Music superstars are cashing in on a red-hot market.
Justin Bieber on Tuesday joined a growing list of iconic singers who have struck mammoth deals to sell their music catalogs — or, in some cases, their masters — for hundreds of millions of dollars.
The song management company Hipgnosis said that it had acquired the rights to Bieber's entire music catalog in an acquisition that "ranks among the biggest deals ever made for an artist under 70." While the terms were not disclosed, Billboard reported that the price tag was a hulking $200 million.
The news comes amid a broader trend — one that has been on the rise since Merck Mercuriadis founded Hipgnosis in 2018 and started buying up rights to legendary tracks. "What I wanted to do on behalf of the entire songwriter community is to really establish music as an asset class and create a market," Mercuriadis told me on Tuesday, equating the value of hit songs to gold or oil. "I wanted to demonstrate to the financial community that these great proven songs have very predictable, reliable income and therefore they are investable."
Mercuriadis has certainly helped lead the way in doing that. In the last few years, generational stars have inked nine-figure deals to hand over the rights to their catalogs. Bruce Springsteen sold his masters and publishing rights for a reported $500 million. Bob Dylan sold his catalog for a reported $300 million. And, younger artists have taken part in the action too, with singers such as John Legend and Iggy Azalea striking deals.
So why are these deals taking place in the last few years? For a few reasons.
The streaming era has made music more valuable than ever. In the early aughts, Top 40 stations exerted a firm grip on music sales, sending fans to stores to purchase physical CDs of their favorite artists. Now, services like Spotify and Apple Music have revolutionized the music industry. And it is a business that is still on the advance.
"The streaming market, especially if you think globally, has been steadily growing," Serona Elton, a former recording executive who now teaches as professor of music industry at the University of Miami Frost School of Music, told me. "It has expanded into new markets as the costs of cellphones and wifi and cell services go down."
At the same time, the pandemic starved artists of touring revenue, forcing them to look at other moneymaking opportunities to expand their revenue stream. And the poor economic conditions created by the pandemic helped businesspeople realize that music is a "recession-proof asset," Elton said, explaining, "Even if someone loses their job, they're still listening to music."
Mercuriadis wholeheartedly agreed, telling me, "Our emotional barometer as human beings is married to music. If we are living our best life, we are doing it to a soundtrack of music. And, equally, if we are being challenged, whether through a pandemic or inflation ... we take comfort and escape with these songs. Songs are always part of our lives."
Finally, there is the more-recent TikTok factor. Short form video apps have accelerated the discovery of music as they send older tracks viral, driving streams and prompting spikes in downloads. Which is to say that songs of the past are experiencing a surge in new popularity.
All of these factors are heating up the market. The Wall Street Journal reported that investors and music management companies "have been buying catalogs for as much as 30 times their average annual royalties."
Elton indicated that there is some risk for these artists selling to relatively new companies, such as Hipgnosis. Unlike legacy companies, these new businesses don't have a long track record managing music. "Those of us who are not involved in the buying and selling, but are watching, are wondering: how is this going to play out over time?" Elton asked.
But Mercuriadis argued that not only is he "managing these songs with great responsibility," but his boutique-styled firm is a better steward than the legacy record labels. The labels, he said, often have a disparate set of goals, including creating new hits, which could distract them from the singular mission of managing older music. And, Mercuriadis noted, they manage massive libraries — not a narrower library of highly concentrated hits.
"We are fully focused," he said, "on managing the proven songs of the past."
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