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Penny Fractions: When Wall Street Entered Music Publishing

Hello, folks! I want to say thank you to those of you who joined the last couple of reader calls. If
Penny Fractions
Penny Fractions: When Wall Street Entered Music Publishing
By David Turner • Issue #129 • View online
Hello, folks! I want to say thank you to those of you who joined the last couple of reader calls. If you’re interested in coming to the next one on June 10th at 7pm EST, sign-up here. I should also note that I’ll be taking next week off and will be back on June 10th. If you enjoy this newsletter, please do forward or recommend it to friends, or perhaps check out my Patreon! If you’re a recent subscriber of it, please let me know if you want me to send you stickers! 

Last December, Music Business Worldwide posed the question: ‘Who’s the Biggest Publisher in the World?’ The inquiry was sparked by Sony’s $2.3 billion acquisition of EMI Music Publishing in 2018 and note the contrast: the Jackson Estate and the Mubadala Investment Company. The former is the estate of a once-in-a-generation pop star; the latter is an Abu Dhabi sovereign wealth fund with total assets worth over $300 billion. A slightly odd pairing but one that shows just how far and removed the original artists are from the key stakeholders in the industry. Publishing, like many industries, laid out a welcome mat for finance through the 80s, and that’s where we’re starting this week’s abridged historical lookback at music publishing.
A Story of Four Publishers
By the mid-1980s there were a handful of major music publishers: Warner, Chappell & Co., CBS Songs, and EMI. This relatively new oligopoly holds roots in the 1960s when music executives and labels lined with deep pockets began an accelerated trajectory of collecting small publishers. Not yet even a billion-dollar industry, Freddy Bienstock, a former song plugger that helped place songs on Elvis Presley’s films, started picking up song catalogs in the mid-60s. Bienstock was subject to a 1985 New York Times profile, which talks about how he, along with Rodgers & Hammerstein estates and investment firm Wertheim & Co., purchased the Edward B. Marks catalog for $5 million a couple of years prior. The tension between artists, managers, and labels over these rights goes back to the top of the 20th century, but finance entering this already-fraught relationship pushed artists further away from the bargaining table and put more money in the pocket of spend-ready firms. (A high profile mid-century example of this was when ATV Music Publishing, a part of the British television company Associated Television, bought Northern Songs, which controlled a majority of the Beatles’ catalog.) 
$100 million is the price tag that announced a new era of money in music publishing. In 1984, Wertheim & Co. got the crew back together with Bienstock and the Hammerstein estate to buy Chappell (then the world’s largest music publisher) from Polygram. The product of Dutch and German conglomerates, Polygram bought Chappell from its original family owners in 1968. The Wertheim purchase followed a Federal Trade Commission blocked attempted merger between Polygram and Warner Music in March. Wertheim’s investment group’s ownership would be brief, as three years later Warner would purchase Chappell off their hands for $200 million. CBS, burdened with sudden debt after Ted Turner’s failed takeover, let go of CBS Songs to SBK Entertainment for $125 million, only for Thorn-EMI to purchase the company for $337 million three years later. The constant swapping shows that James Harmon, then Wertheim Vice Chairman, understood the direction his business nudged the industry in when speaking to the Los Angeles Times in 1985
Some people see music publishing as a dull, nickel-and-dime business because publishers collect very modest royalty sums from thousands of copyrights they own or administer all over the world…We saw a business that was consistent, with many different and stable sources of revenues, that didn’t have the volatility of the other more glamorous areas of the entertainment industry, which didn’t require heavy spending and which was only going to increase with the new changes in the delivery of music, namely music videos and compact discs.
The 80s saw multi-million purchases for catalogs suddenly become the norm. In 1985, the Michael Jackson Estate bought ATV Music for $47.5 million, mostly for the Beatles catalog. Sony, after purchasing CBS Records, wanted to expand into publishing, but since CBS already sold its publishing arm, the Japanese company bought Tree International Publishing for $30 million. This was the last country music publisher that was still run out of Nashville, as smaller firms had been bought out over the prior couple of decades. The 80s closed with a game of publisher musical chairs with nearly everyone seeing a new corporate owner every couple of years with higher and higher price tags attached to successive purchases. 
The 90s and the 00s big-name purchases didn’t slow down. In 1995, Sony bought half of ATV Music from the Jackson estate for $110 million, more than double what Jackson paid for the company a decade prior. MCA Publishing merged with Polygram in 1998 to create Universal Music Group Publishing, which bought Bertelsmann Music Publishing in 2006, making them the largest music publisher. The price inflation extended to even smaller catalogs, as Berry Gordy sold half of Motown’s publishing to EMI in 1997 for $132 million. The message for anyone with a decent catalog was that there were plenty of buyers ready to take it off your hands for a high price. A decade later, private equity firm Terra Firma bought EMI and after a disastrous few years of management, sold off EMI’s publishing wing to the Jackson Estate and Mubadala Investment Company in 2012. Harmon’s might’ve been correct in calling publishing ‘unglamorous’ but he did, along with a number of others in the 80s, figure out a way to at least raise the number of commas next to deals they were signing. 
The consolidation of major players within publishing didn’t mean that there was no space for smaller firms. The Hipgnosis Fund, founded in 2018 by Merck Mercuriadis, along with Niles Rodgers, raised over $800 million for the purpose of rounding up popular song rights. Variety reported last fall that they were still on the hunt for smaller publishers to buy. There’s also the newer private equity music groups like Round Hill Music, Lyric Capital Group, or even Tempo Music Group, a collaboration between Warner Music Group and Providence, which are all trying to buy up the loose song rights that are still out there. 
