finance
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Spotify ended 2022 with 205 million subscribers, annual revenue of 11.7 billion euros ($12.4 billion) — up 21% from 2021 — and an acknowledgment that “things change” regarding the company’s bold investment in podcasting and its recent “tightening” of spending.
“In hindsight I probably got a little carried away and over invested relative to the uncertainty we saw shaping up in the market,” said CEO Daniel Ek in an earnings call with investors on Tuesday (Jan. 31). “So we are shifting to tightening our spend and becoming more efficient.”
Ek added that “it was the right call to invest and I would do it again” because it set the company apart from competitors, but the souring macro economic environment requires them to pull back. “To be clear this doesn’t mean we are changing our strategy,” he asserted.
The company spent hundreds of millions of dollars acquiring exclusive rights to podcast programming (see: Joe Rogan, Prince Harry and others) and startups, but in recent months began eliminating some original shows and trimming staff at its Parcast and Gimlet studios. Earlier this month, Spotify announced it would shed 6% of its workforce, roughly 600 employees. It also canceled numerous shows that it had been promoting on its separate Spotify Live app.
“You go for growth first and then you seek efficiency,” Ek said.
Elsewhere in the call, the company laid out its fourth-quarter results, with revenue of 3.166 billion euros ($3.38 billion), representing 18% growth year-over-year. Subscription revenue was 2.7 billion euros ($2.88 billion) of that tally, a 18% increase year over year. Advertising revenue was 449 million euros ($479 million), up 14% year over year. Its user base grew to 205 premium subscribers, up from 195 million in Q3, and 295 million free (ad-supported) users, up from 273 million. Total monthly active users (MAUs) have hit the 489 million mark, up from 456 million last quarter.
Average revenue per user was 4.55 euros ($4.85) in the fourth quarter, down slightly from 4.63 euros ($4.94) in the third quarter. Excluding the impact of the foreign exchange market, Spotify attributed the change to a “product and market mix.”
Spotify’s gross margin of 25.3% — 80 basis points above guidance, the company said — was slightly better than the 24.7% registered in the third quarter but still a full percentage point below the 26.5% in the prior-year period. The company attributed the change to “lower investment spending and broad-based music favorability.”
Spotify reported an operating loss of 231 million euros ($246 million), up from 228 million euros in Q3 and a 7 million euro loss back in Q4 2021. A slew of higher personnel costs due to headcount growth — that has since been halted (except for internships) — and higher advertising costs, as well as currency movements, was cited for the rise in losses during the quarter. The company also said that its business has more than 3.4 billion euros ($3.6 billion) in liquidity and that its free cash flow was actually in the negative in the quarter — by 73 million euros — but that for the full year the company ended with 21 million euros ($22 million).
Financial Metrics (Q4 2022 vs. Q4 2021)
Revenue: 3.166 billion euros ($3.38 billion), up 18% year over year from 2.689 billion euros
Gross margin: 25.3%, compared to 26.5% the prior-year quarter
Operating loss: 231 million euros, up from a 7-million euros loss
Free cash flow: 73 million euros, down from 103 million euros
Listener Metrics (Q4 2022 vs. Q3 2022)
Paid subscribers: 205 million, up 5% from 195 million in Q3
Ad-supported listeners: 295 million, up 8% from 273 million in Q3
Total monthly active users (MAUs): 489 million, up 7% from 456 million in Q3
Average revenue per subscriber: 4.55 euros, up from 4.63 euros in Q3
Q1 2023 Guidance
Revenue: 3.1 billion euros
Subscribers: 207 million
MAUs: 500 million
Gross margin: 24.9%
Operating loss: 194 million
Is there anything more delicious and envy-inducing than poring over a “highest-paid DJs” list? The thought of earning millions by providing people with music to dance to — off a USB stick, no less — comes with its own special degree of fascination.
The truth is, the percentage of upper-echelon DJs annually earning seven-plus figures is tiny, about 1%. The next tier of DJs comes in at about 100 times less than that amount at minimum, according to an established promoter. Indeed, most DJs whose names grace the top half of festival flyers are earning a living wage — but only if they’re sensible.
Most DJs are generally stratified into earning $500/$2,000/$5,000/$10,000 per club gig and between $2,000/$5,000/$10,000/$25,000 per festival gig. Meanwhile, festival headliners can command over $100,000, with multiple factors contributing to this jump.
“At this level, performance fees aren’t always determined as a simple dollar value per show,” says Saleem Amode of Amode Agency regarding festival headliners. “Agents, promoters and artist teams evaluate metrics like touring history, ticket history [and] region exclusivity. Of course, the music and recent content comes into play to determine the estimated value and risk of a fee offer. The costs of putting on the event itself are the large[st] factor in determining the risk for the promoter.”
Such dollar amounts are also just gross earnings, before the DJ has paid their agent, manager, business manager, lawyer and flight and hotel costs — which are increasingly being covered by artists’ fees rather than the promoter. After taxes, a DJ’s net pay is often less than 40% of their fee.
“There is a public misunderstanding of how much money DJs are making,” says Orlando Higginbottom, professionally known as producer Totally Enormous Extinct Dinosaurs. “You can do the math on the back of a postcard. If you’re a DJ who is grossing $20,000 a month, what you’re ending up with is $10,000. No one’s going to turn up their nose at that, but a $120,000 annual salary is not the celebrity lifestyle people think DJs are having. It’s not rich money. It’s not house (in L.A.) money. It’s rent money.”
These earnings also don’t come with health insurance, unemployment insurance, retirement plans, human resources support or even job security. “DJs are CEOs of their own company — even if no one views them that way,” says Higginbottom. As such, the unsexy parts of the business are often left to DJs to set up for themselves — or not.
