MBW Explains is a collection of analytical options through which we discover the context behind main music trade speaking factors – and counsel what may occur subsequent. Solely MBW+ subscribers have limitless entry to those articles.
One of many largest music enterprise tales of the 12 months has been lacking one thing: official affirmation.
And did SMG then splash an extra USD $400 million on Pink Floyd’s recorded music catalog, plus ‘identify, picture, and likeness’ rights?
Sufficient trade sources and credible media stories have mixed to quasi-confirm that sure, it did.
Earlier this month, talking to Bloomberg in Los Angeles, SMG boss Stringer publicly verified for the primary time that Sony has purchased each these historic catalogs (even when he didn’t verify the value).
Stringer additional confirmed that Sony not too long ago acquired a stake in Michael Jackson’s catalog, a deal which is believed to embody 50% of the King of Pop’s music rights portfolio.
For those who imagine trade whisperers (MBW included), Sony — backed by money from Apollo — has cumulatively spent over $2 billion mixed on MJ, Queen, and Pink Floyd.
So why did Stringer and Sony lay down such huge sums on these classic catalogs? And, Jackson apart, why has Sony guess so massive on ‘basic rock’ in an age when it’s removed from the dominant style on streaming providers?
Listed here are three good causes…
1) ‘eventized’ potential
At Bloomberg’s occasion this month, Rob Stringer confirmed that Sony acquired “identify, picture, and likeness” rights to 2 of the three acts in query. We all know Pink Floyd is one; he didn’t verify the opposite.
Stringer steered that buying these ‘NIL’ rights would allow Sony to creatively and financially take part within the “experiential potential” and “occasion potential” they provide.
Photos of ABBA Voyage instantly spring to thoughts: the concept of replicating the imagery and sound of a legendary act, in a number of venues the world over, by way of cutting-edge know-how.
May ABBA Voyage-esque productions, owned by ‘identify & likeness’ domain-holders, finally turn into the brand new ‘tribute band’?
In that case, no marvel Stringer’s seeing greenback indicators.
The Australian Pink Floyd (TAPF), to select one instance, has usually appeared in Pollstar’s quarterly High 100highest-grossing live performance lists lately.
Credit score: Sony Music Group
“It’s like an act touring times-five – that’s fairly profitable!”
Rob Stringer on Sony’s stake in MJ: The Musical, and the actual fact it may possibly play in a number of cities on the identical evening
The persevering with recognition of the Aussies’ copycat Pink Floyd ‘expertise’ is not any nice shock: individuals generally overlook that the actual Pink Floyd secured the biggest-grossing international stay present of the entire of the Nineteen Eighties with the A Momentary Lapse Of Purpose tour.
(Sure, it grossed much more than Michael Jackson’s legendary Dangerous tour that decade – although Floyd performed 197 exhibits vs. MJ’s 123.)
The thought of a Sony-owned or co-owned “experiential” manufacturing, taking part in in a number of areas every night, is clearly one Stringer likes very a lot.
“[Sony] has a share of MJ: The Musical, a proportion with the Michael Jackson property, as does our image firm,” Stringer confirmed on the Bloomberg occasion.
Stringer stated variations of this musical could be taking part in in 5 cities worldwide over the following 12 months (doubtlessly on the similar time).
That, he stated “is like an act touring times-five – that’s fairly profitable!”
2) Basic Rock isn’t lifeless… it’s streaming like wild
‘Title, Picture, and Likeness’, then – and the place possession of it’d lead within the stay house – is a vital a part of why Sony spent what it did on these catalogs.
So too is bodily music and merch gross sales – one other beneficiary of ‘NIL’.
However there’s a extra trendy purpose why Stringer and SMG splashed the money: streaming.
At this level, you may assume, “Streaming’s all very properly for Michael Jackson, however classic rock like Pink Floyd isn’t precisely down with the children.”
On the floor, you’d be proper: Beneath you possibly can scan a chart primarily based onLuminate‘s latest mid-year market report (and different comparable historic stories exhibiting half-year knowledge for the US).
It exhibits the recognition of the three largest genres within the US – ‘Rock’, ‘Pop’, and ‘R&B/Hip-hop’ (as categorized by Luminate) – within the Jan-Jun interval over the previous few years.
As you possibly can see, ‘Rock’ has barely grown share throughout this timeline, however: (a) It hasn’t spectacularly gained market share, up 110 foundation factors since 2019; and (b) that’s regardless of a major decline (minus 500 foundation factors) in market share for ‘R&B/Hip-hop’ since 2020.
(Latin Music has been the large market share gainer since H1 2019, rising from a 4.2% mid-year share that 12 months to 8.3% in H1 2024.)
By taking the above stats and making use of them to the whole audio streams within the US market in H1 2024 (all 665.8 billion of them), we will estimate the whole stream volumes for every style within the interval.
That is arguably a greater illustration of the gulf between the most well-liked genres within the States.
Once more, ‘Rock’ doesn’t do badly on this image, however as you’d anticipate, it’s dwarfed by ‘R&B/Hip-hop‘.
However now look.
Luminate’s mid-year 2024 report consists of the slide beneath, which provides an approximate impression of the proportion of whole streams inside every style which can be from tracks which can be much less than 5 years outdated vs. tracks which can be extra than 5 years outdated.
