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Deep Dive

Why The Music Publishing Market Is Still Booming — And How Long The Party Will Last

 Low interest rates and technology turned music publishing from an opaque business into a hot market for both buyers and sellers. Here’s how

Four years ago, attorney Jeff Biederman was having lunch with a publisher who had a prediction: The bull market for song catalogs would crater within six months. Prices would plummet. So, the publisher reasoned, Biederman should accept the offer on the table for one of his client’s catalogs.

Biederman, a partner at Manatt Phelps, laughs as he recounts the story. Fast forward to 2020, and the feeding frenzy for song catalogs remains not only unabated but increasingly frenetic.


“It has been feverish,” says Biederman. “There’s no diminution of interest at all.” Biederman says Manatt Phelps, which represents both buyers and sellers, has helped facilitate $690 million in catalog sales in the past six years alone.

“I’ve never seen this much deal flow in the marketplace in 26 years in publishing,” says Loeb & Loeb partner Derek Crownover.

Deals such as Hipgnosis’ recent Nov. 2 acquisition of 33,000 songs from Kobalt Music Copyrights Fund 1 for $322.9 million, Round Hill Music’s 2018 purchase of Carlin Music for $245 million and Concord’s 2017 purchase of Imagem for $550 million all point to the escalating value of company catalogs. Kobalt sold for 18.3 times net publisher’s share (NPS), and Carlin 16 times. In 2015, the going rate for market valuations was a multiple of 12 times.

Individual songwriter catalogs are also selling at higher values than ever before. Only three years ago, the top individual song catalogs brought a multiple of up to 16 times NPS, which at the time seemed astronomical. Now, A-list catalogs are hitting up to 23 times NPS. For example, Dolly Parton’s catalog of over 3,000 compositions, which she recently told Billboard she would probably sell “at the right time,” is valued at anywhere between $96 million and $184 million.

This unquenchable market also marks a dramatic shift from a decade ago, when the major players — Sony/ATV, Universal Music Publishing Group and Warner Chappell — dominated the landscape. While lawyers say that the majors are still highly competitive when they’re interested in a catalog, it’s independent publishers — backed by money from private equity and institutional investors with seemingly bottomless checking accounts — that are heating up the marketplace.

Companies are either getting swallowed up — as Big Deal was by Hipgnosis in August — or finding ways to gobble up assets themselves. Such was the case with Spirit Music Group, which in 2018 decided “we’re buyers, not sellers,” says chairman Jon Singer. The independent publisher’s owner, Lyric Capital Group, raised $350 million in equity from Morgan Stanley and debt financing from SunTrust Bank and Pinnacle Financial Partners, and has been on a shopping spree ever since.

Other major shifts in the last decade that have led to the buying bonanza include the growth of streaming, and, crucially, low interest rates that are unlikely to increase anytime soon. Those rates make the stratospheric multiples work. “If you have a lot of access to capital and the cost of money is 3% to 4% and you’ve got an asset that you think is going to grow at 5%, your investment is not at risk at a 20 times multiple,” says Crownover.

Also of importance, says Crownover, is technology, which has made number-crunching both easier and more accurate, transforming publishing from an opaque and obscure business into an understandable, forecastable industry. “Ten years ago, there were only certain people who understood publishing in the marketplace,” he says. “All the royalty statements were on paper. It was very hard to get the information manipulated. Now, there’s much more ability to source documents and do a deep dive on how the asset is performing from a royalty perspective.”

Hipgnosis’ entry as a full-fledged player in 2018 also kicked sales up a notch. Founded by Merck Mercuriadis with an initial fund of $300 million, its first purchase was a stake in The-Dream’s catalog. By 2018, Hipgnosis was trading on the London Stock Exchange and now has spent over $1 billion buying assets. (Round Hill Music, founded by former hedge fund manager Josh Gruss in 2011, held a similar public offering on the London Stock Exchange in mid-November that raised $573 million.)

“From the seller side, Hipgnosis has kept the pressure on for everybody,” says Biederman, while some of Mercuriadis’ competitors believe he is driving up prices.

Also on the uptick: Some publishers are expanding their portfolios to include masters. In the last several months, Primary Wave formed a partnership with Olivia Newton-John that includes the masters and publishing assets she owns, as well as acquired a stake in Whitney Houston’s publishing and master recording income streams, while Spirit Music Group purchased a portion of Tim McGraw’s masters as well as masters and publishing assets owned by singer-songwriter Ingrid Michaelson.

Owning masters and publishing together provides a smoother functioning income stream, says Spirit’s Singer. “You have both sides, you control it, you don’t have to worry,” he says. “It’s easy to license. We love that. We’d do those [deals] all day long, [but] they don’t come around that often, mainly because the major record companies own most of the masters.”

With interest rates expected to stay low — the Federal Reserve has committed to a near zero rate through 2021 and possibly into 2023 — and money continuing to flood the market, experts say they see no end in sight for the foreseeable future. Long term, the boom could slow when subscription services’ growth plateaus — though Spotify is testing price hikes in several markets that would increase payments to songwriters that could offset that if they are implemented. Also, there is a finite number of top-shelf catalogs, but that would likely only slow sales, not drop multiples. In the meantime, expect a few A-list songwriters who have been holding on to their publishing to see the value in selling. “Everybody says ‘never’ until the price is right,” says Biederman. “It just depends upon how many zeroes there are.”


Billboard Pro