.e. white noise playlists, with Deezer creating its own royalty-free alternatives) and crack down much harder on fraudulent uploaders of content.
Within this, acts with fewer than 1,000 streams (and 500 unique listeners) a month would have to forgo royalties, but those above that threshold would get a “double boost” on the service as would tracks and artists actively sought out by listeners (i.e. not passively consumed on algorithm-powered playlists).
This move, initially involving only the biggest company in recorded music and publishing, was not met with applause across the business. Key independent labels quickly voiced their concern about this deal being done without their involvement or without sufficient transparency on the deal terms.
The following month, Deezer announced it was extending beyond recorded music rights and into publishing, revealing that Sacem in France was collaborating with it “to explore the artist centric monetization model for publishing rights in music streaming”.
Despite the indie labels’ concerns, the dominos had started to topple.
In late October, mere weeks after confirming the Deezer deal, UMG stepped forward with news of an even bigger deal: this time a global one with Spotify, the biggest subscription DSP in the market. The stakes had been dramatically raised. And the clauses within the deal were decidedly more complex and controversial.
The scheme will roll into operation in Q1 2024 and was dressed up in robes of egalitarianism by UMG, with much talk of “ensuring that real artists with real fan bases are fairly rewarded for the platform engagement they drive” (our emphasis on the key words in bold).
As with Deezer, royalties would not kick in until a listening threshold was reached, with estimates that this would affect 05.% of Spotify’s royalties pool (and be shared across the remaining 99.5%). Distributors and labels trying to game their plays would also face financial penalties. Plus there would be the “introduction of a minimum length of play-time that each non-music ‘noise’ track must reach in order to generate royalties”.
In early December, European indie trade body Impala raised its hand and outlined its many concerns, as gathered from its membership, with the UMG/Spotify deal. It demanded a pause on the scheme’s implementation until all its questions could be answered.
Key among the questions were: how reallocation of royalties from any acts could justifiably be implemented across the board; if it could be an “opt in” system; if acts demonetised for not hitting 1,000 streams would get compensation in the form of double royalties if they passed this 1,000-stream threshold – up to 2,000 streams; greater transparency to “assess whether the reform’s effects are fair and equitable”; clarification on how this would affect publishing as well as recorded rights; how smaller and emerging acts could be better supported rather than penalized here; and if regulators had been involved in discussions about the pragmatics and implications of the scheme’s implementation.
Related to the publishing issue, Amelia Fletcher, professor of Competition Policy at Norwich Business School, called the sub-1,000 streams demonetization move not just “intrinsically unfair” but “also anticompetitive and [something that] seriously risks constituting an abuse of dominance under UK and EU competition law”. She added that “any demonetization of songwriting rights [could] be illegal under copyright law”.
In a blog post in mid December, Spotify did clarify that publishing royalties would not (for now) be affected (“This eligibility calculation only applies to recording royalties”). It also added that banking charges can negate small royalty payments. “There are significant operational expenses and liabilities taken on by distributors to collect and pay out royalties to artists who use their service,” it said. “Understandably, music distributors typically charge artists a banking fee to withdraw earnings (usually $1-$20 per withdrawal) and have minimum amounts required for withdrawal (usually $2-$50).”
It added, “On average, tracks with under 1,000 annual streams on Spotify are generating $0.03 per month. This money often never reaches the uploader because it doesn’t hit the minimums and fees that would make it worth withdrawing, meaning — in aggregate — significant money is wasted or forgotten about.”
Mere weeks away from its promised implementation, there has been no formal response from UMG or Spotify to the bulk of the Impala-led criticisms and concerns their joint move has provoked. Spotify did caveat “[a]ny change to the royalty system on Spotify requires broad buy-in from our licensing partners” and that implementation is planned for “early 2024” but would be no more specific than that.
Regardless, it is clear that the issue of user-centric (or artist-centric) payments will become a new contested terrain next year.
The shape it could take might be different, but its mass implementation in some form seems inevitable in 2024.
Back for good: artists getting their rights back (or blocking the sale of their rights)
The boom time for catalog sales did not slow down in 2023, with plenty of blockbuster deals being done (see section below); but this year saw an interesting new dynamic enter the space, where acts moved to get their rights back or even block their rights being sold on.
In November, it was reported that Dua Lipa had bought back her music publishing rights from TaP Music Publishing (with the star having left TaP Management in early 2022). Neither side offered any more details on the terms of the deal (or the price of the deal), with TaP merely saying “[w]e wish Dua all the best for the future” and then adding that it was “expanding our services and teams globally and continue to add talented writers and artists to our already stellar roster”.
Perhaps Dua Lipa is something of an outlier here, but alongside acts like Taylor Swift doing deals whereby they still own their recording masters, a new generation of writers and recording artists is being educated about the power and independence that can flow from owning, or at least having the option to own, their own rights.
In a slightly more altruistic move, acts linked to Bad Boy Records were given back their songwriting rights in September. The BBC reported that the move was about “giving back to the people who helped build [the] company” rather than selling off the rights to a third party. As with the Dua Lipa deal, details remain thin on the ground, but this will surely prompt other writers tied to other companies to wonder if something similar should, or even will, happen to their rights.
One derailed deal that has found itself under immense industry and media scrutiny is that relating to the partnership between Hall & Oates and their music rights.
It began when Daryl Hall filed a restraining order against John Oates in late November. Slowly details emerged. Hall called it the “ultimate partnership betrayal”, accusing Oates of breaching their business partnership by seeking to sell half of their Whole Oats Enterprises to Primary Wave. That joint company controls their trademarks, likenesses and recorded music royalties, but not their publishing.
