Does that song you hear on your phone, radio, or movie theater sound familiar? Private equity, the industry that bankrupts companies, cuts jobs, and increases mortality rates in the nursing homes it buys, They make money by gobbling up the rights to hit movies and sending them back to the present day. The result is a remarkably bland music scene, as financiers cannibalize the past at the expense of the future, making it even harder to cultivate new artists whose contributions enrich the culture as a whole.
Take Whitney Houston's 1987 hit “I Wanna Dance With Somebody (Who Loves Me),” for example, which was written by Primary, a music publisher backed by two private equity firms. It was acquired by Wave in late 2022 as part of a $50 million to $100 million deal. The song recently received a reboot across our hippocampus through a film about the singer, unsurprisingly titled “I Wanna Dance With Somebody,” which will propel streaming of this song and her hits. It was helpful. Primary Wave has a variety of agreements with artists and their estates, including publishing rights, publicity rights, and recorded music revenue streams, including Whitney Houston's signature fragrances and unreleased recordings by Houston. He also contributed to the introduction of non-fungible tokens based on . .
Hoarding the rights to proven hits, dusting them off, and dressing them up as movies may make a good impression at shareholder meetings, but it does little to strengthen a sustainable and vibrant music ecosystem. Like farmers struggling to survive the winter, we're eating art seed corn, given another industry upended by private equity.
Private equity firms have poured billions of dollars into music, believing it to be a reliable and growing source of income. Investors spent $12 billion on music rights in 2021 alone, more than the entire decade before the pandemic. It's pocket change in an industry with $2.59 trillion in uninvested assets, but music industry veterans see the investment as a sign of confidence in an industry still recovering from a dark decade and a half led by streaming. It was welcomed as such. The combination of reduced touring income due to the coronavirus and concerns about tax hikes, combined with a frothy mood, has made selling catalogs for hundreds of millions of dollars attractive for many artists, including Stevie Nicks and Shakira. .
How widespread is the Wall Street takeover? The next time you listen to Katy Perry's “Firework,” Justin Timberlake's “Can't Stop the Feeling,” and Bruce Springsteen's “Born to Run” on Spotify or Apple Music, you private investment firms Carlyle, Blackstone, and Eldridge. A portion of the royalties from Luis Fonsi's “Despacito'' will be donated to Apollo. As for Rod Stewart's “Do Ya Think I'm sexy,” no matter who likes you, it's a gold mine for HPS Investment Partners.
Similar to the major Hollywood studios that continue to pump out movies tied to already popular titles, the music industry's new masters are building expanded multimedia worlds around many of the Cold War hits. This is how they squeeze out acquisitions. Musicians, TV tie-ins, flashy celebrity biopics, and more. As big bucks bring these aging phenomena back into our cultural consciousness, lower-class artists will vie for the scraps of the algorithm, with music streaming giant Spotify recently banning songs with fewer than 1,000 streams per year. payments have been abolished.
The same harsh logic that led to the closure of Toys R Us and the collapse of media brand Vice is also affecting our music. Historically, record labels and music publishers have been able to use royalties from old hits to take risky bets on unproven talent. But “why sacrifice the catalog and spend time trying to create something new?” asked Merck Mercuriadis, a former manager for Beyoncé and Elton John who founded Hypnosis.
Instead, self-proclaimed destroyers can remove my old hits and turn them into new ones. Nearly four years ago, the publicly traded Hypnosis Songs Fund bought a 50 percent stake in funkster Rick James' catalog. This catalog includes his irresistibly catchy 1981 hit “Super Freak.” To monetize the prize money, Hipgnosis found a lightly modernized update to the “Super Freak” track, enlisted Nicki Minaj to enlist his songwriting staff, and voila! In 2022, Minaj's “Super Freaky Girl'' is basically the pop-rap superstar rapping “''. “Super Freak” became their first No. 1 single that wasn't a joint release. Hipgnosis touted this victory in its annual report.
This disruption will only further weaken an industry that already has little economic incentive to create something new. In the 1990s, bands sold 10,000 albums and earned about $50,000 in revenue, as musician and independent label founder Jenny Twomey recently wrote in Fast Company. was completed. To earn the same amount in 2024, he will need to collect 1 million streams across the band's albums. This is almost enough for each song to be in the top 1% of tracks on Spotify. While music industry revenues have recently hit record highs and major labels are making record profits, the streaming platform model is skewed toward megastars with a portion of every penny trickling down to artists. It means that.
Fortunately, it brought us Whitney Houston's perfume (Primary Wave, created through a partnership between Ms. Houston's estate and a perfumer) and Smokey Robinson's watch (through a partnership with Shinola). Some macroeconomic forces are changing. That surge subsided as interest rates rose. In February, word surfaced that private equity giant KKR was quietly exiting the music industry. Most recently, “Super Freak” owner Hipgnosis and his Songs Fund cut the value of his music portfolio by more than a quarter following a shareholder revolt. A long-touted deal to sell Pink Floyd's catalog for an offer of $500 million and Queen's catalog for $1.2 billion has yet to publicly come to fruition.
And that's probably okay. All music is derivative on some level – outside of courts and boardrooms, music has a folk tradition of everyone borrowing ideas from everyone – but artists who are already wealthy It's hard to argue that we should receive 1990s-level compensation for such flagrant recycling fees. This is what the private equity cohort is demanding. For example, in a music world without sequels to theme park Dark Side of the Moon or Bohemian Rhapsody movies, it seems like there's a little more room for fresher sounds to breathe.
Additionally, subscription growth for streaming services such as Spotify and Apple Music is likely to slow as limited customer numbers are maxed out. As growth slows, the value of music copyrights is expected to level off. Perhaps there will be more money left over for musicians just starting their careers.
Music is priceless, but for the music industry and the technology companies that currently distribute its products, a song is an instant dopamine hit in an endless scroll, and musicians are rewarded accordingly. will be paid. Wall Street didn't start the systematic devaluation of music, but it brought this grim reality into sharp relief. Private equity's foray into music copyright may have been less a sign of a gold rush and more of another canary in the coal mine.
Musician groups are fighting for fairer pay, and this month, Rep. Rashida Tlaib of Michigan and Rep. Jamal Bowman of New York (both Democrats) announced an initiative aimed at increasing streaming pay for artists. submitted a bill. While these efforts are sure to face fierce opposition, it's long past time for the music industry to try something new. We need to make it important again to make music enough for a future John Lennon to pick up a guitar.