Wall Street owns the music business for the last decade, and its tentacles in the industry are stretching further everyday. From record labels and streaming services, to concert tickets and songs funds, the financial power of Wall Street is being felt as new technologies emerge and artists make more hits.
Nowadays big fund managers like Blackstone, Apollo and KKR have entered the market with billion dollar purses searching for new assets in the form of intellectual property. The die was cast from as far back as 2011, when Universal Music Group, owned by Vivendi, purchased the Citigroup owned EMI Music for $1.9 billion, creating the world’s largest music company with catalogs of the Beatles, Pink Floyd, Radiohead and more. Sony Corp also bought EMI’s music publishing division for $2.2 billion.
These two acquisitions set the pace for rights ownership for nearly all of the important music of the 20th and 21st century by clawing massive market share.
Over the years there has been speculation and utterances from artists like Junior Reid who says Chris Blackwell founder of Island Records is an all powerful force in the music industry, particularly as it relates to reggae music. But Blackwell himself has had to deal with much more powerful corporate forces as he maneuvered a space in the global entertainment industry.
In July 1959 a young Blackwell founded Island Records and eventually brought reggae icon Bob Marley and U2 to the world and as a result he has earned the respect of his peers. However, in 1997 the music entrepreneur had one of the most talked about clashes with the world’s largest music company at the time and it’s then leader.
Blackwell did not mince his words to criticize then chairman of PolyGram Alain Levy and said his goals are in jeopardy if he should continue under the leadership of the Dutch conglomerate.
PolyGram wanted to become a larger player in the U.S. market and the Blackwell beef started to affect those prospects.
Island Sold To PolyGram
The Island Records founder sold his label to PolyGram UK for £180 million ($300 million) in July 1989,—he explained in 2009: “It had gotten too big and too corporate for me and I couldn’t really handle it.” The deal included the record company, its distribution operation and music publishing catalogue reported the LA Times. At the time of the sale, Island was one of the few successful record companies not already owned by a major conglomerate or Wall-street private equity big wigs and all the major record distributors Capitol-EMI, –CBS, BMG, Warner Communications and PolyGram were bidding for the extensive catalogue.
With PolyGram eventually snatching up the label, they took on Blackwell as president; he said he went along to “ensure they didn’t erase Marley’s legacy.”
After pocketing only $80 million from the deal due to royalties owed to U2, 8 years later, the 60 year old music impresario grew so fed up with the corporate culture at PolyGram that he offered to resign from the company’s board of directors.
His offer to quit the board was prompted by the French Executive Levy who made the suggestion to him after the two had been in disagreement for some time. Blackwell lambasted Levy in the media in an unprecedented way for music executives.
“What I have come to realize is that it is not really possible for me to continue to grow creatively in the entertainment business within PolyGram,” Blackwell said in a phone interview from his GoldenEye estate in Jamaica. “I feel that Alain Levy is restricting me, and I don’t understand why. It is unlikely that I will be able to do what I want to do and still stay within the corporate structure,” Blackwell stated publicly in the LA Times.
As companies were going after music houses that were built from the ground by entrepreneurs the pressure was on to sell records and increase the company’s bottomline.
The easy going Blackwell, who grew up on the lawns of what is now the Terra Nova Hotel says he believed that meeting corporate demands for increased sales to drive up stock prices is not how an artist’s career is built.
He said he believes artists should commit to the industry and make albums that may not hit until their third or fourth project. Bob Marley and the Wailers’ first album Catch A Fire Blackwell has stated in his memoir ‘The Islander’, only sold 14000 units in the first year and in its first month only sold 6000 copies. His marketing principles are underscored by the fact that much of the world didn’t catch on to the Marley magic until he died in 1981.
“When I renewed my contract a few years ago with PolyGram, I was under the impression that I was going to be able to build an entertainment business with an independent feeling within PolyGram,” said Blackwell, in 97 whose PolyGram contract was due to expire 1999. “But it isn’t going to happen. I really believe that it is impossible for an independent type of company structure to work and grow within a corporation like PolyGram. You can’t sit and wait and do projections on everything the way they do. You have to trust the judgment of the people you hire. In my case, I feel that Alain has repeatedly disregarded my judgment.”
The career music executive scoffs at the idea of “charting music” at all cost to fill a record label’s bottomline and says much of the music that charted in the past no one remembers who sang the songs in Icon Magazine.
