The Securization of Music Rights – Music Enterprise Analysis

The Securization of Music Rights – Music Enterprise Analysis

by | Aug 3, 2025 | Entertainment Law, Music Business, Podcast News


Non-public fairness initiatives, wherein music catalogues are purchased up for hundreds of thousands, might simply be a transitional section in the direction of a brand new growth wherein music turns into a speculative commodity. The buzzword is securitisation. Which means that monetary giants are creating new monetary merchandise primarily based on music rights and the revenue streams they generate. In enterprise jargon, these are known as asset-backed securities (ABS), which gained their doubtful fame throughout the monetary and financial disaster that started in 2008. Nevertheless, on this case, it’s music rights somewhat than actual property loans which can be being securitised. This fifth and last a part of the weblog collection takes a more in-depth have a look at how this works and the benefits and downsides of this growth.

Comply with the Cash! Huge Capital within the Music Rights Market – Half 5: The Securization of Music Rights*

The Revival of the “Bowie Bonds”

In December 2021, Northleaf Capital Companions issued US $303.8 million in asset-backed securities (ABS) for buyers to subscribe to. These securities had been backed by a combination of music publishing and grasp rights to 52,729 music titles from the Spirit Music Group catalogue, together with the publishing rights to songs by Pete Townshend of The Who and the masters catalogue of nation star Tim McGraw, [1] each of which had been acquired by Spirit Music Group earlier than Northleaf’s funding in 2020. [2] This elevated the funding in music rights to a brand new degree, because it turned music right into a commodity that may be traded alongside different securities. This idea is paying homage to the ‘Bowie Bonds’, which British celebrity David Bowie launched on the U.S. market in 1997. These bonds bundled the rights to Bowie’s songs and assured buyers a set annual rate of interest of seven.9 per cent for ten years. Though buyers had been repaid their capital plus curiosity on the finish of the bond’s time period, the report business’s recession, starting round 2000, led ranking businesses to downgrade the Bowie Bonds from an preliminary triple-A ranking to Baa3, simply above junk degree.[3] The worldwide monetary disaster that adopted ultimately put an finish to this and related ventures.

A New Increase of Music Rights Securization

A long time later, Bowie’s avant-garde monetary experiment will be seen in a brand new mild because the time appears ripe for brand new monetary merchandise that package deal music rights for buyers. After Northleaf, KKR in February 2022 introduced the securitization of an unlimited music rights portfolio, acquired by its Chord Music three way partnership with Dundee Companions. KKR Credit score Advisors meant to promote greater than US $732 million of ABS supported by publishing and sound recording royalties from a list of 65,000 songs, together with hits from The Weeknd, Infantile Gambino, and Stevie Nicks.[4]

Nevertheless, a forerunner of this securitization increase was the US music accumulating society SESAC, which was purchased by Blackstone in 2017. In August 2019, SESAC bought US $560 million in bonds backed by licensing agreements and music royalty streams. In comparison with the later ABS offers, SESAC bought basic company bonds providing a yield of 5.25 per cent for a weighted common lifetime of 6.7 years. Kroll Bond Ranking assigned these bonds a ranking of BBB minus.[5] Three years later, in July 2022, SESAC once more issued company bonds price US $335 million to finance the acquisition of Audio Community, acquired by SESAC in 2021.[6] These bonds act like loans, however from a bunch of buyers as a substitute of elevating cash from a financial institution. The buyers anticipate the payback of their investments plus curiosity after an outlined interval, when the underlying asset has earned the required revenue.

These music rights ABS transactions, nonetheless, created new monetary merchandise, tradeable in a specialised market. This was the intention of Blackstone’s Hipgnosis Songs Capital fund, when it introduced the launch of a US $221.65 million securitization of 950 songs of its music catalogue, together with hit songs by Leonard Cohen, Justin Timberlake, and Nelly Furtado.[7]

Determine 1: The method of securitization of music rights catalogues, 2019-2025

Date of transaction Firm Sort of securitization Catalogue Transaction worth (in US$ m)
Aug 2019 Blackstone Group Company bonds SESAC licensing catalogue 560
Dec 2021 Northleaf Capital Companions ABS 52,729 music titles from the Spirit Music Group catalogue 303.8
Feb 2022 KKR ABS 65,000 songs acquired by Chord Music 732
Jul 2022 Blackstone Group Company bonds SESAC licensing catalogue 335
Aug 2022 Blackstone Group ABS 950 songs from the Hipgnosis Songs Capital fund 221.7
Dec 2022 Apollo Asset Administration ABS Greater than 1 million songs from the Harmony catalogue 1,800
Feb 2024 ATLAS SP Companions and Truist Securities ABS 5,000 songs from the Kobalt Music Publishing catalogue 266.5
Mar 2024 KKR ABS HarbourView music rights catalogue 500
Nov 2024 Blackstone Group ABS 45,000 songs catalogue from the Hipgnosis Songs Fund 1,470
Complete       6,189

