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 catalogues, or, in some cases, their teachers, for hundreds of millions of dollars.
Song management company Hipgnosis said it had acquired the rights to Bieber’s entire music catalog in an acquisition that “ranks among the largest deals ever for an artist under the age of 70.” While the terms were not disclosed, the price was reported by Billboard to be $200 million.
The news comes amid a broader trend, one that has been on the rise since Merck Mercuriadis founded Hipgnosis in 2018 and began buying the rights to legendary tracks. “What I wanted to do on behalf of the entire songwriting community is really establish music as an asset class and create a market,” Mercuriadis said Tuesday, equating the value of hit songs to gold or oil. “I wanted to show the financial community that these proven great songs have very predictable and reliable income and are therefore investable.”
Mercuriadis has certainly helped lead the way in doing so. In recent years, generational stars have signed nine-figure deals to sign over the rights to their catalogues. Bruce Springsteen sold his masters and publishing rights for $500 million. Bob Dylan sold his catalog for $300 million. And, younger artists have gotten in on the action too, with singers like John Legend and Iggy Azalea closing deals.
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So why are these deals taking place in recent years? For some reasons.
The streaming era has made music more valuable than ever. In the early years, Top 40 stations exercised a firm grip on music sales, sending fans into stores to buy physical CDs of their favorite artists. Now, services like Spotify and Apple Music have revolutionized the music industry. And it’s a business that’s still going.
“The streaming market, especially if you think globally, has been growing steadily,” said Serona Elton, a former record executive who now teaches as a professor of the music industry at the University of Miami Frost School of Music. . “It has expanded into new markets as the costs of cell phones, Wi-Fi and cellular services come down.”
At the same time, the pandemic deprived artists of touring revenue, forcing them to seek other money-making opportunities to expand their revenue stream. And the poor economic conditions created by the pandemic helped employers realize that music is a “recession-proof asset,” Elton said, explaining, “Even if someone loses their job, they’re still listening to music.”
Mercuriadis fully agreed, saying: “Our emotional barometer as human beings is married to music. If we’re living our best life, we’re doing it to a soundtrack of music. And equally, if we’re being challenged, whether it’s a pandemic or inflation…we console ourselves and run away with these songs. Songs are always part of our lives.”
Finally, there is the latest TikTok factor. Short-form video apps have accelerated music discovery, sending old tracks viral, boosting streams, and causing spikes in downloads. Which is to say that songs from the past are experiencing a surge in popularity.
All these factors are heating up the market. The Wall Street Journal reported that investors and music management companies “have been buying up catalogs for up to 30 times their average annual royalties.”
Elton indicated that there is some risk that these artists will sell to relatively new companies, such as Hipgnosis. Unlike legacy companies, these startups don’t have a long track record in music management. “Those of us who aren’t involved in buying and selling, but are watching, are wondering: how will this play out over time?” Elton asked.
But Mercuriadis argued that not only is he “managing these songs with great responsibility,” but his boutique-style firm is a better steward than legacy record labels. Labels, he said, often have a disparate set of goals, including creating new hits, which could distract them from the singular mission of managing old music. And, Mercuriadis noted, they manage massive libraries, not a narrower library of highly concentrated results.
“We are completely focused,” he said, “on managing the proven songs from the past.”