He compares Island’s artist building protocol to that of Motown:
“It’s all about how pretty you are or what you can sell with the music. If you look at Island Records’ history, you realize how few hit singles we had after “My Boy Lollipop.” Look at the same history for, say, Motown. There you find a zillion hit singles from artists that nobody remembers even existed. We had album artists, bands that are still active and, even though the music industry looks like it does, still sell millions of records. It’s unbelievable!”
“I’ve always had a good feel for the new and slightly different, and have never been afraid to trust my intuition,” says Chris.
Blackwell built Island from a one-man operation into an industry powerhouse that introduced the world to ska and reggae music. His other top acts include Cat Stevens and Steve Winwood.
Over the years, Blackwell expanded Island into movies, resort hotels, animation and at one point even had a line of independent cinema theaters.
His public statements more than likely infuriate Levy especially in an interview, where he claimed he was growing increasingly frustrated at PolyGram since Levy rejected his proposals to acquire a chunk of Interscope Records and of alternative music cable station the Box.
Seagram eventually picked up a half interest in Interscope for $200 million. Interscope became one of the hottest music labels in the business, with acts like Tupac and Dr. Dre generating revenue in the hundreds of millions throughout the late 1990s.
He disassociated himself from Alain’s vision, “Alain and I have not seen eye-to-eye for a long time,” Blackwell said. “I don’t understand Alain’s vision. He’s not a very communicative person. He never discusses anything with me–which is fine. But then just let me do my own thing. Don’t stop me at every turn,” he chided.
“This is what the story really is: good and bad. Alain’s point of view is this: Just because I come up with these ideas, why should PolyGram automatically finance them? And he’s absolutely right. It doesn’t say in my deal that just because I have an idea PolyGram has to finance it. But I don’t think he has confidence in my judgment. And it’s very frustrating for me,” Blackwell said at the time.
In 1997, PolyGram, a subsidiary of Holland’s Philips Electronics, was the leading record company in the world in the U.S. it controlled only about 13% of the $12-billion market throughout the 1990s.
Over a ten year period in the late 80s up till then PolyGram spent more than $1 billion to acquire a handful of prominent U.S. labels, including Island, A&M;, Mercury Records, Motown and half of Def Jam.
“[But] what corporations don’t understand is that you can’t run studies and projections on what is going to work and what isn’t in the entertainment business,” Blackwell said.
“You have to decide if you want to be in business with a recording act or not. And what they don’t get is that entrepreneurs like me are more like acts than businessmen. Either you’d like to be in the Chris Blackwell business or not. Question things. Make suggestions–by all means. But don’t stop us at every single turn just because you don’t understand what we want to do. If Island Records was just starting out attached to a major corporation structure the way that label deals are set up now, we never would have survived. Not in this corporate environment. Absolutely not,” he told the LA Times.
In May 1998, alcoholic distiller Seagram Co. which owned Universal Studios bought PolyGram for $10.6 Billion and PolyGram Chief Executive Alain Levy’s fate was in limbo. He eventually left to join McKinsey as a senior advisor.
As Blackwell exited the music business as an executive at the top of the 90s, it ushered in the era of the label first approach for the music industry. PolyGram was eventually folded into Universal Music Group, and PolyGram Filmed Entertainment was folded into Universal Pictures, which had been both Seagram successors of MCA Inc. The entertainment division of Seagram faced financial difficulties, and was sold to Vivendi, and MCA became known as Universal Studios, as Seagram ceased to exist. To date Vivendi remains the majority owner of the Universal Music Group. In February 2017, UMG revived the company under the name of PolyGram Entertainment, which currently serves as their film and television division.
Streaming and Wallstreet
The era of streaming also has Wall Street to thank as it has also been instrumental in the rise of streaming services such as Spotify, Apple Music, Amazon, YouTube and Tidal. After leaving Polygram, Levy went to EMI where he championed the era of the Itunes downloads with Apple which has now morphed into streaming.
Now, all of these services are backed by major venture capital firms, that are only interested in lining the bottomline of shareholders who perhaps have never even listened to 50 Cent’s Many Men or know why Bob Marley Shot The Sheriff. These services have however revolutionized the way music is consumed, turning it into a utility and allowing people to access millions of songs for a low monthly subscription fee.
Power Of TikTok
As the TikTok craze continue globally with a new trend popping up and new artist emerging from the platform, their parent company ByteDance (valued at $300 million) is in talks with record companies about expanding its dedicated music-streaming platform into more than 12 new markets according to a The Wall Street Journal report on Wednesday (October 12).