This situation is not exclusive to DJs, but artists across the board. Steve Braines, who manages producer Maya Jane Coles, shares, “I took over a touring rock artist’s career and he filed for bankruptcy. During that time, he was still trying to buy jewelry and had never bought a house despite the huge amounts previously earned.
“There is a sense sometimes that the money will last forever,” Braines continues, “but it’s such a tiny percentage of touring artists that’s true of. DJs also have that same time period of being hot, and then it decays for many. If you can afford to buy a house, buy one, and also get a pension, just as a teacher, doctor or anyone else would. Ultimately, objectively, it’s a job, and the bank doesn’t care how you make your money.”
Though widespread touring has since resumed, the pandemic brought the instability of the profession into even sharper focus for a lot of DJs, particularly because many weren’t eligible for unemployment. Billboard spoke with several about how they’re working to establish a secure future for themselves — even if/when the money in their chosen field dries up.
Put your money in higher-yield accounts
As a headlining artist who says he’s very prudent with his money, 12th Planet (born John Dadzie) exercises the tried-and-true practice of putting aside 25% of his earnings. This percentage is put into certificates of deposit (CDs), which have a fixed term length that typically falls between three months and five years. Though most of these accounts assess penalties for withdrawing your money before the end of the term, they earn a higher interest rate than a conventional savings account. Other options are money market accounts that pay interest based on the market rate, or bonds, for which the issuer pays back the principal plus interest after a set time period.
“It took me a long time to learn that when your money just sits in the bank, you’re actually losing on it,” says Dadzie. “Once I learned that, I moved everything over to other types of accounts. I’m not doing anything aggressive. … I’d rather post a positive 1% or 2% than a negative risky 10%.”
After taking on a business manager early in his career and a wealth manager soon after, Dadzie began putting his money into individual retirement accounts (IRAs) and 401Ks, which are personal pension accounts. The funds in these types of accounts cannot be touched until maturity, which is usually what would be considered “retirement age.” He also recommends starting a retirement plan early, saying “Not only does that money go to you, but it also goes against taxes paid to the government and can move you from being in the highest tax bracket.”
Keep your overhead low
Jennifer Lee, professionally known as TOKiMONSTA, experienced not just the slowdown of the pandemic, but the slowdown of her entire life after brain surgeries to treat Moyamoya disease in 2016. Lee says keeping her spending in proportion to her earnings was a key factor in weathering these unforeseen occurrences.
“It’s being cognizant of how much money you’re making, and how much money you’re spending on a monthly basis,” she says. “A lot of very successful people spend a lot of money and have massive teams and multiple employees. People who have a high overhead are spending that money even when they’re not touring. My operation is fairly simple with two full-time employees. When I’m 60, I don’t know if I [will] want to, or will be able to, DJ every single weekend. I have to set up my whole lifestyle so I’m comfortable at that age.” (She adds that she’s also put her money in investment portfolios.)
Diversify your financial interests
Brothers Dimitri Vegas & Like Mike, who have topped DJ Mag’s Top 100 DJs list multiple times — have diversified their finances into multiple arenas. Together, they have a company encompassing artist services, booking and management in a joint venture with their own manager, Nick Royaards, and Michiel Beers, the co-founder of Belgium mega-fest Tomorrowland. They also have their Smash the House record label and its various sub-labels, and each have their own clothing line and were early investors in esports and entertainment company FaZe Clan. Vegas’ particular funding focus is on content creation via his production company, which is focused on the development of films, television series, graphic novels and books.
“Most of my investments go to something I have control over,” says Vegas. “When the pandemic started, I was trying so many different things, because I was a bit scared shows weren’t coming back. There are a lot of people with beautiful decks and crazy ideas and promises. You need to be able to filter out what is going to work, and even then, it’s always risky. It’s about surrounding yourself with people who know what they’re doing or making sure you yourself know what you’re doing.”
Pioneering DJ Richie Hawtin famously invested in the electronic digital download store Beatport early on, a move he considers one of his best. Currently, his Plus8 Equity Partners venture capital firm, which he started with partners John Acquaviva and Rishi Patel, has an investment portfolio that includes Splice, Subpac, Landr, Lynq, Rap Tech Studios and other creative entertainment technology disruptors. As he puts it, the venture allows him to “re-invest back into our own culture.”
Barry Ashworth of Dub Pistols has had his share of financial knockbacks over his more than three-decade career. He went from a $1.5 million record deal for the second Dub Pistols album, Six Million Ways To Live and making $25,000 per remix — which he was doing at a clip of three a day — to his accounts being overdrawn.
After a five-year stretch of living gig-to-gig, Ashworth began making wiser moves, including starting up a healthy Dub Pistols merchandise business. This extends beyond conventional clothing and paraphernalia into a range of branded CBD oil, Minirig portable speakers and pale ale. The latter three items have a high sell-through rate and are manufactured, produced and distributed by companies Ashworth has partnered with. They provide him with wholly passive income.
Ashworth also purchased the U.K.’s Mucky Weekender Festival, which is growing under his leadership and is looking to expand into additional events. When he was unable to source a tour bus amidst the pandemic shortages, he purchased a couple to rent out and launched a touring logistics company. Says Ashworth of his various ventures, “It’s taking every little opportunity you see and feeling confident enough to do it.”
Invest in real estate (if you can afford it)
Property is one of the mainstay investments for DJs, as globally, real estate rarely drops in value. Most DJs purchase their own home(s) as soon as they can afford to. Rental property is the next step for those who can extend to that option. Producer Nicole Moudaber stepped into the rental arena back in 2003 when she bought an estate in Ibiza, upgrading it to a villa aimed at weekly rentals.
“It was like a hotel operation,” says Moudaber. “I did that for 10 years in Ibiza and gained an understanding of architecture and property management. I bought a place in Miami, but I panicked and sold it during COVID. I lost my nerve. I’m mourning it. But lesson learned: Never panic when there’s a crash in the market, and that goes for people who invest in stocks as well.”
