Justin Bieber selling past catalogs is frowned upon due to the artist’s youth.business news

Selling past catalog rights has become a well-known avenue for musicians.

yes Justin Bieber Not exactly breaking new ground sell the rights to his work Sold to Hipgnosis Songs Capital for $200 million (£162 million).

What’s a little frowned upon about the deal, though, is that Bieber, 28, is somewhat younger than many artists who have done so in the last few years.

Most of the big blockbuster deals don’t involve young artists, but so-called “legacy” acts like Bob Dylan, Neil Young, Bruce Springsteen and Fleetwood Mac.

The reason Bieber and other artists sell their rights is simple. They receive a lump sum to give them and their loved ones financial security.

The rationale for buyers is that songs can be turned into revenue streams in a variety of ways, including streaming, physical purchase of CDs or vinyl records, downloads, live performances, or licensing use to filmmakers. It means you can. , TV shows, and increasingly computer games.

By purchasing a large back catalog at scale, buyers build a portfolio diversified enough to appeal to all tastes capable of generating consistent revenue streams regardless of changing trends. can.

Buyers such as Hypnosis argue that by specializing in this space, they can be more successful in commercializing their songs by actively managing their portfolios.

However, Bieber’s deal is a little riskier from a buyer’s perspective due to his relatively young age.

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Sting sells music rights
Why do so many big stars sell their music rights?

Bieber still has years ahead – for better or worse

A number of artists like Springsteen and Dylan are well known. With an established audience and fan base willing and continuing to pay for their music, the revenue their work generates is pretty predictable.

Given their age, it’s unlikely that their work will be embroiled in scandals that would make it toxic to consumers.

Bieber, on the other hand, still has years ahead of him, enough to alienate his fanbase either by his actions or by producing subpar new productions that alienate fans from his past efforts. I have time

Bowie was a pioneer in monetizing past catalogs

Music fans won’t be surprised to learn that one of the pioneers of effectively monetizing the catalog of the past was one of pop’s greatest innovators, David Bowie.

In 1997, he and his management came up with the idea to sell asset-backed securities to investors and pay them returns from a portion of future royalties over the next ten years. He raised $55 million (£44 million) from the sale of these “Bowie Bonds”, some of which ironically had bought back the previous recording rights from his former manager.

Hipgnosis founder Merck Mercuriadis said that by more aggressively commodifying back catalog rights, by trying to make songs themselves an asset class, and by doing so through stock-market-listed means. , built on that idea.

Mercuriadis, former manager of artists such as Beyoncé, Elton John, Morrissey and Guns N’ Roses, has raised £1.2bn from city investors including Axa and Investec. in any economic situation. This allowed him to purchase the rights to even more songs.

There is a race for the founders of Hypnosis

Mercuriadis (frontman Nile Rodgers is a close friend) and Barry Manilow, whose portfolios include works by Blondie and Chic, have competitors.

His rivals include New York-based Primary Wave, which owns a 20,000-song catalog featuring works by artists such as Aerosmith and Bob Marley, and Round, which, like Hipgnosis, is listed on the London Stock Exchange. Hill Music and others. Its catalog includes the Beatles’ hits “From Me To You” and “She Loves You,” as well as Rolling She’s Stones’ first single, “I Wanna Be Your Man,” written by the Beatles. .

Then there’s the iconic Los Angeles-based artist group founded by music industry veteran Irving Azoff, former manager of the Eagles and Jon Bon Jovi.

We own the rights to the works of artists Linda Ronstadt, Dean Martin, Nat ‘King’ Cole and The Beach Boys.

There are other large established global music groups that are also busy buying rights. For example, Japan’s Sony bought the rights to Springsteen’s back his catalog last year, and US-based Universal Music bought Dylan’s work for him at the end of 2020. Meanwhile, Warner Music bought the publishing rights to Bowie’s back catalog last January for $250 million. Year.

Skepticism about business models

Another curiosity about the Bieber deal speaks to skepticism about the business model.

Hipgnosis Songs Fund shares are priced at a significant discount to the company’s net asset value (the value per share that would be realized if the company were split, the assets were sold, and the proceeds were returned to shareholders). are traded at

This reflects the fact that the market doesn’t believe some of the songs in the company’s portfolio are worth as much as the company claims. Hipgnosis’ catalog is worth $2.2 billion (£1.78 billion), but the company’s stock market valuation is now just over £1 billion.

The price cut, which Mercuriadis said last month was “unacceptable,” has prevented the company from raising more money from investors to buy more songs.

As such, Bieber’s catalog was purchased by the similarly named Hipgnosis Songs Capital, rather than the Hipgnosis Songs Fund. Hipgnosis Songs Capital is not listed on the stock market, but is privately owned by his equity giant, Blackstone.

The latter is advised by Hipgnosis Song Management as well as the Hipgnosis Songs Fund. To make things even more confusing, Blackstone is majority owned and controlled by Mercuriadis.

The deal with Bieber is unlikely to be the last deal by Hypnosis Songs Capital. Reportedly a prime candidate to buy Pink Floyd’s past catalogue, it was sold due to a strained relationship between band members Roger Waters and David Gilmour. is said to have been postponed.

More broadly, other deals are likely to take place, many involving British artists. Thanks to the weaker pound, their catalog is more valuable to US buyers who pay in dollars.