Why was Sony Music keen to pay megabucks for Queen and Pink Floyd’s catalogs?

One of many greatest music enterprise tales of the yr has been lacking one thing: official affirmation.

Did Sony Music Group (SMG), led by Rob Stringer, actually pay USD $1.2 billion to purchase Queen’s catalog, together with world publishing rights and recorded music rights exterior North America?

And did SMG then splash an extra USD $400 million on Pink Floyd’s recorded music catalog, plus ‘title, picture, and likeness’ rights?

Sufficient business sources and credible media reviews have mixed to quasi-confirm that sure, it did.

Earlier this month, chatting with Bloomberg in Los Angeles, SMG boss Stringer publicly verified for the primary time that Sony has purchased each these historic catalogs (even when he didn’t verify the value).

Stringer additional confirmed that Sony not too long ago acquired a stake in Michael Jackson’s catalog, a deal which is believed to embody 50% of the King of Pop’s music rights portfolio.

Should you imagine business whisperers (MBW included), Sony — backed by money from Apollo — has cumulatively spent over $2 billion mixed on MJ, Queen, and Pink Floyd.

So why did Stringer and Sony lay down such huge sums on these classic catalogs? And, Jackson apart, why has Sony guess so large on ‘basic rock’ in an age when it’s removed from the dominant style on streaming providers?

Listed here are three good causes…

1) ‘eventized’ potential

At Bloomberg’s occasion this month, Rob Stringer confirmed that Sony acquired “title, picture, and likeness” rights to 2 of the three acts in query. We all know Pink Floyd is one; he didn’t verify the opposite.

Stringer prompt that buying these ‘NIL’ rights would allow Sony to creatively and financially take part within the “experiential potential” and “occasion potential” they provide.

Pictures of ABBA Voyage instantly spring to thoughts: the thought of replicating the imagery and sound of a legendary act, in a number of venues internationally, through cutting-edge know-how.

May ABBA Voyage-esque productions, owned by ‘title & likeness’ domain-holders, ultimately turn out to be the brand new ‘tribute band’?

If that’s the case, no surprise Stringer’s seeing greenback indicators.

The Australian Pink Floyd (TAPF), to select one instance, has commonly appeared in Pollstar’s quarterly Prime 100 highest-grossing live performance lists in recent times.

“It’s like an act touring times-five – that’s fairly profitable!”

Rob Stringer on Sony’s stake in MJ: The Musical, and the actual fact it might play in a number of cities on the identical night time 

The persevering with recognition of the Aussies’ copycat Pink Floyd ‘expertise’ isn’t any nice shock: individuals generally overlook that the true Pink Floyd secured the biggest-grossing world reside present of the complete of the Eighties with the A Momentary Lapse Of Cause tour.

(Sure, it grossed much more than Michael Jackson’s legendary Unhealthy tour that decade – although Floyd performed 197 reveals vs. MJ’s 123.)

The thought of a Sony-owned or co-owned “experiential” manufacturing, enjoying in a number of places every night, is clearly one Stringer likes very a lot.

“[Sony] has a share of MJ: The Musical, a share with the Michael Jackson property, as does our image firm,” Stringer confirmed on the Bloomberg occasion.

Stringer mentioned variations of this musical could be enjoying in 5 cities worldwide over the following yr (doubtlessly on the similar time).

That, he mentioned “is like an act touring times-five – that’s fairly profitable!”

2) Basic Rock isn’t lifeless… it’s streaming like wild

‘Identify, Picture, and Likeness’, then – and the place possession of it would lead within the reside area – is an important a part of why Sony spent what it did on these catalogs.

So too is bodily music and merch gross sales – one other beneficiary of ‘NIL’.

However there’s a extra fashionable motive why Stringer and SMG splashed the money: streaming.

At this level, you may suppose, “Streaming’s all very properly for Michael Jackson, however classic rock like Pink Floyd isn’t precisely down with the youngsters.”

On the floor, you’d be proper: Beneath you’ll be able to scan a chart primarily based on Luminate‘s current mid-year market report (and different comparable historic reviews displaying half-year knowledge for the US).

It reveals the recognition of the three greatest genres within the US – ‘Rock’, ‘Pop’, and ‘R&B/Hip-hop’ (as categorized by Luminate) – within the Jan-Jun interval over the previous few years.

As you’ll be able to see, ‘Rock’ has barely grown share throughout this timeline, however: (a) It hasn’t spectacularly gained market share, up 110 foundation factors since 2019; and (b) that’s regardless of a major decline (minus 500 foundation factors) in market share for ‘R&B/Hip-hop’ since 2020.

(Latin Music has been the large market share gainer since H1 2019, rising from a 4.2% mid-year share that yr to 8.3% in H1 2024.)

By taking the above stats and making use of them to the whole audio streams within the US market in H1 2024 (all 665.8 billion of them), we are able to estimate the whole stream volumes for every style within the interval.

That is arguably a greater illustration of the gulf between the most well-liked genres within the States.

Once more, ‘Rock’ doesn’t do badly on this image, however as you’d count on, it’s dwarfed by ‘R&B/Hip-hop‘.

However now look.

Luminate’s mid-year 2024 report contains the slide beneath, which supplies an approximate impression of the proportion of whole streams inside every style which might be from tracks which might be much less than 5 years previous vs. tracks which might be extra than 5 years previous.