Hawtin has also invested in a few real estate properties with significant financial rewards, a move he says is “definitely not as sexy or exciting as sitting with engineers dreaming up new creative tech, but definitely safe and secure.”
If DJs have the disposable income, investing in building development projects can have a significant return, particularly if you invest a large sum. This is what Ashworth has done in the UK. “Property developers are building flats, renovating flats. They need money to do it,” he says. “The return has been quite ludicrous.”
Consider self-releasing your music
Like most DJs, Moudaber owns her own record label, In the Mood, as does Ashworth with Cyclone Records, Lee with Young Art Records and Higginbottom with Nice Age. While DJs owning their own record label is a default of the dance music community, the real value is in owning your music.
While many artists find it tempting to sign a big figure recording or publishing deal at the start of their career, for the long game this choice is not always optimal. Higginbottom found this out the hard way when he signed to Universal Music in the early part of his career. His takeaway from his experience is, “I don’t think it’s a good idea to release through a label, unless you do a very, very good deal and you are getting your masters back in five years or something.”
Higginbottom considers his music an investment, and the only way to retain that investment for the long-term is to self-release it. “That,” he says, “is your pension, your money flow and your passive income.”
“There’s loads of money to be made through streaming, but you have to own the masters,” he continues, “Look how rich the record labels are. Look how much money there is out there. Artists just don’t know how to access it. From streaming, you could make a few hundred, a few thousand or $10,000, $20,000 or $30,000 a month. If you sign with a major label, you’re never going to see it. If you sign with an indie on a 50/50 deal, you’ll see it eventually. Eighty-five percent of my income was through touring. When we lost touring for two years during COVID, that royalty income saved my business.”
Set up different LLCs for each aspect of your business
In a further safety move, Higginbottom recommends setting up different LLCs for each section of an artist’s professional activities. For example, one for touring, one for royalties from your own releases, one for income from songwriting for others. This way, if an artist ends up being liable for something that happens during one of their shows, they won’t get cleared out of their entire income — just the touring LLC. Additionally, when one of the LLCs is having a lull, it can be propped up by the others.
“It’s really hard to make enough as a musician to save or invest,” says Lee. I’m always grateful to be in [the music business] for as long as I have, but I’m very aware of the lack of stability that comes with entertainment, and I’ve steered my career in the direction of stability. You never know when the rug can get pulled out from under you.”
Live Nation investors were either nonplussed or unmoved by the Senate Judiciary Committee’s political theatrics Tuesday (Jan. 24), probing the causes behind a disastrous ticket presale to Taylor Swift‘s Eras tour last November hosted on the company’s Ticketmaster platform. While Live Nation president and chief financial officer Joe Berchtold was being grilled by lawmakers about Ticketmaster’s technology and market power with a focus on monopolistic behavior, Live Nation’s share price rose as much as 2.3% to $77.71 before closing at $76.67, up 1.4% on the day, on about half of the average daily trading volume.
With that modest gain, Live Nation beat the Dow Jones Industrial Average (+0.3%), S&P 500 (-0.1%), Nasdaq composite (-0.3%) and Russell 2000 (-0.3%). It also outperformed two competitors, MSG Entertainment (+0.6%) and Germany’s CTS Eventim (-1.1%), that weren’t subjected to Congressional questioning.
Congressional oversight was already priced into Live Nation’s share price to a degree, though. Live Nation shares fell 7.8% to $66.21 on Nov. 18, 2022, after Sen. Amy Klobuchar, chair of the Senate Judiciary Subcommittee on Competition, Antitrust and Consumer Rights, penned a letter to Ticketmaster about her concerns regarding its “system failures, increasing fees and complaints of conduct that violate the consent decree” under which Ticketmaster and Live Nation operate.
The hearing, titled “That’s the Ticket: Promoting Competition and Protecting Consumers in Live Entertainment,” turned Live Nation and Ticketmaster into punching bags for senators who, as Sen. Richard Blumenthal noted, were brought together “in an absolute, unified case.” The legislators’ pointed questions and obvious frustration on behalf of their constituents made it clear Ticketmaster is one of the more loathed companies in the U.S. One witness, Kathleen Bradish, vp for legal advocacy at the American Antitrust Institute, called Live Nation and Ticketmaster “a very traditional monopoly” with a dominant market position that results in higher fees to consumers and less innovation.
Exactly what will come from the hearing is far less certain. While there may be some appetite amongst the senators to undo the 2010 merger of Live Nation and Ticketmaster, or implement some other structural remedies, Sen. Klobuchar said the committee will wait for a Department of Justice report before moving forward.
Some senators proposed non-legislative measures. Sen. Joe Kennedy suggested the person in charge of the ticketing presale should be fired. Sen. Marsha Blackburn called the bot-related service outages “unbelievable” and told Berchtold that the company “ought to be able to get some good advice” for better dealing with these kinds of issues.
Warner Bros. Discovery is exploring a sale of its music assets that could be worth upwards of $1 billion, according to a source familiar with the matter. The catalog is being shopped by famed entertainment attorney Allen Grubman.
While the potential sale — which was first reported by The Financial Times — is still in the very early stages, some of Warner Bros. Discovery’s current music partners could be potential buyers.
Universal Music Group (UMG) already administers the publishing assets, which are likely the largest part of the deal, and Warner Music Group (WMG) distributes WaterTower Music, Warner Bros. Discovery’s in-house record label.
The assets being shopped, including music and production music from the company’s television and film projects, are not the kinds of music rights that have made headlines over the past couple of years as investors have flocked to the music business. Unlike most publishing rights or royalty streams, the Warner Bros. Discovery assets are not tied to the steady growth trend affecting traditional streaming. That’s because relatively few people head to Spotify to stream the soundtracks for Game of Thrones, The White Lotus or Batman, for example, even if the television and film projects are smash successes. As such, these type of assets have historically trade lower than popular music rights — typically in the single-digit multiples.