The 80s dreams of getting Wall Street money into music’s most stable source of money generation arrived. Mercuriadis said to Variety last year regarding the value of songs echoing Harmon in the mid-80s: “They are the currency that makes the world go round. They are predictable and reliable and they are better than gold or oil. We have lined up the finest available song catalogues and will be deploying them immediately.” The financialized nature of music publishing reached a new zenith in 2018 when Music Business Worldwide reported that Sony/ATV owns part of Tencent Music Entertainment. A publisher owning part of a company that does music distribution is all but normalized when Warner Music Group’s owner Access Industries owns parts of Spotify and Deezer. Of course, the industry figured out a way to make more money, everyone’s on the same team! (I jest.)
Song Ownership Concerns
The 1960s kicked off the music publisher consolidation snowball so that by the 80s there were only a few publishers left for purchase, and thus the majority saw multiple owners in the years to follow. Questions around the regulation of these deals should’ve been more alive given that Warner and Polygram weren’t able to merge, but the frequency of subsequent acquisitions minimized the power of that regulation. Still, there was a core reason why for decades the game was all about collecting in: Only a few songs have the potential to truly succeed and become these unshakable money makers. 
Phil Hardy in the book Nickels & Dimes: Music Publishing & It’s Administration in the Modern Age noted that for Chappell, only a little over 2,000 songs out of the tens of thousands it owned accounted for 90% of what the company made in 1987. Thus, the only way to make publishing into a business was to keep accumulating rights until those created nice stockpiles that were a steady source of income every year with little fuss. (This reflects similar trends from the book Rockonomics, which is that the top earners in the music industry see more money, while smaller ones see less.) 
That’s why I get concerned reading blogs like this ‘The Song Economy’, which lays out how much value there is in music and how little counterweight those not within those larger firms actually hold. In particular, this thought by MIDiA’s Keith Jopling writing stood out to me (emphasis mine)
At the same time, songs in popular culture are helping to keep music up there in the attention economy – competing with TV, games, books, spoken word, and sports. Indeed, it is only those mini-industry songs that can claim a spot across every slice of media, through sync to podcasts to multiple forms of video. Those are the songs we want to know all about and hear over and over again. 
The idea outlined above illuminates how the ownership of popular songs could be leveraged into other branding and synching deals. Suddenly synching cannot even provide smaller artists a bit of relief and is instead crowded out by songs that are in movie trailers, video game pop-up events, and TikTok memes. This is why Warner Music Group, while launching its IPO, mentioned ‘publishing’ specifically, as a sector with a potential for many acquisitions. This new ‘song economy’ is one where financialization fully envelops what was the music industry’s steady paycheck.
Unheard Labor
This week in white-collar music worker news. Spotify said that employees can work from home until 2021. Personally, the idea of going to an office during a pandemic, especially in New York City, where I live, sounds ridiculous. Why risk the lives! However, when there were reports of record labels holding meetings in car parking lots, perhaps others in the industry do need that office banter. Otherwise, I’ll stay on the lookout for when/if major labels plan to return and any other reports on remote working life (Zoom calls, so many). Last, I mentioned the group last week, but the Musicians Guild of America is having a meeting on 6/2 at 2pm EST, if you’re an American musician or curious party (link here). 
6 Links 2 Read
I’ll make the note to write about tipping sooner than later, cause I’m realizing with more reporting that the topics inspires more thoughts than I expected. So, I’ll say here that until tipping is given the same amount of labor that goes into streaming or what was previously pitching physical sales, it’ll remain a fringe option. Though certainly it’s worth asking if that model is might be preferred than others. 
A deep dive into the background of the house group Housekeeping and how a single tech-house group shows many of the limits facing the electronic music underground, as it navigates the coronavirus shutdown of the industry. 
This is a story that’s mostly about the pockets of C-suite executives, yet the media does a really good job of making it appear relevant to the lives of average music workers. If labels end up losing a conflict with Spotify, it’ll be the artists, not the record labels, who’ll feel the effects. Though in this current system, they’re already barely making a living wage on these platforms, so one would be forgiven for not investing too much in the outcome. 
The alarm bells for Spotify’s potential impact on various audio industries shouldn’t just be limited to music. There is a chance we’re seeing a shift in podcasting, which will make it far more corporatized and fashioned in the mold of traditional media. Personally not a big fan of that but luckily Stoller again points out that any amount of federal regulation and prevention of acquisitions and mergers could alter this trajectory. This would also be a solid point for podcast creators and companies to start fighting for what is bound to be a consolidation of their business, whether the government is providing oversight or not. 
The pervasiveness of advertising within music is so overwhelming to me that I do want to keep pushing back that all forms of music must be tied into advertising. Also, musician influencer isn’t exactly something that can scale across all of those in the industry, so why entertain it only for the privilege of a chosen few. 
These are all fine selections but rather what’s interesting to me is just imagining what this vision of the music industry would look like. Suddenly in this future an artist’s creations are thoroughly monetized and tracked from initial creation by either label or platform. Then once an artist is fully formed, all interactions with fans are also placed onto the market and nearly all aspects of music can be intertwined into the “music industry”. I don’t desire a future of such an intense drive to pull money out of the pockets of creators and fans but it is a vision! 
Blog Read
The Penny Fractions newsletter arrives every Wednesday morning (EST). If you’d like to support it, check out the Patreon page or follow it on Twitter. The artwork is done by graphic designer Kurt Woerpel whose work can be found at his website here. The newsletter is copy edited by Mariana Carvalho, with additional support from Taylor Curry. My personal website is davidturner.work. A list of my favorite 2020 albums, books, and mixes can be found here. My current job is Emerging Creator Lead at SoundCloud, so all thoughts here represent me, not my employer. Any comments or concerns can be sent to pennyfractions@gmail.com. 
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