This Week In Royalties: Merlin's Distributions Soar as UMG Wants a Prince Refund. (Also Concord/Imagem & Reservoir/Century)

Jun 09, 2017

Benom Plumb, Assistant Professor of Music Industry Studies at the University of Colorado Denver, reviews the biggest stories of the week affecting music royalties. He is a music industry professional, not an attorney.

Concord Bicycle Music Acquires Indie Publisher Imagem (NY Times) / (Billboard)
Benom’s Take: This is an interesting case study for music royalty investments. Let’s consider the backstory: Concord Music Group (Paul McCartney, Stax Records, Paul Simon, James Taylor, Creedence Clearwater Revival) was purchased by private equity firm, Wood Creek Capital Management (an affiliate of MassMutual), four years ago. In 2015, Concord then merged with the Bicycle Music Company and began a series of acquisitions including successful record labels, Wind Up Records and Razor & Tie. The interested parties on this deal multiplied even further now that Wood Creek has a successor, Barings Alternative Investments, in addition to other investors. With the Imagem acquisition, Concord is reported to have doubled the size of the company to $1 billion. The Imagem catalog will add hits from a few notable mentions such as Rodgers & Hammerstein, Boosey & Hawkes, Justin Timberlake, Phil Collins, Vampire Weekend and Daft Punk.

The New York Times article goes on to say that the Imagem deal is “...the latest in a frothy market for music publishing...” and that “..investors have viewed publishing catalogs as a safer investment.” Billboard reports the deal was approximately $600 million, while the New York Times reported that Imagem had sought out a $650 million purchase price about three years ago and was unsuccessful. It’s also interesting to note that Music Business Worldwide reported the $600 million purchase price may have been a 10x - 12x multiple. All in all, Concord Bicycle is on a roll. The company is not only a major competitor in the music industry, they have proven to be an attractive investment for the financial world as well. I see this whole Concord Bicycle backstory, not just the Imagem acquisition, as a great example of how attractive music royalty investments are. Everyone wants a piece of that pie!

Reservoir Acquires Century Media’s Heavy Metal Publishing Catalog (Music Business Worldwide)
Benom’s Take: More acquisition news from competitive independent companies. Reservoir’s acquisition of Century Media’s music publishing catalog includes numerous successful song catalogs in the worldwide heavy metal genre. This deal comes after Sony Music acquired Century’s label and distribution operations about two years ago for a reported $17 million. In addition to the music publishing copyright assets, Reservoir also acquired over 350 songwriter contracts that will include future music publishing works.

So this deal is not only an alternative asset investment for Reservoir, it also entails the responsibilities and obligations of a bona fide music publisher. Maintaining music publishing assets and collecting royalties is one thing - but maintaining sensitive relationships with creative professionals and helping develop their future creative works, is entirely another, and not for the inexperienced or faint of heart.

 Merlin Distribution Revenues Soar 52% to $353 Million (Music Week)
Benom’s Take: It’s always good to see positive news for independent artists and record labels. We mentioned Merlin in last week’s news regarding Sony Music merging it’s indie distribution divisions and how Merlin’s CEO wasn’t impressed by the merger. Merlin is a strong competitor and is truly an independent company, they are not in any way affiliated with the major record companies. Merlin is responsible for handling global digital rights and licensing for the independent label sector and this news comes amidst a steady flow of data showing growing revenues industry-wide due to streaming. Though the video streaming numbers suffered for Merlin, this news is still another data point to add to the mix of positive royalty growth we’ve seen over the past year.

Prince Estate Battle Over Recorded Music Begins As Universal Seeks $31 Million Refund (Billboard)
Benom’s Take: This is so messy and unfortunate. As I mentioned in another post, the Prince tragedy just emphasizes that we all need to have a will and our affairs in order before we pass. This particular court battle comes down to, in my opinion, someone’s error or incompetence conducting due diligence before finalizing a deal. Not to mention the Prince estate is not experienced in the mechanics of the music business. As the article quotes Prince’s former attorney: “There are too many people involved in the estate that just don’t understand the entertainment business.”

The rights in question to Prince’s recorded music are claimed by Warner Music Group until 2020, but the Prince Estate and Universal Music Group finalized their deal thinking the rights reverted to Prince in 2018. It’s reported that the Warner contracts were reviewed before finalizing the deal with Universal, so the $31 million  question is - why the discrepancy? What happened? I suppose it’ll all come out in court, but as the article explains, the details of this agreement are complex and confusing. For the sake of Prince’s legacy, let’s hope the estate can sort things out.