Are we coming to the end of the music catalogue buying frenzy?
If you keep up with the various financial machinations within the recorded music industry, you’ll know that dozens and dozens of artists have sold a piece or all of their songwriting catalogue and publishing to large companies like Hipignosis, Primary Round Hill, and a bunch of others.
Bruce Springsteen, US$550 million. Bob Dylan, US$400 million. Sting, US$350 million. Deryck Whibley of Sum 41, Imagine Dragons, Killers, Alice in Chains, David Bowie, ZZ Top–the list goes on and on. Just this week, Chuck D sold a chunk of his stake in Public Enemy songs.
The artists are now enjoying their money. These companies, meanwhile, now have to make their money back and turn a profit for their investors. They’ll do that by finding new ways for these songs to generate money through licensing, publishing deals, and whatever else they can come up with.
The problem is that these companies have taken on a lot of debt. A LOT. That was okay when the stock market was flying and interest rates were low. But now that rates have spiked and stock markets are struggling, they find themselves in a bit of a pickle.
Hipgnosis, for example, is said to have burned through all its cash and is unable to raise more. In fact, Hipgnoisis, which spent billions, has not bought a single song in the last year. Not good considering that higher interest rates make it harder to service debt. All the other companies are facing the same issue. In fact, Hipgnoisis, which spent billions, has not bought a single song in the last year.
This could mean several things:
- The number of catalogue acquisitions will drop because they’ve become too expensive to purchase. Pink Floyd is currently shopping their catalogue for somewhere around US$500 million. Who has those kinds of funds in a high interest rate environment?
- Those who do strike a deal might find themselves taking less money for their music.
- And this is important: We may see the new owners of these catalogues accelerate their exploitation of these songs in order to bring in more cash faster.
- Alternatively, maybe old songs aren’t as valuable as first thought.
We’ll see what happens. Meanwhile, those who have already sold their catalogues are happily sitting at home counting their money having outwitted the bankers.