The asset valuations will likely be tied to broadcast trends, which are growing slower for film and television than for music. But due to the depth of the catalog, which dates back decades, the package will likely be seen as an attractive and stable investment for any major music company or private equity fund.
Warner Bros. Discovery formed last year through the merger of AT&T’s WarnerMedia unit and Discovery Inc.
Warner Bros. Discovery, UMG and Grubman did not respond to requests for comment at the time of publishing. WMG declined to comment for this story.
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Music companies across the board grew revenues in 2022, fueled by global streaming growth and the return of live music. Their stock prices went in a different direction, though.
The Billboard Global Music Index, a group of 20 music-focused companies listed in five countries, declined 36.4% in 2022.
The index aggregates the market capitalizations of 20 music companies spanning record labels, music publishing, live music, streaming and broadcasting. Each company’s float — the outstanding shares — has been adjusted to remove corporate owners, executives, directors and other long-term shareholders.
Music companies weren’t the only stock losers of 2022. Markets were down across the board as interest rates rose, inflation soared and investors placed greater value on profits than growth potential. The index’s deficit was slightly bigger than that of the tech-heavy Nasdaq composite and almost double the 19.4% decline of the S&P 500. The Dow Jones Industrial Average, a collection of 30 blue-chip companies such as Johnson & Johnson and Home Depot, fell just 8.8%.
The two largest companies in the index, Universal Music Group and Warner Music Group, fared relatively well. UMG’s share price fell 9.2% and WMG’s declined 18.9%. Another label group, South Korea’s SM Entertainment, improved 3.4% — one of only two companies in the index whose share prices rose in 2022. As a group, however, record labels and publishers’ adjusted float declined 23.1%. The largest deficit of the group was 50.3% by South Korea’s HYBE, whose main artist, BTS, sent the stock spiraling by announcing a hiatus in June.
The six streaming companies’ index value declined 54.9%, the worst of the index’s four sectors. Spotify’s share price dropped 66.3% and the company dropped to the fourth-largest contributor to index value, after finishing as the top contributor at the end of 2021. The dramatic downturn wasn’t surprising given what was happening in the broader marketplace. Streaming stocks generally benefited from the early days of the pandemic as consumers listened to and viewed more content online and subscriptions spiked. But investors fled many pandemic darlings in 2022: Netflix shares fell 51.1% and Disney shares dropped 43.9%.
With a 20.9% gain in 2022, Tencent Music Entertainment was the rare company in positive territory — not that it isn’t well below its all-time high. While Spotify and other stocks started to drop in mid-December 2021 after the Federal Reserve announced it would raise interest rates in 2022, Tencent Music’s share price had nowhere to go but up. In March 2021, after Chinese regulators cracked down on Tencent Music’s exclusive licensing contracts — many other Chinese companies also came under fire for various reasons — the share price fell 58.5% over three days and another 70.9% through Dec. 20, 2021.
The smaller streaming companies, on average, fared worse than their larger competitors. Abu Dhabi-based Anghami declined 84.3% and French streamer Deezer dropped 51.4%. Both companies went public in 2022 via reverse mergers with publicly traded blank check companies (SPACs), so their annual performance is calculated using the Dec. 31, 2021, share price of the public companies they merged with. Shares of LiveOne fell 49.7%.
Streaming companies’ declines mirrored the losses of some high-profile tech stocks. Amazon, another high-flying pandemic stock, fell 49.6%. Meta sank 64.2% as the company put billions of dollars into building a metaverse that few people seemingly want to visit. Tesla fared even worse by slipping 65% as investors appeared worried that CEO Elon Musk was spending too much time mismanaging his latest acquisition, Twitter, and hurting the brand’s value amongst liberal consumers.
The index value of live music companies — Live Nation, CTS Eventim and MSG Entertainment — declined 35.9%. Even though Live Nation posted record revenues in the second and third quarters as the touring business recovered from pandemic-era lows, the company’s index value dropped 41.7% in 2022. Live Nation’s shares stumbled 10.9% over two days in November after the problematic pre-sale for Taylor Swift’s Eras Tour enraged consumers and brought the possibility of regulatory action (about half of that loss was recovered by the end of December). MSG Entertainment shares fell 36.6% while German promoter CTS Eventim fell just 7.4%.
Broadcasters’ index value declined 33.3%. Even though shares of satellite radio company SiriusXM, the largest broadcaster by market capitalization, declined just 8.0%, the two terrestrial broadcasters in the index fared much worse. IHeartMedia shares fell 70.9% and Cumulus Media dropped 44.8%.
The relatively good performance of labels and publishers — especially the larger ones — brought those eight companies’ share of the index’s value to 49.2%, up from 40.7% at the end of 2021. The six streaming companies’ share of the index value declined to 22.1% from 31.1%.
U.S.-listed companies improved their share of the index to 58.9%, up from 49.9% at the end of 2021. Some of the change can be attributed to the growth in the dollar, which reduces the value of foreign-listed companies when adjusted market capitalizations are converted to U.S. dollars. Compared to the dollar, the euro was down 5.5%, the pound sterling was down 10.4%, the Korean won was down 5.8% and the Hong Kong dollar was down 0.2% in 2022.
Music streaming company LiveOne’s podcasting division, PodcastOne, filed an S-1 with the Securities Exchange Commission on Tuesday as a prelude to becoming a standalone, publicly traded company. LiveOne has set a record date of Jan. 16 for PodcastOne’s special dividend to LiveOne shareholders of record.
The spinoff “will meaningfully enhance our industry market perception,” the company wrote in the filing, “thereby providing greater growth opportunities for us than our consolidated operation as a private subsidiary of LiveOne.”