This tells us, in a single snapshot, that the recognition of ‘R&B/Hip-hop’ seems to be way more reliant on new releases than ‘Rock’.
Over 1 / 4 (26.7%) of R&B/Hip-hop tracks streamed in H1 2024 had been much less than 60 months outdated, whereas practically three-quarters of ‘Rock’ tracks (70.5%) had been extra than 60 months outdated.
Now, let’s take the approximate figures above and apply them to precise H1 2024 US stream volumes divided by style.
This offers us new perception into how every style fares in actual phrases in case you solely rely streams of music older than 5 years/60 months (‘Deep Catalog’).
(Warning: a few of that is guesswork primarily based by myself eyes. Luminate confirms numbers for 3 genres within the above chart, however for different genres it provides an indicative coloured chart. For instance, wanting on the above, it seems that 48% of ‘R&B/Hip-hop’ streams – the yellow bar – had been of ‘Deep Catalog’ within the interval, judging by the values on the Y axis.)
Conclusion: whenever you solely contemplate music older than 5 years, within the first half of 2024, ‘Rock’ near-or-less saved tempo with ‘R&B/Hip-hop’.
Michael Jackson is 94th with 15.56 billion performs.
Pink Floyd is 209th, with 10.07 billion performs – forward of the likes of Mariah Carey, The Rolling Stones, Enrique Iglesias, and ABBA.
3) After they zig, you zag… particularly if forex’s in your facet
There are many different potential components price mentioning for Sony’s big-spending on catalog music titans in latest months, together with curiosity and alternate charges in Japan.
As rates of interest have ballooned within the ‘West’ over the previous few years, limiting the willingness of blockbuster spending on music catalogs, rates of interest in Japan – set by the Financial institution Of Japan (BoJ) have usually been detrimental in the identical interval, at round -0.10%.
Extra not too long ago, Japan’s rates of interest have climbed to +0.25%, the best since 2008, however nonetheless significantly decrease than the US/UK/EU (see beneath).
Japan’s rates of interest as per the Financial institution Of Japan over the previous few years (supply: TradingEconomics)
In the meantime, Japan’s Yen has weakened considerably in opposition to GBP and USD lately.
Instance: as not too long ago as February 2021, one US Greenback would have price you 0.0092 Yen; right this moment, that very same greenback prices 0.0065 Yen.
Placing that in less complicated phrases: in case you needed to spend USD $400 million on Pink Floyd’s catalog right this moment, and also you had been changing the money to pay for it into USD from Yen, it will at the moment price you round a 3rd much less (in Yen phrases) than it did three years in the past.
Sony would, due to this fact, be capable of reap the benefits of forex traits by buying US/UK-based catalogs with its Japan-based treasury. (And it’s a significantly massive treasury: Sony Corpended its newest FY in March with 1.907 trillion Yen in money and money equivalents – at the moment price round USD $12.5 billion.)
The Japanese company would additionally doubtlessly be capable of borrow debt domestically at far cheaper charges than US, EU, or UK firms if required.
(Then once more, Sony Music Group won’t even have wanted all that a lot cash from its dad or mum: don’t overlook that Apollo led a $700 million “capital resolution” for SMG earlier this 12 months, cash that will have been put to good use within the Pink Floyd deal, and certain the Queen deal too.)
Backside line: Sony Music Group’s entry to capital isn’t in query.
This may partly assist clarify why, when its rivals have appeared to ‘zig’ on blockbuster single-artist catalog offers – slowing down the big-spending we noticed on the peak of the market – Sony has ‘zagged’, spending greater than ever.
Common Music Group, for instance, has but to publicly announce any large-scale catalog acquisitions by way of Chord Music — the $1.85-billion-valued car UMG minority-owns (and Dundee Companions majority-owns), as introduced in February.
We’ve additionally seen general worth slowdowns in catalog pipeline offers up to now 12 months at firms together with Reservoir and BMG, whereas consolidation has hit music’s catalog M&A sector elsewhere: witness the sale of music catalogs from Spherical Hill, Opus, and Vine Various Investments to rival music firms.
(It’s solely proper to level out that, amid this slowdown, the likes of Harmony and Litmus have nonetheless pulled off a number of nine-figure acquisitions of artist catalogs.)
That determine ($2.2 billion) is roughly, in line with stories, the identical quantity Sony has spent on simply three catalog offers: Queen, Pink Floyd, and 50% of Michael Jackson.
Talking to Bloomberg this month, Rob Stringersteeredthat Pink Floyd’s recorded music catalog was basically priceless, and that purchasing it was tantamount to an artwork collector shopping for a Picasso.
In some methods, that analogy doesn’t fairly match: somebody buying a Picasso is unlikely to earn tons of of thousands and thousands from it in royalties and T-shirts over the course of its copyright-able lifetime.
But in one other sense, Stringer’s analogy completely mirrored his firm’s philosophy in these offers.
In any case, no critical artwork investor buys a priceless Picasso with out feeling assured that in ten years, or fifty years, it will likely be price considerably extra than it’s right this moment.Music Enterprise Worldwide