In December 2022, Apollo Asset Administration’s Capital Resolution issued asset-backed securities price US $1.8 billion in cooperation with JP Morgan. Apollo’s ABS are backed by greater than 1 million copyrights from Harmony’s music catalogues, together with songs from Phil Collins, Creedence Clearwater Revival, Daft Punk, Miles Davis, Genesis, Think about Dragons, James Taylor, 9 Inch Nails, Pink Floyd, Cyndi Lauper, Little Richard, Otis Redding, R.E.M. and lots of different superstars.[8] In February 2024, it was introduced that ATLAS SP Companions, along with Truist Securities, had provided to promote US $266.5 million price of music ABS primarily based on roughly 5,000 songs from 66 songwriters from the Kobalt Music Publishing  catalogue.[9] A month later HarbourView efficiently satisfied the personal fairness agency KKR to challenge US $500 million in ABS backed by the royalty revenue from the exploitation of the acquired rights catalogue.[10] In November 2024, Blackstone accomplished a US $1.47 billion music rights ABS transaction, backed by the Hipgnosis Songs Fund 45,000-song portfolio, which Blackstone had acquired in July 2024 for US $1.58 billion. The proceeds from the so-called Lyra 24-2 ABS deal had been used primarily to repay debt and to finance future music catalogue acquisitions.[11]

A complete of US $6.2 billion of music-related bonds and asset-backed securities (ABS) has been issued since 2019 primarily by the big PE corporations, Apollo, Blackstone, KKR, and Northleaf. The securitization of music catalogues is each a monetization of music rights but additionally an exit technique for PE initiatives.

How the Securization Enterprise Works: Benefits & Disadvantages

In 2022, the pre-sale report for Hipgnosis Music Belongings (MUSIC 2022-1) by Kroll Bond Ranking Company (KBRA) highlighted how the ABS enterprise works. The MUSIC 2022-1 ABS had been issued by Hipgnosis Music Belongings 2022-1 L.P. with a price of US $221.65 million, collateralized by the royalty streams from the music publishing and grasp rights catalogue comprising 950 songs from charting songwriters and artists, together with Justin Timberlake, Nelly Furdato, and Leonard Cohen. This music catalogue was administered by the three music majors Common, Sony and Warner in addition to seven different music rights directors. The 950 songs catalogue was valued at US $341 million with a reduction fee of seven per cent. The bonds bear curiosity semi-annually and no repayments are scheduled earlier than the anticipated compensation date in Could 2027. The ranking company instructed a ranking of A- for the MUSIC 2022-1 bonds, suggesting a low danger profile.[12]

The pre-sales report additionally included an evaluation of the royalty construction of the music catalogue. Virtually two thirds of the entire annual income of US $13.4 million (earlier 12 months to Q1 2022) had been derived from licensing of publishing rights with one third from sound recording rights. Nevertheless, the income figures present that only some songs are worthwhile. For instance, ‘Hallelujah’, written by Leonard Cohen and carried out by himself and 9 different acts, generated by far the very best annual revenues accounting for 12.8 per cent or US $1.71 million.[13] General, the highest 10 songs accounted for nearly 40 per cent of all royalties. This extraordinarily uneven distribution of royalties can be seen among the many artists. The highest 10 artists within the catalogue account for 78 per cent of the entire revenue. An evaluation by age of songs revealed that outdated repertoire, outlined as songs launched 30 years in the past or extra, generated income of US $4.6 million per yr, or 35 per cent of complete income. An additional 34 per cent of gross sales had been generated by songs 10 to twenty years outdated, and an additional 8 per cent got here from songs that had been between 20 and 30 years outdated. General, songs that had been greater than 10 years outdated generated gross sales of US $10.2 million, which corresponds to a 77 per cent share of gross sales. Conversely, this meant that solely 23 per cent of annual catalogue income got here from repertoire lower than 10 years outdated.[14]