LiveOne will remain PodcastOne’s majority shareholder and will distribute approximately 6.2% of outstanding shares to LiveOne shareholders. LiveOne will retain 86.3% of outstanding shares. The remaining shares will be held by holders of bridge notes as well as the company’s directors and executives. PodcastOne currently expects its shares to trade on the Nasdaq.
In addition, LiveOne said it intends to explore spinning out SlackerOne into a separate public company during its 2024 fiscal year. LiveOne acquired music streaming service Slacker in 2017 for $50 million. Slacker was ordered by a judge in November to pay SoundExchange $10 million for performance royalties owed since 2018. Slacker asked the judge to overturn the ruling, saying the decision had led debtors to default on two senior secured notes, threatening “economic damage” to the company that would be “unsustainable.” The judge denied LiveOne’s request.
PodcastOne was co-founded in 2012 by current president Kit Gray and Westwood One founder Norman Pattiz and ranks No. 14 on Podtrac’s list of top podcast publishers in the U.S. It has about 2.1 billion downloads annually and produces 350 episodes per week. Among its podcast titles are Court Junkie, Cold Case Files, The Adam Corolla Show and Nappy Boy Radio with rapper T-Pain. PodcastOne also operates LaunchpadOne, a do-it-yourself platform for independent podcasters in the vein of Spotify-owned Anchor and Amazon-owned Art19 that distributes content to Spotify, Apple Podcast, Google Podcasts and other outlets. LiveOne — then named LiveXLive — acquired PodcastOne in 2020.
PodcastOne generated $32.2 million in the fiscal year ended March 31, 2022, a 36% improvement from the prior-year period, and plans to have revenues of $25 million in the nine-month period ending Dec. 31, 2022, according to LiveOne.
The Ledger is a weekly newsletter about the economics of the music business sent to Billboard Pro subscribers. An abbreviated version of the newsletter is published online.
This was a year without splashy public offerings, like Universal Music Group’s last year and Warner Music Group’s the year before. Some of the biggest rights acquisitions of all time — for Bob Dylan’s and Bruce Springsteen’s recordings and publishing, and David Bowie’s publishing took place in those years, too. And the time when the biggest companies in the business could acquire their rivals may be over for the time being as well.
Rising interest rates put a chill on the catalog acquisition market and brought down valuations, but there was no shortage of investors for a seemingly never-ending supply of creators willing to take advantage of the streaming boom to part with their catalogs. The list of deals that didn’t even make this list includes various rights for the music of The Ramones, Justin Timberlake, Keith Urban, Louis Prima, Swedish House Mafia, Future and Blake Shelton.
Only two of the last year’s top 10 deals — ranked by dollar amount — didn’t involve a catalog changing hands. One was a reverse merger that made French streaming company Deezer a publicly traded company, while he other was Spotify’s latest acquisition to further its goal of becoming a one-stop destination for audio.
Concord sells asset-backed securities ($1.8 billion)
This month, Concord priced the biggest music-related asset-backed securitization in history: $1.8 billion of senior notes backed by a diversified catalog of music publishing and recorded music rights valued at $4.1 billion. Apollo’s Capital Solutions business structured the transaction and formed an investor syndicate led by Apollo-managed funds. JP Morgan was the co-structuring agent. Music-backed securitization was made famous in 1997 with $55 million of asset-backed securities, commonly referred to as Bowie Bonds, supported by royalties from Bowie’s recorded music catalog. Concord’s offering was significantly larger and diverse than Bowie’s: The catalog behind Concord’s bonds includes compositions and recordings by Phil Collins, Creedence Clearwater Revival, Daft Punk, Miles Davis, Imagine Dragons, Pink Floyd, Cyndi Lauper, Little Richard and James Taylor.
Brookfield Asset Management Invests in Primary Wave ($1.7 billion)
The biggest music industry deal of the year by dollar amount was something of a surprise. The 100-year-old Canadian asset manager Brookfield’s decision to put $1.7 billion into Primary Wave, an active buyer of music rights for nearly 17 years, came during a lull in the market. Rising interest rates were making music rights a less attractive investment, headline-grabbing acquisitions had slowed since the Fed began hiking rates in March and possible changes to tax treatment of catalog sales in 2022 culminated a busy 2021. Brookfield wasn’t discouraged by market forces, though. The two companies spent six months hashing out a deal, Brookfield managing partner Angelo Rufino told Billboard. Brookfield was attracted to Primary Wave’s model of employing marketing and branding experts to build the value of its acquisitions. He called Primary Wave CEO Larry Mestel “the best I’ve ever seen at leveraging brand extensions to supercharge the growth of these assets.”
Kobalt sells majority interest to Francisco Partners ($750 million)
Kobalt has been selling off assets left and right in recent years. It sold its two investment funds that owned music assets — one went to Hipgnosis Song Management for $323 million in 2020, the other to KKR and Dundee Partners for $1.1 billion in 2021 (which resulted in the Chord Music Partners bond offering this year, see below) — and Sony Music purchased Kobalt’s independent distributor and label services provider, AWAL, as well as its neighboring rights business. These moves allowed Kobalt to pay off its debt and finish 2021 with $315 million in cash. This year, Kobalt sold a piece of itself when tech-focused investment firm Francisco Partners, along with Dundee Partners and Matt Pincus’ MUSIC, bought a majority stake in the company for $750 million.
KKR sells asset-backed security ($732.5 million)
The technical sounding Hi-Fi Music IP Issuer II L.P., Series 2022-1, was a bond offering by Chord Music Partners in February, backed by a music catalog valued at $1.13 billion. What the bond lacked in curb appeal it made up for in sheer dollar volume after raising $732.5 million for Chord Music Partners, a venture of KKR Credit Advisors and Dundee Partners. The music publishing catalog behind Hi-Fi Music offering — about 62,000 titles in all — was purchased from Kobalt three months earlier. The According to a report by ratings agency KBRA, the Hi-Fi offering is backed by over 65,000 compositions and master recordings and related assets and includes artists and songwriters such as The Weeknd, Maroon 5, Childish Gambino, Dua Lipa, Mumford & Sons and Stevie Nicks.