This tells us, in a single snapshot, that the recognition of ‘R&B/Hip-hop’ seems to be way more reliant on new releases than ‘Rock’.

Over 1 / 4 (26.7%) of R&B/Hip-hop tracks streamed in H1 2024 had been much less than 60 months previous, whereas almost three-quarters of ‘Rock’ tracks (70.5%) had been extra than 60 months previous.

Now, let’s take the approximate figures above and apply them to precise H1 2024 US stream volumes divided by style.

This provides us new perception into how every style fares in actual phrases in the event you solely rely streams of music older than 5 years/60 months (‘Deep Catalog’).

(Warning: a few of that is guesswork primarily based alone eyes. Luminate confirms numbers for 3 genres within the above chart, however for different genres it gives an indicative coloured chart. For instance, trying on the above, it seems that 48% of ‘R&B/Hip-hop’ streams – the yellow bar – had been of ‘Deep Catalog’ within the interval, judging by the values on the Y axis.)

Conclusion: while you solely think about music older than 5 years, within the first half of 2024, ‘Rock’ near-or-less stored tempo with ‘R&B/Hip-hop’.

Price a point out right here: Queen is at present the 51st most-streamed world artist on Spotify of all time, with 23.7 billion performs thus far.

Michael Jackson is 94th with 15.56 billion performs.

Pink Floyd is 209th, with 10.07 billion performs – forward of the likes of Mariah Carey, The Rolling Stones, Enrique Iglesias, and ABBA.

3) Once they zig, you zag… particularly if forex’s in your facet

There are many different potential elements price mentioning for Sony’s big-spending on catalog music titans in current months, together with curiosity and change charges in Japan.

As rates of interest have ballooned within the ‘West’ over the previous few years, limiting the willingness of blockbuster spending on music catalogs, rates of interest in Japan – set by the Financial institution Of Japan (BoJ) have usually been destructive in the identical interval, at round -0.10%.

Extra not too long ago, Japan’s rates of interest have climbed to +0.25%, the very best since 2008, however nonetheless significantly decrease than the US/UK/EU (see beneath).

In the meantime, Japan’s Yen has weakened considerably towards GBP and USD in recent times.

Instance: as not too long ago as February 2021, one US Greenback would have price you 0.0092 Yen; at present, that very same greenback prices 0.0065 Yen.

Placing that in less complicated phrases: in the event you wished to spend USD $400 million on Pink Floyd’s catalog at present, and also you had been changing the money to pay for it into USD from Yen, it could at present price you round a 3rd much less (in Yen phrases) than it did three years in the past.

Sony Music‘s father or mother is, in fact, the Tokyo-HQ’d Sony Corp.

Sony would, subsequently, have the ability to make the most of forex traits by buying US/UK-based catalogs with its Japan-based treasury. (And it’s a significantly giant treasury: Sony Corp ended its newest FY in March with 1.907 trillion Yen in money and money equivalents – at present price round USD $12.5 billion.)

The Japanese company would additionally doubtlessly have the ability to borrow debt domestically at far cheaper charges than US, EU, or UK firms if required.

(Then once more, Sony Music Group won’t even have wanted all that a lot cash from its father or mother: don’t overlook that Apollo led a $700 million “capital resolution” for SMG earlier this yr, cash that may have been put to good use within the Pink Floyd deal, and sure the Queen deal too.)

Backside line: Sony Music Group’s entry to capital isn’t in query.

This may partly assist clarify why, when its rivals have appeared to ‘zig’ on blockbuster single-artist catalog offers – slowing down the big-spending we noticed on the peak of the market – Sony has ‘zagged’, spending greater than ever. 

Common Music Group, for instance, has but to publicly announce any large-scale catalog acquisitions through Chord Music — the $1.85-billion-valued automobile UMG minority-owns (and Dundee Companions majority-owns), as introduced in February.

We’ve additionally seen general worth slowdowns in catalog pipeline offers previously 12 months at firms together with Reservoir and BMG, whereas consolidation has hit music’s catalog M&A sector elsewhere: witness the sale of music catalogs from Spherical Hill, Opus, and Vine Various Investments to rival music firms.

(It’s solely proper to level out that, amid this slowdown, the likes of Harmony and Litmus have nonetheless pulled off a number of nine-figure acquisitions of artist catalogs.)

Right here’s one final stat to chew on: earlier this yr, Blackstone paid USD $1.584 billion to purchase Hipgnosis Songs Fund and its share of 40,000 songs from its public house owners. This deal gave HSF an enterprise valuation within the area of $2.2 billion.

That determine ($2.2 billion) is roughly, in keeping with reviews, the identical quantity Sony has spent on simply three catalog offers: Queen, Pink Floyd, and 50% of Michael Jackson.

Chatting with Bloomberg this month, Rob Stringer prompt that Pink Floyd’s recorded music catalog was primarily priceless, and that purchasing it was tantamount to an artwork collector shopping for a Picasso.

In some methods, that analogy doesn’t fairly match: somebody buying a Picasso is unlikely to earn tons of of tens of millions from it in royalties and T-shirts over the course of its copyright-able lifetime.

But in one other sense, Stringer’s analogy completely mirrored his firm’s philosophy in these offers.

In spite of everything, no critical artwork investor buys a priceless Picasso with out feeling assured that in ten years, or fifty years, will probably be price considerably extra than it’s at present.Music Enterprise Worldwide