Nevertheless, in comparison with different ABS transactions, the focus of income from the highest 10 songs within the Hipgnosis MUSIC 2022-1 ABS is the very best at virtually 40 per cent. By comparability, the highest 10 songs from the 65,000-song Chord Music catalogue, on which the KKR ABS is predicated, generated 10.7 per cent of annual revenues, whereas the highest 10 songs from the 52,729-song Spirit Music catalogue, on which the Northleaf ABS is predicated, generated 15.9 per cent of complete annual revenues. This robust focus of revenue within the Hipgnosis ABS most likely led to the A- ranking by the KBRA, whereas the KKR and Northleaf ABS had been every rated A.[15]

The KBRA report highlights each, the benefits of the securitization of music rights catalogues in addition to the disadvantages. ABS transactions allow the monetisation of music catalogues, which thereby enhance in worth. Securitisation additionally creates new monetary merchandise that may be traded on a market which supplies music rights an financial worth that’s decided by provide and demand.

The KBRA report additionally reveals one other downside that the worth of the brand new monetary merchandise depends upon a couple of fashionable songs. Ought to these songs, for no matter motive, lose their reputation, the worth of the related music bonds will undergo. If, as well as, different leisure rights or different claims to future revenue (e.g. authorized proceedings received) are bundled with the music rights within the ABS, non-transparent monetary merchandise might come up that solely serve hypothesis. On this case, losses in different areas might even have a unfavorable impression on the worth of the music rights.

All elements of the collection “Comply with the Cash! Huge Capital within the Music Rights Market”

Half 1: A Quick Historical past

Half 2: The Funding Giants

Half 3: Shamrock Capital Advisors

Half 4: The Enterprise Mannequin of Non-public Fairness Corporations

Half 5: The Securization of Music Rights

Endnotes

[1] Music Enterprise Worldwide, “‘Bowie bonds’ are again: Northleaf makes use of Spirit Music Group belongings to lift $303.8m providing”, December 20, 2021, accessed: 2025-02-14.

[2] Music Enterprise Worldwide, “Spirit Music Group acquires grasp recordings of Tim McGraw initially launched by Huge Machine”, September 9, 2020, accessed: 2025-02-14.

[3] Music Enterprise Worldwide, “The title’s bonds. Music bonds.”, October 19, 2021, accessed: 2025-02-14.

[4] Music Enterprise Worldwide, “KKR purchased a music catalog from Kobalt for $1.1bn. Now it’s turning it into bonds”, February 7, 2022, accessed: 2025-02-24.

[5] Reuters, “SESAC sells $560 million in bonds backed by music royalties”, August 2, 2019, accessed: 2025-02-24.

[6] Bloomberg, “Adele License Charges to Assist Fund $335 Million of Bonds”, July 1, 2022, accessed: 2025-02-24.

[7] Music Enterprise Worldwide, “Music’s bond journey continues, as SESAC and Hipgnosis each launch nine-figure choices”, August 10, 2022, accessed: 2025-02-24.

[8] Music Enterprise Worldwide, “Harmony costs $1.8bn bond providing backed by over 1m music copyrights”, December 8, 2022, accessed: 2025-02-24.

[9] Billboard, “Kobalt Elevating $267M From Safety Backed by Tune Catalog Together with YoungBoy & Extra”, March 19, 2024, accessed: 2025-02-24.

[10] Music Enterprise Worldwide, “HarbourView raises $500m in debt financing led by KKR”, March 13, 2024, accessed: 2025-02-24.

[11] Music Enterprise Worldwide, “Blackstone’s Hipgnosis closes $1.47bn asset-backed securities transaction”, November 11, 2024, accessed: 2025-02-24.

[12] Kroll Bond Ranking Company, 2022, Hipgnosis Music Belongings 2022-1 L.P., ABS Pre-Gross sales Report, August 2, 2022.

[13] Ibid., p. 8.

[14] Ibid., p. 7.

[15] Ibid., p. 9.

* This weblog publish is predicated on the report IP Finance within the Music Business, which was commissioned by the World Mental Property Rights Group (WIPO).