Concord acquires Genesis, Phil Collins and Mike + The Mechanics rights ($335 million to $375 million)
Phil Collins’ and Genesis’s The Last Domino tour, which concluded at London’s O2 Arena in March, was a reminder of how beloved the 71-year-old Collins remains 47 years after he took over vocal duties when original Genesis singer Peter Gabriel departed in 1975. In that warm afterglow, Concord acquired the recording catalogs and music publishing rights of Collins, as well as Tony Banks and Mike Rutherford for the years they were in Genesis and Mike + The Mechanics, for something in the range of $335 million to $375 million. (Former Genesis members Peter Gabriel and Steve Hackett did not participate in the deal.) Collins’ solo material, focused on a string of four multi-platinum albums from 1981 to 1989, has 403 million streams in the U.S. this year (through Dec. 8), according to Luminate. In addition, Collins’ catalog has nearly 311,000 airplay spins this year. The acquisition includes Collins’ signature solo hit “In The Air Tonight,” from the 1981 album Face Value, that counts for more than a quarter of his year-to-date on-demand streams, and “That’s All,” a No.6 hit on the Hot 100 from the 1983 album Genesis. “Everyone at Concord feels the weight of the cultural significance of this remarkable collection of works,” Concord president Bob Valentine said when the deal was announced.
Sting sells entire publishing catalog to Universal Music Group ($360 million)
Universal Music Group isn’t the most active buyer of music catalogs, but it makes a splash when it decides to pull the trigger. In 2020, it purchased Bob Dylan’s publishing catalog for an estimated $400 million. In February, UMG acquired Sting’s entire publishing catalog, including his compositions with The Police (Sting was the sole songwriter of the group’s most popular songs, such as “Roxanne,” “Every Breath You Take,” “Message in a Bottle,” “Every Little Thing She Does is Magic”) as well as his solo material (“Fields of Gold,” “Englishman in New York,” “Shape of My Heart,” “If You Love Somebody Set Them Free”). Because UMG already has the master recordings to both the Police and Sting’s solo releases, buying the publishing catalog brings both rights under one roof. That should facilitate licensing and enhance UMG’s ability to generate income from the catalog. Billboard believes Sting’s representatives were shopping the catalog with a $360 million price tag, making the deal the largest for a single artist in 2022. Across both the Police and Sting’s solo releases, the catalog generated 469 million on-demand streams in the U.S. in 2022 (through Dec. 8), according to Luminate.
HarbourView Equity Partners acquires SoundHouse ($325 million)
HarborView Equity Partners burst onto the music business scene in 2021, led by founder and CEO Sherrese Clark Soares, an alum of Morgan Stanley and Providence Equity Partners-backed Tempo Music, and $1 billion backing by Apollo Global Management. Among its initial deals were the publishing catalog of Latin star Luis Fonsi that includes a share of the global hit “Despascito,” the master recording income of country star Brad Paisley, the publishing catalog of country group Lady A and the publishing catalog of Dre & Vidal, the songwriting and production duo who has worked with Alicia Keys, Justin Bieber and Mary J. Blige. HarborView’s biggest-single acquisition is an unknown name with considerable star-power: SoundHouse, the owner of about 20 master recording catalogs and the assets of indie contemporary Christian label InPop. That gave HarborView the rights to some master recordings by the likes of Tech N9ne, Trey Songz, George Jones, Whiskey Myers and Tenth Avenue North. Billboard estimates the deal was worth about $325 million. SoundHouse’s 2021 income was said to be about $24 million.
Sony Music acquired Som Livre ($255 million)
Brazil’s largest domestic record label hit the market as its parent company, Grupo Globo, went through organization restructuring. Announced in 2021, Sony Music’s acquisition Som Livre was finalized in Feb. 2022 after Brazilian regulators said there would be “low market concentration and low barriers to entry” from the merger, despite Sony already having the top record label market share in Brazil and Som Livre being third behind Universal Music Brasil. Som Livre is home to more than 80 artists, including sertanejo act Jorge & Mateus, forró star Wesley Safadão and rising stars like Israel & Rodolffo. Domestic music accounts for 70% of total music consumption in Brazil, the world’s 11th largest recorded music market in 2021, according to the IFPI.
Sony Music acquired Bob Dylan’s recorded music catalog ($200 million)
Thirteen months after Universal Music Group acquired Bob Dylan’s songwriting catalog, Sony Music picked up the bard’s recorded music catalog. Sony has not disclosed the terms of the transaction, but Billboard estimates the catalog generates roughly $16 million per year globally and is worth $200 million or more. The catalog covers all of Dylan’s recordings — 39 studio albums and 16 compilations in the Bootleg series — as well as unreleased material that could be released on future collections. (Separately, Primary Wave acquired Dylan’s share of the master and neighboring rights royalties from the Traveling Wilburys supergroup.) It makes sense that Dylan’s recordings ended up with Sony. The artist spent almost his entire career at Columbia Records, save two albums, Planet Waves and Before the Flood, both released by David Geffen’s Asylum Records in 1974 but distributed by Sony for decades. Dylan’s catalog amassed 313.5 million on-demand streams in 2022 (through Dec. 8), according to Luminate, and provides Sony with ample opportunities for licensing for film, television and advertisements (Airbnb used his track “Shelter From The Storm” from 1975’s Blood on the Tracks in a television ad this year). He used his return to Columbia in 1974 to gain ownership of his recordings, according to Dylan: A Biography by Bob Spitz.
