Published
Thu, Dec 14, 2023, 13:00
- Our latest industry-focused missive looks at how Big Finance is impacting clubland.
Welcome to the RA Pro Newsletter: a bite-sized look at the trends and themes impacting businesses in the electronic music industry. Sign up to the full newsletter to get early access to each release and read all archived editions.
The music business is experiencing one hell of a gold rush. High-profile investment and acquisition deals are growing pervasive across all areas–festivals, venues, licensing and streaming–as financiers take notice of shifting, and evidently lucrative, industry dynamics. Last month, music rights behemoth BMI was sold to US private equity firm New Mountain Capital. That followed Songtradr's purchase of Bandcamp, a $440 million proposal from music royalties fund Hipgnosis to sell 29 catalogues, news of Universal buying a partial stake in NTS Radio and scores of others.
In September, we examined what all this dealmaking means from a subcultural perspective, but there's another question at hand: what does it say about the state of the industry? While each deal has its own nuances specific to the companies involved, some key words come to mind: growth and competition. Revenues from recorded and live music are rising globally thanks to streaming subscriptions, synchronisation (i.e. the use of recorded music in advertising, film, games and TV) and active fan communities. Labels, publishers, tech platforms and other players are strategising how to capitalise on that robust demand so when investors come knocking with the promise of scale, it's an alluring prospect.
Opportunities for music are expanding, Frances Moore, chief executive at The International Federation of the Phonographic Industry, pointed out in the organisation's 2023 report. Amid this growth, industry figures must ensure the value of music is being recognised. "This challenge is becoming increasingly complex as a greater number of actors seek to benefit from music while playing no part in investing in and developing it," she wrote.
"We need to make sure the people who are setting the agenda for music are the people for whom artist development and moving culture forward are the priority—not those who are solely in this to seize financial opportunities in a growing market," Will Tanous, executive vice president and chief administrative officer of Universal Music Group, said in that same report.
Bandcamp's layoffs certainly illustrate this challenge. Let's hope the investors in the industry realise it too.
Perspectives on the ground
One big takeaway from the recent wave of deals is that it's now "increasingly hard to define exactly where the [music] industry starts and ends," describes George Howard, a music business professor at Berklee College of Music. He believes the very role of music is "expanding and creeping into other areas and asset classes."
Pointing to streaming as an example, he notes how "all but one of the major DSPs [Digital Service Providers] use music as a loss-leader for other industries." That is, "other than Spotify, the places where people consume music are owned by companies that don't have an economic imperative to make money from music."
Right now, most investors are too focused on enterprise value instead of "actual sustainability" for creators, "who are indeed desperately trying, and increasingly failing, to stay afloat," he tells Resident Advisor.
In case you missed it: important industry news
• Is the Music Industry Losing Money to Sped-Up Remixes?
• YouTube's New A.I. Music Generation Tool Mimics the Voices of Popular Singers
• The Fight Between Musicians and Venues Over Merch Profits Is a Big Deal With a Simple Solution
• Spotify pulls out of Uruguay following equitable remuneration bill
• Music streamer and marketplace Nina launches second version without cryptocurrency
• Smart tech or a security concern? Unpacking the use of RFID wristbands at festivals