The Funding Giants – Music Enterprise Analysis

The Funding Giants – Music Enterprise Analysis

by | Jul 13, 2025 | Entertainment Law, Music Business, Podcast News


Partially 1 of the collection, we traced the music rights gross sales increase since 2019. On this half, we are going to take a more in-depth take a look at the businesses that present the monetary assets to amass music rights catalogues. These are a number of the largest corporations within the worldwide monetary trade. They embody BlackRock, Blackstone, KKR, The Carlyle Group, Brookfield Asset Administration and Apollo World Administration. These corporations handle billions, and even trillions, of US {dollars} of belongings beneath administration (AUM) in investor capital. These are primarily personal fairness companies whose enterprise mannequin entails figuring out undervalued belongings, buying them through the use of a mixture of fairness and debt capital, after which promoting them at an elevated goal worth to generate returns for his or her buyers. Their income mannequin relies on varied charges they obtain for his or her administration companies. This second a part of the ‘Observe the Cash!’ collection presents an important of those monetary and funding giants.

Observe the Cash! Massive Capital within the Music Rights Market –   Half 2: The Funding Giants

BlackRock Inc.

BlackRock Inc. is the biggest monetary and funding conglomerate on this planet, with 19,800 workers in over 30 nations and managing US $10 trillion in belongings by the top of 2023.[1] It was based in March 1988 as Blackstone Monetary Administration by Larry Fink and different former managers of US funding financial institution First Boston, with monetary help from Blackstone, which initially held a 50 per cent stake.[2] In 1994, Blackstone bought its stake, and the corporate was renamed BlackRock Monetary Administration.[3] BlackRock went public in 1999, managing US $141 billion in belongings.[4]

BlackRock is concerned within the music IP market by means of two funding automobiles: BlackRock Various Traders (BAI) and Affect Media Companions, a three way partnership with Warner Music Group. BAI partnered with Main Wave in 2016 to speculate US $300 million in Main Wave’s IP Fund 1, buying shares of Smokey Robinson’s music catalogue.[5] BAI was shaped when BlackRock purchased Quellos Group’s fund-of-funds enterprise for US $1.7 billion in 2007. Hedge funds, like BAI, use high-risk methods to outperform market returns. Fund-of-funds diversify investments to scale back danger for conservative buyers, although they arrive with larger administration charges.[6] In 2022, Brookfield Asset Administration purchased out BAI, investing US $1.7 billion in Main Wave and buying US $700 million price of rights from Main Wave’s IP Fund 1 and a pair of.[7] Affect Media Companions, based by Lylette Pizarro in 2019, partnered with Warner Music Group in 2022 to create a music IP fund. BlackRock invested US $750 million within the firm to amass music catalogues from artists like Dangerous Bunny, Bruno Mars, and Enrique Iglesias.[8] In December 2024, HPS Funding Companions, with US $148 billion in belongings, grew to become a part of BlackRock. HPS invested US $1 billion in Iconic Artist Group, buying Rod Stewart’s music catalogue for US $100 million.[9] BlackRock, due to this fact, has direct investments within the music rights market with HPS Funding Companions and is not directly concerned with Affect Media Companions. However, BlackRock’s engagement within the music IRP market stays very restricted and seems to be solely a marginal a part of the group.

Blackstone Group

Blackstone is among the oldest personal fairness corporations, based in 1985 by former Lehman Brothers executives Peter Peterson and Stephen Schwarzman in New York Metropolis. The title “Blackstone” comes from the founders’ names: “Schwarz” means black in German, and “Peter” (from “petros”) means rock or stone in Greek.[10] Initially, Blackstone’s enterprise mannequin was to purchase poorly run public corporations, delist them, enhance their worth, and promote them at a revenue. This mannequin is typical for personal fairness corporations, and Blackstone was a pioneer on this discipline. After a non-public fairness increase within the Nineteen Eighties, the marketplace for leveraged buyouts cooled within the Nineties however recovered within the early 2000s. Blackstone was a number one participant throughout this era, collaborating in vital acquisitions resembling Houghton Mifflin Firm[11] and music shopping for membership Columbia Home in 2002.[12]. In 2007, Blackstone acquired Hilton Resorts for US $26 billion[13] and went public shortly earlier than the subprime mortgage disaster.[14] Regardless of the disaster, Blackstone emerged comparatively unscathed and continued to be a key participant in personal fairness acquisitions within the 2010s and 2020s. Over time, Blackstone reworked from a pure personal fairness firm to another funding administration conglomerate. By 2023, it reported 4 enterprise segments: Actual Property, Non-public Fairness, Credit score & Insurance coverage, and Hedge Fund Options. The Actual Property section was the biggest, adopted by Credit score & Insurance coverage, Non-public Fairness, and Hedge Fund Options.[15] Blackstone’s principal income sources are administration and advisory charges, together with realized funding earnings.