The company seeks to take TikTok’s sister app, Resso, out of its three current marketplaces – Brazil, India and Indonesia – and into the new territories excluding the United States, reports the WSJ, citing sources.
Music Business Worldwide also reported that “ByteDance’s plan is meeting some resistance from certain music rights-holders” who are questioning how much money TikTok pays out.
In 2022 a revenue share agreement was reached between Meta and the top rights-holders Universal Music Group and Warner Music Group, for certain user-generated video types on Facebook. The launch of Facebook’s ‘Music Revenue Sharing’ was initially US-only, but earlier this month expanded globally as per a Meta announcement on October 5.
Currently, TikTok’s licensing agreements with music rights-holders are based on so-called “buy-out” deals, which often last for two years – under which ByteDance pays rights-holders an upfront check for a blanket license for the use of music in short-form video clips.
WSJ, also reports that Resso’s payouts, are similar to Sony Music Entertainment has in the past refused to renew its licensing agreement with Resso, resulting in its catalog being pulled from the service in all three of its current territories, per WBW.
TikTok Distribution
TikTok hired a music team in New York as they expanded their distribution business to become a full on digital music distributor where artists and rights holders can release their music on all digital platforms via their new service “Sound on”. If that’s not enough their latest addition to the service is “Pre-Release”; a new self-service feature that allows artists and rights holders to give TikTok listeners exclusive access to clips in advance of releasing their tracks.
In a September 2022 interview with Anthony Miller of Entertainment Report, U.K. dancehall rapper Stefflon Don said that TikTok is the reason Dancehall’s future is exciting.
“Dancehall is huge, especially since TikTok. I think when a Dancehall artist drops a song, it transitions to the world through TikTok straight away, like it’s instantly. Before it would have to travel, you’d have to be at a Dancehall party to hear certain songs, or you’d have to have Jamaican friends to hear certain songs. Now, it don’t matter what country you’re from- If you’re on TikTok, you’re going to hear the baddest Jamaican songs,” She told Miller.
While YouTube is still in the lead miles ahead as the world’s largest video streaming platform, with more than 2 billion users every month, TikTok revealed last September that it already has over 1 billion global monthly active users (MAUs) and was predicted to surpass that number this year.
In September 2020, YouTube hit back at TikTok’s closing in by launching its rival Shorts platform in India, the US, and expansions into Latin America, Canada and the UK. Shorts videos can still only be a maximum of 60 seconds long.
TikTok and YouTube aren’t just competing for users and creators, they’re also competing for advertising revenue as reported in Music Business Worldwide.
YouTube generated USD $8.63 billion in advertising revenues in Q4 2021 (ended December) and over $28 billion across the course of 2021.
In October 2022, YouTube‘s revenues for its third–quarter earnings dropped 2% to $7.1bn, contrasting with the anticipated boost of 4.4%. This was the original decline in YouTube ad sales since the company started to report its performance separately in 2020. In comparison, TikTok‘s revenue is growing rapidly, with estimates indicating it was around $10bn for 2022. Additionally, it is offering advertising at lower prices than its competitors.
YouTube is hoping that its “Shorts” offering will draw new creators, who may then be encouraged to try diverse formats such as long–form videos. These longer videos can contain more ads, providing more profits for the platform and creators. Ben Foster, managing partner at media agency The Kite Factory, believes YouTube Shorts is essential for parent company Alphabet‘s efforts to keep its predominance as a search engine, particularly as the younger generations move away from Google. He stated to the Financial Times, “Younger audiences are now using TikTok for product research, ‘how to’ videos and fact research. All activities previously dominated by Google. So, YouTube Shorts...it’s a mechanism to protect far wider advertising income.”
According to an MRC Data survey in 2021, 63% of TikTok users heard new music on the platform that they had never heard before, while 67% said they are likely to seek out a song on a music streaming service that they heard on the app first. TikTok is the 6th most popular social media network in the world according to data collecting website Statista and Reggae/Dancehall music is heavily used genre on the platform as revealed in a music report by TikTok last year.
TikTok has over 689 million active users and in their 2020 music year-in-review report, they revealed that more than 176 different songs surpassed 1 billion streams including Shaggy and Conkorah’s remix of “Banana.”
The remix of Conkarah and Shaggy’s Banana jumped 250 thousand views within a day.
