Music as an Investment – Part 2: BMG re-enters the music rights business

Bertelsmann Music Group (BMG) is an interesting case of a company exiting the music business in the 2000s and re-entering it in 2009 to invest billions of dollars in publishing and master catalogues and to become the fourth largest music company in the world behind the three majors – Universal, Sony and Warner. BMG’s re-entry into the music industry thus marks the first phase of the boom around the purchase of music rights, which is examined more closely in this case study of BMG.

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Music as an Investment – Part 1: An Overview

Until a few years ago, music publishing was considered to be a rather boring business field in which music rights are acquired and licensed for various uses. This business model has not principally changed, but music rights have become a speculative investment in recent years, when new players such as Hipgnosis, Primary Wave and Round Hill entered the market with spectacular music catalogue acquisitions in the multi-digit million range.

This blog entry traces the development of the music rights market and the most important players in recent years and is the introduction to a multi-part blog series on “Music as an Investment”.

The Global Music Publishing Market – An Analysis

In a Music Business World Wide article[1], music industry analyst Will Page calculated a value of US $11.34bn for the global music publishing market in 2014. The number comprises of US $7.55bn for the collection of performance fees, US $1.32bn for mechanical collections and US $0.35bn for private copying collections by CISAC[2] members and US $0.42bn for non-CISAC mechanical collections (e.g. Harry Fox Agency collections). Further US $1.70bn of revenue have to be added for music directly licensed by the publishers (“grand rights” and synchronisation rights).

 

Figure 1: The global value of the music publishing market in 2014

Source: After Music Business World Wide, “$25 billion: The best number to happen to the global music business in a very long time”, December 10, 2015 (retrieved January 19, 2016)

 

The analysis highlights that music publishing is as relevant as the recorded music industry with a global market volume of about US$ 15bn. Therefore, this blog post analysis the global music publishing market in a long-term perspective and investigates economic relevance of music publishing for the music majors – Universal Music Group, Sony Music Entertainment and Warner Music Group – as well as the structure of the global music publishing market.