Blackstone’s preliminary foray into the music rights market started with the acquisition of the non-profit US-collecting society, Society of European Stage Authors and Composers (SESAC), for a rumoured US $1 billion in January 2017.[16] This acquisition was made by Blackstone’s Core Fairness Companions (BCEP I), which manages US $4.76 billion in belongings. BCEP I is a long-term personal fairness fund with a concentrate on investments exceeding ten years.[17] In addition to SESAC, BCEP I has made sixteen different investments, together with the acquisition of Japanese actual property firm GE Capital in 2020[18] and the producer of promoting supplies, HH World, in 2019.[19] The restricted companions of BCEP I are primarily retirement and pension funds within the US, Canada and Finland.[20]

Hipgnosis Songs Capital and Hipgnosis Music Administration Ltd. are managed by Blackstone Tactical Alternatives Advisors (BTOA), which manages a number of funds, together with the Blackstone Tactical Alternatives Funds I-IV.[21] The Tactical Alternatives Fund I (Tac Opps I), which administers the Hipgnosis belongings, was launched in 2012 with US $5.6 billion to put money into personal funding alternatives outdoors of conventional personal fairness.[22] Tac Opps I has buyers as restricted companions, primarily retirement funds such because the New York State Retirement Fund and the Allegheny County Retirement System.[23] Different investments of Tac Opps I embody L’Occitane Worldwide, Sustana Fiber, and SUNZ Insurance coverage.[24]

Blackstone can be a 9 per cent shareholder of New Mountain Capital, which led a consortium to purchase the US accumulating society Broadcast Music Integrated (BMI) for a rumoured US $1.3 billion in November 2023.[25] New Mountain Capital focuses on small and mid-sized corporations in monetary hassle, utilizing a modest quantity of debt to restructure and later promote them.[26] New Mountain Capital manages US $29.1 billion in belongings from pooled funding automobiles with retirement and pension funds as restricted companions.[27]

Apollo World Administration

Apollo Advisors was based by 4 former executives of Drexel Burnham Lambert after its chapter in 1990, elevating US $400 million for a non-public fairness fund specialising in distressed securities.[28] In 1993, Apollo entered the actual property market with the Apollo Actual Property Funding Fund.[29] Between 1995 and 2001, Apollo established three extra personal fairness funds with a complete of US $8.8 billion in investor commitments.[30] Earlier than the 2008 monetary disaster, Apollo benefited from the personal fairness market increase, buying a number of corporations in multi-billion-dollar offers resembling Momentive Efficiency Supplies for US $3.8 billion and the Dutch mail and parcel service PostNL for US $1.9 billion in 2006 in addition to Noranda Aluminium for US $1.15 billion[31]. In 2007, Abu Dhabi Funding Authority purchased a 9 per cent stake in Apollo,[32] foreshadowing a deliberate IPO in 2008, which finally failed because of the worldwide monetary disaster. The IPO was postponed to 2011, when Apollo World Administration raised US $565.4 million on the New York Inventory Change.[33] This led to new investments in media and cultural industries, such because the acquisition of McGraw-Hill’s training unit[34] and the merger of Apollo’s Endemol tv studios with 21st Century Fox’s Shine Group to type Endemol Shine Group. [35] From the 2010s onwards, Apollo continued to amass corporations in multi-billion-dollar offers, together with Verizon Media Group with Yahoo![36] and insurance coverage big Athene.[37]

Apollo World Administration’s involvement within the music rights market, although modest in comparison with multi-billion-dollar offers, is important. In October 2021, Apollo offered US $1 billion to HarbourView Fairness Companions, based by Sherrese Clarke Soares, to amass grasp and publishing rights.[38] HarbourView has since spent at the least US $500 million on music rights, with its credit score line elevated to US $300 million in December 2023.[39] Apollo additionally partnered with Harmony Bicycle Music Group in 2022 to subject US $1.8 billion in asset-backed securities and supported Harmony’s unsuccessful bid for the Hipgnosis Songs Fund.[40] Most lately, Apollo co-invested US $700 million within the music catalogue of the British rock band Queen, which Sony Music bought for $1.27 billion in June 2024.[41]

Kohlberg Kravis Roberts & Co. (KKR)