Advertising Exec and former record label executive Steve Stoute said on the Earn Your Leisure Podcast recently that, “Really what you want is TikTok to be the place where you promote the song and then if you could go “you like that? you can listen to the full length song on Apple Music and one of these streaming platforms.”
In one ByteDance job ad it said: “Resso or TikTok Music, is a music app for Gen Z that launched [in] 2020 in India, Indonesia and Brazil”.
Wallstreet and Ticketing
Wall Street has also had a major impact on the concert industry.
Ticketing services such as Ticketmaster and LiveNation’s majority shareholder is the ‘Cowboy of Cable’ John Malone, Chairman of Liberty Global. Malone was who bankrolled Bob Johnson’s dream to start BET in the 1980s. Together, these companies often charge and benefit from high fees for concert tickets, and have recently come under fire from the U.S. Senate for the way they manage ticket prices and tack on useless fees.
Live Nation and HYBE CEOs are two of the most paid in the music industry while the companies earn record profits year on year. Full year earnings for the New York Stock Exchange listed company Live Nation for the year ended December 31, 2021 , showed that the Los Angeles based company has a presence on over 200 venues, including every NFL stadium. They improved their operating income from $1.2 billion up $1.3 billion (vs 2020). The official report states that over 35 Million Fans Attended Concerts which is a double digit improvement from pre-pandemic numbers in 2019.
Event ticketing was the main money maker for their “Best Quarter Ever”.
As the effects of the pandemic cease and more top billing artist hit the road like, Drake and Beyonce, the multi-national company with offices if Los Angeles, is projecting 2023 event-related referred revenue of $2.3 billion.
With tickets and top tour prices increasing by 20% concerts saw a huge numbers for Coldplay, Bad Bunny, Dua Lipa and Billie Eilish last year.
The company is comprised of three market leading divisions – Ticketmaster, Live Nation Concerts, Live Nation Sponsorship – Live Nation annually issues over 500 million tickets, promotes more than 35,000 events, partners with over 1,000 sponsors and manages the careers of 500+ artists. Its e-commerce sites average 80 million unique monthly users.
Michael Rapino, President and Chief Executive Officer who reportedly gave up salary in 2020 as the company tightened its belt during the pandemic, said in a statement,
“Building our venue portfolio enables us to more rapidly grow our show count and fan base in 2022, and over the next few years, and positions us to drive on-site spending more widely and provide additional assets to brand partners.”
He continued, “The two year wait for artists and fans is over. Never have the tailwinds to our business been so strong, and I believe this is just the start of what will be the strongest multi-year period ever for the concert industry.”
Songs Funds
There is a new class of investor seeking ownership of music who never existed before says Matt Pincus, founder of SONGS. Pincus has a holding company named MUSIC, with US Bank LionTree. This amoral relationship between investors, labels, rights holders and artists have become stronger as music gets evaluated as an asset class that can withstand the test of time, fluctuating inflation and interest rates.
Over in the U.K., Church Of England CCLA Investment Management which has £7bn in assets for 30,000 charities are putting their funds towards buying and owning songs that are explicitly describing sex, drugs, acts of violence among other anti-religious rhetoric but they are not alone.
“Everybody knows the fight was fixed. The poor stay poor, the rich get rich,” from Leonard Cohen’s 1988 hit “Everybody Knows” is owned by Private Equity major player Blackstone whose chief executive is the Jewish raised Stephen Schwarzman. Blackstone pumped a billion dollars into Hipgnosis Songs Fund and Schwarzman personally made more than a billion dollars last year” as he packaged the future earnings of songs against hundreds of millions of debt,” according to the Financial Times. The company earns money every time Justin Timberlake’s “SexyBack” is played at a football match and more recently each time Justin Bieber’s dancehall single “Sorry” is played.
Blackstone also set up a separate $1bn fund, Hipgnosis Songs Capital, from which to do more song deals.HarbourView Private Equity founder Sherrese Clarke Soares, is the daughter of Jamaican immigrants who got $1bn from Apollo Global Management to invest in music acquisition.
2022 Billboard Power Lister Sherrese Clarke SoaresSoares, named a Wallstreet Journal Woman To Watch has already snatched up 35 catalogues including $100 million to acquire Despacito artist Luis Fonsi’s mostly spanish sing alongs and $40 million to acquire Usher’s share of Justin Beibers catalogue. HarbourView also own songs from rapper Tech N9ne, George Jones and Trey Songz.