Universal Music Group acquires Neil Diamond Catalog ($145 million)
In February, Universal Music Group announced a deal to acquire Neil Diamond’s song and master recording catalogs, reuniting Diamond’s non-UMG work with music released through UMG’s MCA Records during the artist’s successful 1968 to 1972 streak. Diamond’s catalog includes “Sweet Caroline,” “Cracklin Rosie” and “Forever iIn Blue Jeans.” His songwriting catalog includes compositions for other artists that reached No. 1 on the Billboard Hot 100 chart: “I’m a Believer” by The Monkees (1966); “You Don’t Bring Me Flowers” by Barbra Streisand (1978, co-written with Alan and Marilyn Bergman); and “Red, Red Wine” by UB40 (1988). Additionally, the recording of “Girl, You’ll Be a Woman Soon” by Urge Overkill has an indelible place in pop culture for its use in Quentin Tarantino’s 1994 movie Pulp Fiction. The trove of material included 110 unreleased tracks, an unreleased album and archival video. The deal also includes the rights to release any future music by Diamond should he return to the studio. Billboard estimates the deal was worth about $145 million.
Deezer’s reverse merger with SPAC I2PO ($143 million)
Deezer was one of two music companies to go public in 2022 through a reverse merger with a special purpose acquisition company (SPAC) in April before the SPAC craze fizzled in the second half of the year. (The other was Anghami, an Abu Dhabi-based streaming service. A third, wholesale distribution giant Alliance Entertainment, plans to complete a reverse merger with Adara Acquisition Corp.) The reverse merger with French company I2PO, which traded on the Euronext Paris exchange, provided Deezer with 135 million euros and valued Deezer at 1.08 billion euros ($1.17 billion at the time). The money came through a PIPE (private investment in public equity) subscribed by most of Deezer’s existing shareholders, including Access Industries, Universal Music Group, Warner Music Group, French telecom company Orange, Kingdom Holdings, Eurazeo and Xavier Niel. After investors poured money into blank check companies in 2020 and 2021 in pursuit of companies to take public, SPAC deals are increasingly rare these days. Among the many SPACs to end their search and return funds to shareholders are Music Acquisition Corp, which raised $230 million in Feb. 2021, and Liberty Media’s $575 million Liberty Media Acquisition Corporation.
Spotify acquired audiobook distributor Findaway ($122 million)
Findaway was neither Spotify’s priciest acquisition — it paid more for podcast companies The Ringer and Gimlet and tech platforms Anchor and Megaphone — nor was it the splashiest deal the music streaming giant has made in its roughly 15-year history. But buying the Ohio-based audiobook distributor was a pivotal moment in the company’s years-long transition from a music platform to a broader audio platform. With its share price down 68.1% year to date and investors anxious for profits, Spotify is betting that being a single destination for all things audio is a better strategy than focusing solely on music. The more ways Spotify can keep people listening, the idea goes, the longer consumers will engage with the platform , which in turn will funnels more people from the free version to the subscription service. Plus, audiobook margins are about double what Spotify gets for licensing music. Audiobooks also fit neatly with Spotify’s ongoing battle with Apple over the latter’s 30% share of in-app purchases and subscription revenue. Spotify CEO Daniel Ek’s PR push in recent months has been aided — and overshadowed — by new Twitter CEO Elon Musk’s public takedown of Apple over the same in-app fees.
LONDON — Hipgnosis Songs Funds reported a 7.5% year-on-year rise in gross revenue to $91.7 million for the six months ended Sept. 30, up from $85.3 million in the same period the previous year, at the company’s bi-annual presentation to investors, held in London Thursday (Dec. 8).
Net revenue — gross revenue minus royalties paid to songwriters under contract and administered catalogs — grew 5.8% to $78.4 million during the same period, while earnings before interest, taxes, depreciation and amortization (EBITDA) increased 16.9% year-on-year to $63.8 million.
Hipgnosis’ portfolio of over 65,000 songs, which includes hits by Dave Stewart, Timbaland, Journey, Mark Ronson and Barry Manilow, and includes the writer’s and/or publisher’s share of 13 of YouTube’s top 30 most viewed videos, has a net asset value (NAV) of $1.52 billion, down from $1.58 billion on March 31, according to the company’s mid-year financial results.
They report its “operative” net asset value as $2.22 billion, down from $2.24 billion six months prior. The aggregate fair value of Hipgnosis’ extensive portfolio was calculated by independent valuer Citrin Cooperman at $2.67 billion.
Speaking at the investor presentation, held at London’s Savoy Place, Hipgnosis’ founder and chief executive Merck Mercuriadis said he shared investors’ concern over the Guernsey-registered company’s share price, which has fallen by nearly 30% on the London Stock Exchange over the past six months as investor interest in music stocks has cooled. The share price at the close of trading on Monday was £0.81.5, down from £1.26.0 at the start of the year.
“I’m not going to pretend that the current share price is anything other than disappointing,” said Mercuriadis at the start of an almost three-hour presentation, which also included talks by Hipgnosis Songs Fund chief financial officer Chris Helm, Hipgnosis Song Management president and COO Ben Katovsky and chief music officer Ted Cockle, as well as a brief live music performance by rock guitarist Richie Sambora.
(Hipgnosis Songs Fund is the acquirer of music publishing and recording rights, while Hipgnosis Songs Management manages the publicly traded company’s catalog. There is also Hipgnosis Songs Capital ICAV, an investment vehicle established in partnership with Blackstone that earlier this year acquired Justin Timberlake’s back catalog, but is separate from the London-listed Hipgnosis Songs Fund.)
Mercuriadis said that Hipgnosis’ current share price “fundamentally undervalues the company” and he was confident the company’s extensive portfolio and proactive drive to grow revenues from its 146 catalogs, coupled with the continued growth of the global music industry, “supports our longer-term expectations for substantial revenue growth” and “will deliver superior shareholder returns over the medium term.”