KKR, based in 1976 by Jerome Kohlberg Jr., Henry Kravis, and George Roberts, is a outstanding personal fairness agency identified for pioneering leveraged buyout offers. It gained fame with its US $31.3 billion takeover of RJR Nabisco in 1988, a deal detailed within the e book “Barbarians on the Gate.”[42] All through the Nineteen Eighties and Nineties, KKR led the personal fairness market with vital acquisitions, together with Beatrice Firms, the proprietor of Samsonite, and the US $5.5 billion buyout of Safeway.[43]. Regardless of a slowdown within the early Nineties, KKR re-entered the market with a US $5 billion fund in 1996, resulting in additional buyouts like Amphenol Company[44] and Wincor Nixdorf.[45] Within the 2000s, KKR continued its success with main transactions resembling Toys “R” Us[46] and SunGard,[47] and its largest pre-crisis deal, the US $44.4 billion buyout of Texas-based electrical energy retailer TXU.[48] After the 2008 monetary disaster, KKR resumed its actions and expanded into actual property with the acquisition of Yorktown Heart in 2012, establishing a brand new enterprise section.[49]

Within the 2010s, KKR began to put money into the media and cultural industries. In 2019, KKR acquired three tv and movie manufacturing corporations in Germany[50] – Tele München Gruppe, Universum Movie GmbH and Wiedemann & Berg Movie Manufacturing – and a 43.54 per cent stake within the German media conglomerate Axel Springer AG for US $3.2 billion.[51] But additionally outdoors Germany, KKR was within the cultural industries and acquired one of many world’s largest e book publishers, Simon S. Schuster, for US $1.6 billion in 2023.[52]

KKR started its engagement within the music sector in 2009 with a three way partnership with Bertelsmann AG to create BMG Rights Administration, through which KKR invested EUR 250 million in return for a 51 per share.[53] Over time, BMG acquired quite a few music publishers and report labels. Nonetheless, KKR withdrew from the three way partnership in March 2013, and Bertelsmann AG acquired KKR’s stake for EUR 300 million.[54] In January 2021, KKR purchased a majority stake within the music catalogue of Ryan Tedder, the frontman of OneRepublic, for US $200 million. This deal included Tedder’s songs written for different artists after January 1, 2016, and the songs he has written and carried out for OneRepublic.[55] KKR made this funding by means of Chord Music Companions, a three way partnership with Dundee Companions, utilizing capital from KKR’s Dislocation Alternatives Fund. KKR’s Dislocation Alternatives Fund is a distressed debt fund,[56] based in 2019, with US $2.97 billion AUM. The Dislocation Alternatives Fund has 10 restricted companions[57] primarily foundations, charitable organizations and insurance coverage corporations. In October 2021, Chord Music Companions and the Dislocation Alternatives Fund purchased the KMR Music Royalties II portfolio from Swedish music writer Kobalt, which contained 62,000 music copyrights, for US $1.1 billion.[58] Shortly after, KKR partnered with BMG once more in March 2021 to collectively purchase music rights, with every get together committing US $500 million for acquisitions.[59] In February 2024, KKR bought its majority stake in Chord Music to Common Group, which holds now a 25.8 per cent stake and Dundee Companions proudly owning the remainder of 74.2 per cent.[60]

The Carlyle Group

The Carlyle Group is a worldwide funding firm managing belongings price US $426 billion.[61] Based by 5 companions in New York Metropolis, it initially centered on leveraged buyouts within the protection trade.[62] Regardless of the dot-com bubble burst in 2000, Carlyle continued its buyout initiatives, buying corporations like Dex Media[63] and The Hertz Company.[64] The 2008 monetary disaster led Carlyle to diversify into credit score options and different asset administration. Notable acquisitions embody Italian clothes firm Dainese, cyber safety agency ManTech Worldwide, and a 50 per cent stake in US clothes model Supreme.[65] Carlyle went public in 2012, elevating US $671 million.[66]

