The general manager of Warner Music questioned the financial sense of some of the high-priced catalog acquisitions in recent months, after a series of contracts for songs by Fleetwood Mac and Barry Manilow signaled a modern gold rush in music rights.
“Both in 1849 and later in the Yukon, more people went bankrupt than they made money,” said Steve Cooper, managing director of Warner, the world’s third largest music company.
“When you… Pay north of a certain multiple, you start to enter the world of finance which lacks a certain degree of discipline,” he told the Financial Times. “I applaud them. people who know how to make money by paying 25 times [a song’s historic annual royalties]. God protects you.”
A combination of low and rising interest rates diffusion spawned a rush for music rights.
Registered in London Hipgnose has raised and spent £ 1.2bn on rights to hit songs since its launch in 2018 and has been on a buying spree, having struck deals with Neil Young, Jimmy Iovine and Lindsey Buckingham this year.
Hipgnosis has paid an average of 14.76 times the historical annual revenue of songs to acquire some of the rights to hits from artists such as Barry Manilow, Fleetwood Mac and Bon Jovi.
But founder Merck Mercuriadis said for some catalogs he paid a multiple as high as 22, which has been scorned by some music officials and industry analysts.
“Right now it’s a very favorable rate environment, and what we’re seeing is that a lot of people are moving money from traditional fixed income to. . . what they believe is a fixed income structure, ”Mr. Cooper said, referring to the predictable royalty payments generated by songwriting catalogs.
Bidders, including private equity groups, specialist buyers and music labels, fought for catalogs of older artists, whose music was given a new lease of life through streaming – thus doubling the value of music rights over the past decade.
Warner Music itself enjoyed an industry-wide recovery in music revenue as people switched to listening to paid subscriptions on Spotify and other audio broadcasters, generating a new source of income for music owners in the digital age.
Mr. Cooper’s comments came as Warner Music posted its highest quarterly revenue since the company was separated from Time Warner in 2004.
The label behind artists such as Lizzo and Ed Sheeran reported that total revenue rose to $ 1.3 billion in the three months to the end of December, up 6% from a year ago a year. The company posted adjusted net income of $ 114 million, down about 10 percent, which Warner attributed to unfavorable changes in exchange rates on euro-denominated debt.
Digital revenue for the quarter, which includes streaming on Spotify as well as royalties from social media companies, rose 17% from a year ago to $ 825 million.
As Spotify streaming matures, social media has been seen as the next frontier in how music labels can extract money from their songs. Warner Music signed a new license agreement with TikTok in December, fixing the payment of royalties when songs by Warner artists are played on the Chinese-owned social media app.