The judge in the dispute put a block on any sale until the two parties go through arbitration. The dispute shows just how precarious deals involving multiple partners or writers can be and why more robust due diligence to look into such sticking points will define the deals through 2024 and beyond.
This issue of due diligence and derailed deals was also laid bare in the story around Rod Stewart and his scuppering of a deal with Hipgnosis Songs. At the end of May, the singer revealed that, after two years of negotiations, his plan to sell his song catalog to Hipgnosis was now off the table.
“This catalogue represents my life’s work,” said Stewart in a statement that left little to the imagination as to what went on behind closed doors in those two years of negotiations. “And it became abundantly clear after much time and due diligence that this was not the right company to manage my song catalogue, career or legacy.”
It would be wrong to see these developments as foreshadowings of trends that will take over the catalog acquisition sector next year; but equally it would be wrong to suggest these developments will not affect the temperature of the catalog acquisition sector next year.
We are selling, we are selling…: blockbuster sales continue apace
When huge names like Bruce Springsteen, Paul Simon, Sting, Phil Collins/Genesis, Neil Young, Bob Dylan and the David Bowie estate were selling (all or parts of) their catalogs for astronomical sums of money, it was suggested that we had hit Peak Deal as all the enormous catalogs that could be bought had now been bought.
There were still plenty of mega-deals happening this year, a blend of the legacy and the contemporary showing how newer (or relatively newer acts) are prepared to sell up and how catalog acquirers are recalibrating what constitutes deep catalog now.
Leading the pack was Katy Perry selling her stakes in master recordings and publishing rights for the five albums she released between 2008 and 2020. The buyer was Litmus Music and the price tag was estimated at $225m.
Not to be outdone, Justin Bieber sold his publishing (and writer’s share) as well as his master recording rights and neighboring rights for his catalog of 290 songs to Hipgnosis. The deal, while not made public, was for a reported $200m.
In a “nine-figure deal” (so in the hundreds of millions), Enrique Iglesias sold his pre-2021 masters rights (so nothing from his Sony deal) as well as name, image and likeness rights to Influence Media Partners. He did, however, announce that his next album, due in 2024, will be his last.
Influence Media acquired the publisher’s share of the song catalog of Tyler Johnson, best known for his co-writing work on the first two Harry Styles solo albums as well as songs by a variety of acts including Sam Smith, Keith Urban, Miley Cyrus, John Legend and Diplo.
On the writer theme, Hipgnosis Song Management acquired the song catalog of songwriting and production team TMS (Tom ‘Froe’ Barnes, Benjamin Kohn and Pete ‘Merf’ Kelleher) who have written with/for acts such as Lewis Capaldi and Jess Glynne.
The Christine McVie estate sold her share of Fleetwood Mac’s recorded music royalties to HarbourView in October, but deal terms were not made public. This followed Hipgnosis Songs Fund buying her 115-song catalog in 2021.
HarbourView also acquired a share of a “select” number of recorded music and publishing assets from both Pat Benatar and Neil Giraldo (Benatar’s long-standing musical partner). Terms were not made public nor were the names of the specific songs involved in the deal.
Another major purchaser this year was Iconic Artists Group which bought up “a controlling interest” in the sound recording and publishing interests of Graham Nash alongside his name, image and likeness rights. How much the deal was worth, or how big that “controlling interest” is, were not revealed.
Finally of note, Reservoir Media bought both the recorded music and publishing rights of jazz saxophonist Sonny Rollins, which stretches back over 70 years.
With major acquisitions going back to the 1950s and including writers and artists who have only begun chalking up hits in recent years, the catalog world is still attracting plenty of deals.
If 2024 can produce deals in the hundreds of millions (as with Bieber, Perry and Iglesias this year) remains to be seen; but significant bets are being made on relatively recent hits and this suggests a new center of investment gravity is slowly emerging to help take this sector into the next phase of its evolution.
Are you being served?: developments in label services
Beyond the signing of deals or renewal of deals with labels, there were a number of key developments in the world of label services, ranging from expansion to very different types of acquisition.
Firstly, Believe acquired Sentric in March in a deal that valued the latter at €47m. It was a somewhat surprising deal given that Sentric had been acquired by Utopia in 2022, but the mounting troubles being faced by Utopia suggested selling off assets was increasingly looking more like a matter of when rather than if. “The acquisition of Sentric is the first step for Believe in the roll-out of a global and comprehensive publishing offer,” said Denis Ladegaillerie, founder & CEO of Believe, in a statement after the completion of the sale. “The growth and digital transformation of the songwriters’ market is opening up many opportunities.”
Secondly, AWAL expanded its footprint in India and South Asia through the acquisition of local player OKListen. The deal saw OKListen’s founder and CEO, Vijay Basrur, appointed as AWAL’s Head of India & South Asia. Given the growing importance of the Indian market for music – coupled with the fact it is now the most populous country in the world, recently overtaking China – this is a critical move for AWAL in terms of preparing for the future of the music business and how certain markets will experience a strong growth curve for years to come and, in doing so, create whole new centers of power for the digital music industry.
Finally, and related to Utopia’s snowballing woes, Absolute Label Services’ leadership team moved in July to regain ownership of the company. Utopia had acquired Absolute in early 2022. “In line with this refined focus, and in an effort to ensure the continued delivery of exceptional services in all aspects of our business, we believe it’s most beneficial for the Absolute team, led by founders Henry Semmence and Simon Wills, to reacquire the company,” said Utopia in a statement.
It was, in that sense, quite an unusual year for label services, where a company buying up operators in 2022 was struggling to handle its own growth issues in 2023 and so had to sell off acquisitions it had only recently acquired.
The belief is that the upheavals of 2023 will not carry over into 2024 and so the following years will be about existing players (especially those under new ownership or control) stabilizing and consolidating their position in the market.