In 2022, Carlyle’s World Credit score platform partnered with music trade consultants to ascertain Litmus Music, an funding automobile for music rights. The Credit score Alternatives Fund II (CCOF II), which has deployed US $2.2 billion in media and leisure corporations, offered US $500 million for the acquisition of Keith City’s recording catalogue in 2022 by means of Litmus.[67] The CCOF II was established in 2020 as a classic personal fairness debt fund with US $4.6 billion AUM. It invests within the films, music and leisure, software program, and monetary service sectors. The fund has 13 restricted companions, primarily insurance coverage corporations and retirement plans such because the Allstate Insurance coverage Firm from Illinois and the I.A.M. Nationwide Pension Fund from Washington D.C.[68] In 2023, the CCOF II and Litmus purchased compositions from Benny Blanco, who wrote hits for Rihanna, The Weeknd, Justin Bieber, Arianna Grande and Maroon 5[69] in addition to the grasp royalty earnings stream and publishing rights to Katy Perry’s albums launched between 2008 and 2020.[70] In 2024, Carlyle elevated the credit score facility for Litmus by US $400 million to amass Opus Music Group, which owns rights to music catalogues from Juice WRLD, Ozuna, Maluma, and Rauw Alejandro,[71] and to purchase a share of Randy Newman’s music publishing and recording catalogue.[72]

Brookfield Company and Oaktree Capital Administration

Brookfield Asset Administration, now generally known as Brookfield Company, is among the world’s largest different funding corporations, based mostly in Toronto, Canada. Based in 1899, it has advanced considerably through the years. Initially offering electrical energy and transport infrastructure in Brazil, it was later acquired by Edper Investments and renamed Brascan Ltd.[73] In 2005, it grew to become Brookfield Asset Administration Inc., specializing in Brazilian infrastructure initiatives.[74] By 2018, it had diversified into varied sectors, together with infrastructure, renewable vitality, property, and enterprise companies. Notably, it acquired Westinghouse Electrical Firm from chapter in 2018[75] in addition to a majority stake in Oaktree Capital Companions in 2019 for US $4,7 billion,[76] which has been elevated to 72 per cent in 2024.[77] In 2022, Brookfield Company spun off a 25 per cent curiosity in its asset administration enterprise, forming Brookfield Asset Administration Ltd., which manages US $916 billion in belongings.[78] This contains vital stakes in Oaktree Capital Administration and music writer Main Wave, which controls the music catalogues of famend artists like Ray Charles, Bob Marley, and Whitney Houston.[79]

DWS Group

DWS Group is the most recent PE firm that entered the music rights market in February 2025, when it funded a US $1 billion three way partnership between Slicing Edge Group and Warner Bros. The predecessor of DWS Group was the Deutsche Gesellschaft für Wertpapiersparen, based in 1956, which was later renamed Die Wertpapier Spezialisten (DWS). It was a three way partnership of a number of German monetary establishments led by Deutsche Financial institution, which held a 30 per cent share. In 2004, DWS was totally acquired by Deutsche Financial institution, which reworked DWS right into a wealth and asset administration subsidiary. In 2018, DWS was spun off as a separate firm in an IPO on the Frankfurt inventory trade, with Deutsche Financial institution as the principle shareholder, which nonetheless holds nearly 80 per cent of the shares. With belongings beneath administration of EUR 896 billion, DWS is among the world’s largest asset administration corporations. DWS gives conventional passive funding automobiles resembling securities funds and exchange-traded funds (ETFs) but additionally elevated the variety of different funding alternatives resembling investments in actual property, infrastructure, personal fairness and liquid belongings.[80] State and municipal governmental companies are the principle buyers in DWS funds, adopted by insurance coverage corporations, pension and retirement plans and different funding corporations.[81]

Smaller PE Firms within the Music IPR Market

BlackRock, Blackstone, KKR, Apollo World Administration, Brookfield Asset Administration (together with Oaktree) and The Carlyle Group are the giants of worldwide asset administration and funding which have develop into lively previously few years in music rights market. For these companies, investing in music rights is a distinct segment exercise with a complete AUM of properly beneath 1 per cent, primarily for danger and portfolio diversification functions. The state of affairs is considerably completely different for smaller PE and asset administration companies, which need to pursue a distinct segment technique because of their restricted assets. We are going to present under that music rights investments are far more related to the general providing of those smaller companies by way of belongings beneath administration.

Thus, smaller PE corporations such because the US-based Hellman & Friedman (H&F), Francisco Companions, Windfall Fairness Companions, the Canadian Northleaf Capital Companions and Shamrock Capital Advisors have invested closely in music rights catalogues.

