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If you're interested in the recorded music business you must read this article.

Used to be, in the first decade of this century, when music was the canary in the coal mine for digital disruption, everyone was tuned into the business and when a player spoke they got heard.

Not anymore. You're probably unaware of Hartwig Masuch's words.

The big news of the past week has been about Universal Music going public. You may have seen the puff piece about Lucian Grainge in the "Financial Times": on.ft.com/3zv2qvc It doesn't really tell you anything you don't know, and Lucian deserves kudos, but the question is where the business is heading, the fact that Universal dominates new music, is that as laudable as it seems?

You see all the money is in catalog. Turns out the classics of the past are much more valuable than the hits of today. With everything in recorded music history available on streaming sites new music has to compete with the old and the verdict is in, people favor the old, by a large margin, 70% to 30%. How much does it cost a record company to stream old music? Right now essentially nothing. You just put it up there and reap the rewards. Might that change in the future, when the business acknowledges the power of the past? Yes, in many cases labels would be better off promoting the old acts, Queen is light years more popular than any new act.

And Universal, as a result of consolidation, has the best catalog, so it is positioned well for the future, but when investors start looking at costs are they going to get pissed how much is spent on new product for so little return? And are we going to see the breakup of these companies, since catalog is so much more valuable than new material? And even if you break new material, will it be classic in the future, or is it one and done? A moment in time. That people in the future won't be that eager to visit.

We've already seen the separation of publishing from recordings. Used to be big acts owned their own publishing and just made administration deals. But it turns out their catalogs were undervalued, and once Pimary Wave and Round Hill and Hipgnosis came along and offered big bucks, a multiple far outstripping previous prices, artists started to sell. And now so many of the greatest songs of all time are no longer controlled by the major label publishers. And Merck just started a songwriters guild... Bottom line, publishers are underpaid on streaming, because of the majors' leverage. But that leverage is eroding, will there be a righting of the wrong? Furthermore, despite the big ticket purchase of Bob Dylan's catalog by Universal and Paul Simon's by Sony, the truth is these companies are now rearguard operations, they're only dipping their toe while the new independent players are all in. In addition, the new players are putting far more effort, money and time, into their acquisitions. Most legacy publishers are about picking up the phone, the new ones are much more active.

And publishing is a predictable business. Why should it be tied up with a record company blowing all that money on new artists? You're taking a steady income and jeopardizing it. Investors don't like this.

There is so much institutional b.s. that needs to be corrected. Like executive salaries. Hartwig posits that a $10 million salary requires 2 billion streams just to pay for it. Actually, in truth the numbers are even worse.

And when I talk to promoters, the acts selling tickets are far different from the Spotify Top 50. Many doing boffo at the b.o., year in and year out, see recordings as an afterthought. Which is one reason Live Nation's stock price has gone up. Then again, despite Rapino's huge push and success in sponsorship, the lion's share of the show money goes to the acts. But not in recordings. This is going to have to change. Not as many acts want to give up all that upside for the power of a major label, especially if they don't make radio-friendly music in a world ever less radio dependent. And those that do want a bigger piece of the pie.

This is the financial industry. These are not Luddites, at least not compared to musicians. Musicians frequently want a leg up from a label that is not interested in them. They refuse to see the present, which is positively cottage industry, where you build it from the ground up and you're almost never ubiquitous. Financiers look at the hard numbers. They are hard to impress with smoke and mirrors, especially when your predictions perennially don't come true. And investors want to cut costs.

The music business believes it is winning by becoming more professional, it just isn't aware of the cost of said victory. Once the Universal bigwigs get their payday and the bean counters come in they're going to start asking about the waste, all that money spent for little success which is less success than ever before. Yes, despite the reams of b.s., today's hits have a fraction of the power of those of yore. If you're sitting at home dismissing the Spotify Top 50...it turns out you're in the majority, MOST PEOPLE are rejecting new music. Which begs the question why labels aren't doing more to promote old music. After all, there's a built-in audience.

The music business is about to become a whole lot more professional. Sure, the movie studios hoodwinked investors for years, but they weren't selling the company, at most investment in a few films. And by constantly doubling down on the old model Hollywood ceded control to Silicon Valley. A movie studio used to be a trophy property, now it's just a depreciated asset whose primary value is its library. Everybody said Reed Hastings was too far out there, ahead of his time, and then the time came to him, as the future always does, and everybody else is now playing catch-up. Not only is Netflix a big power, but so is Amazon, which is in the process of purchasing MGM, and Apple, which has nothing but money. As for HBO Max? It was bought by AT&T who had to lay it off, the telco didn't understand entertainment and realized a whole hell of a lot of investment was necessary and it didn't want to lay down the cash. But HBO and Disney are the only two survivors of old Hollywood in the new world. Everybody else came too late and has minor impact. As for theatrical distribution... Why do they keep pushing the ball uphill? Most people never go to the theatre. They're at home, in front of the flat screen. How long can you succeed by not giving them what they want? The pandemic helped move new flicks to streaming day and date, but foreign flicks have cratered, they belong on the flat screen, not in the theatre.

Music is a mature business. When that happens, you see consolidation, ergo Universal and Live Nation. And then you squeeze the costs and get ready for further disruption.

Which could happen in new music. The old model of paying an advance and then spamming media is inefficient. And you might be able to make bank on a TikTok star today, but what about tomorrow, will there be any meaningful catalog? Doubtful.

Change is brewing.

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