Despite what Mercuriadis said was a “very challenging environment,” Hipgnosis operative net asset value per share remained steady at $1.8312 in the six months ended Sept. 30, which, when translated into pound sterling (at a sterling to dollar exchange rate of $1.2223), gave an equivalent net asset value of 149.82p as of Dec. 6.
Like-for-like pro forma (PFAR) revenues in the first half of the calendar year was $58.5 million, a 7.8% increase on the comparative period in 2021.
MSG Sphere, the long-awaited, globe-shaped venue under construction in Las Vegas, has been promised to revolutionize the concert-going experience. Before it even opens, however, MSG Sphere is transforming the corporate structure of its creator.
On Monday, MSG Entertainment announced new plans for an upcoming spin-off that will separate MSG Sphere, the next-generation music venue being built in Las Vegas, from the rest of its live music business.
The latest version of the proposed transaction results is a pure-play music company under the corporate name MSG Entertainment that includes venues such as Madison Madison Square Garden, Hulu Theater at Madison Square Garden, Radio City Music Hall, the Beacon Theatre and The Chicago Theatre. MSG Entertainment would also include the entertainment and sports booking business, the Radio City Rockettes and the Christmas Spectacular production, and long-term arena license agreements with New York Knicks and New York Rangers, which play their home games at Madison Square Garden.
The first iteration of the spin-off paired the live music business with MSG Networks, a regional sports network that carries live games of the Knicks, Rangers, New York Giants, New Jersey Devils, New York Islanders and Buffalo Sabres. That would have put the company’s two most mature divisions under one roof, separate from MSG Sphere and Tao Group Hospitality, the operator of restaurant and nightlife properties. MSG Entertainment would, however, combine the financially risky Sphere project with the more stable revenues of MSG Networks, which generated $608.2 million of revenue and $131 million of operating profit in the year ended June 30, 2022. The new plan “is optimal for maximizing shareholder value, while providing both companies with enhanced strategic and financial flexibility to drive long-term growth,” the company said in a statement.
The new spin-off plan puts MSG Networks with MSG Sphere and Tao Group Hospitality. The spin-off company will take the name MSG Sphere Corp and “would have enhanced flexibility to execute its business strategy and pursue global growth opportunities,” executive chairman and CEO James L. Dolan said in a statement.
The proposed transaction would be structured as a tax-free spin-off to all MSGE shareholders. Owners of MSGE Class A and Class B shares would receive a pro-rata distribution expected to amount to about a two-thirds economic interest in MSG Entertainment, the live entertainment company. The parent company, MSG Sphere, would retain approximately a one-third interest in MSG Entertainment.
The $1.8 billion MSG Sphere at The Venetian is slated to open in 2023 with a U2 residency. The spherical venue will provide a multi-sensory experience of audio and visuals for 20,000 standing spectators or 17,500 seated guests. It includes 160,000 square feet of video viewing space and an exterior exosphere with programmable LED technology.
Independent music company Concord is the latest to tap into a growing market for music royalty-backed securities with Concord Music Royalties, LLC, Series 2022-1, a $1.65 billion asset-backed security. The bond will be supported by mechanical, performance and synchronization royalties from more than 1 million assets.
The proceeds will be used to fund reserve accounts, pay transaction expenses, repay debt and for other general corporate purposes, according to a report by ratings agency KBRA.
KBRA gave Series 2022-1 a preliminary rating of A+ (on a scale ranging from AAA to D), citing the “large, diversified catalog with globally recognized songs and artists” such as R.E.M., Plain White T’s, Creed, Evanescence, Genesis, Phill Collins and Mike + The Mechanics — the latter three being purchased just two months ago.
The catalog generated $344.7 million in 2021, with 63% coming from recorded music and 37% from music publishing. More than 41% of the catalog’s assets were released more than 20 years ago and 23% are between 10 and 20 years old. About 3.5% of the catalog is comprised of frontline releases, defined by KBRA as “recently recorded and released music with little or no history,” and option rights that Concord can exercise for rights to future recorded music or publishing from artists in the catalog.
FTI Consulting put a $4.1 billion valuation on the catalog, according to the KBRA report. That’s about the same amount Billboard estimated Concord’s price tag would be when the company was exploring a sale in 2021 — before the purchase of the Genesis, Phil Collins and Mike + The Mechanics catalogs that Billboard estimated were worth at least $335 million and its acquisition of Australian music publisher Native Tongue. Concord had sought additional equity from its majority owner, the Michigan Retirement Systems pension fund, but turned to debt in 2020 to raise $600 million, which it used to pay down existing debt.
Among the offering’s sound recordings, Concord Music Group administers a majority and Universal Music Group distributes a majority. Concord Music Publishing administers most of the music publishing rights and ICE, ASCAP and BMI are the collective management organizations for most of the publishing rights.
Series 2022-1 contains two components: Class A-1 VFN, with a principal balance of $150 million and an anticipated repayment date of January 2026; and Class A-2, with a principal balance of $1.5 billion and an anticipated repayment date of January 2029. Class A-1 VFN will have a variable interest rate — the secured overnight financing rate plus a margin — and Class A-2 will have a fixed interest rate. The notes will pay interest quarterly.
Concord’s offering is the largest of the music royalty-backed offerings rated by KBRA in the last 12 months. KKR’s Hi-Fi Music IP Issuer II, backed by about 62,000 songs, raised $732.5 million in February. Crescendo Royalty Funding, a joint effort of Lyric Capital Group and Northleaf Capital Partners and backed by over 52,000 songs owned by Spirit Music Group, raised $303.8 million in Dec. 2021. Hipgnosis Music Assets 2022-1, backed by the Kobalt Music Copyrights Fund 1 that Hipgnosis Songs Fund acquired in 2020, raised $221.7 million in Dec. 2021.