Hellman & Friedman (H&F) made a major funding within the music rights market by buying World Music Rights (GMR) for US $3.3 billion in September 2024, which is a 3.75 per cent share of whole AUM.[82] H&F, based in 1987 by former executives of Lehman Brothers and Solomon Brothers, focuses on leveraged buyouts and progress capital investments, specializing in media, monetary, and data companies. They’ve a historical past of investing in corporations like Axel Springer Verlag, Pro7Sat1 Group, Nielsen, Getty Photographs, and NASDAQ.[83] In 2024, H&F managed US $105 billion in belongings, primarily by means of personal fairness buyouts with their Capital Companions Funds. The most recent fund, the Capital Companions Fund XI, was established in 2023 and has US $22.3 billion in belongings. Main buyers embody public retirement and pension plans, sovereign wealth funds, and different personal fairness companies.[84]

One other San Francisco-based PE firm that has invested in music rights, is Francisco Companions Administration. Francisco Companions had US $45.0 billion AUM by the top of March 2024.[85] Francisco Companions was the lead investor of a consortium, which purchased a 90 per cent stake for US $750 million within the Swedish Kobalt Music Group, consisting of Kobalt Music Publishing and the music accumulating society AMRA in September 2022, which accounted for 1.67 per cent of whole AUM.[86] Francisco Companions was based in 1999 by former workers of different PE companies to concentrate on leveraged buyouts of tech corporations within the Silicon Valley.

One other related investor in music rights is Windfall Fairness Companions, which was based by Jonathan M. Nelson 1989 in Windfall, Rhode Island within the US. Windfall Fairness Companions focuses its investments on media, communications, training, and data applied sciences.[87] In July 2024, Windfall Fairness Companions had US $24.6 billion AUM.[88] In 2019, Windfall partnered with main music firm Warner Music Group to type Tempo Music to amass music publishing in addition to recording catalogues. Windfall offered US $650 million in fairness and debt and Warner acquired a small minority stake within the three way partnership specializing in the administration of the publishing and recorded music belongings purchased by the fund. In February 2025, Warner Music Group purchased a majority stake in Tempo Music for US $450 million from Windfall, which nonetheless holds a minority stake.[89]

Northleaf Capital, a Toronto-based personal fairness firm, has a protracted historical past relationship again to 1969 when it was based as TD Capital. Initially a part of TD Financial institution Monetary Group, it grew to become an unbiased entity in 2009. Northleaf focuses on direct investments in infrastructure and small to medium-sized corporations in OECD nations. In 2016, it expanded into personal credit score, providing loans to mid-market corporations. By 2023, Northleaf managed US $25 billion in funds and personal credit score applications from 275 institutional and particular person buyers.[90]

Northleaf’s investments in music rights are a part of its personal credit score enterprise, described as area of interest investments with low correlation to capital market developments. These investments embody music royalty streams, monetary claims in pending court docket instances, and factoring offers.[91] Northleaf’s portfolio contains corporations like Slicing Edge Group, Duetti, and Crescendo Royalty Funding. Notable offers embody a US $500 million debt refinancing for Slicing Edge Group,[92] a US $75 million credit score facility for Duetti, and a US $303.8 million asset-backed securities issuance by means of Crescendo Royalty Funding, backed by music rights from Spirit Music Group.[93] The London-based Blantyre Capital, which was based as a PE firm in 2016, invested US $125 million in Slicing Edge Media Music in 2022.[94] Since its inception Blantyre made greater than 70 investments price EUR 2.4 billion within the mid-market with a concentrate on European nations. In comparison with the same old investments, which vary from EUR 15 to 100 million, the Slicing Edge funding was distinctive excessive and accounts for greater than 5 per cent of the general investments since 2016.[95] In contrast to typical leveraged buyouts, Slicing Edge was a conventional M&A deal, with the intention of making a income platform. The most recent investments by Blantyre Capital have been the leveraged buyouts of the Spanish catering and residential meals supply

Endnotes

[1] BlackRock Inc., 2024, BlackRock 2023 Annual Report, p. 33.

[2] Carey David & John E. Morris, 2012, King of Capital. The Outstanding Rise, Fall, and Rise Once more of Steve Schwarzman and Blackstone, New York: Forex, p. 59.

[3] Ibid., p. 124.

[4] CNN Cash, “Right here come the IPOs. An onslaught of firm debuts in coming days after week of high-flyers”, September 26, 1999, accessed: 2025-05-28.

[5] Billboard, “Main Wave’s CEO Explains a New $300 Million BlackRock Partnership, Getting Smokey Robinson a Sneaker Deal”, September 26, 2016, accessed: 2025-05-28.

[6] Reuters, “BlackRock to purchase Quellos fund of funds enterprise”, August 9, 2007, accessed: 2025-05-28.

[7] Main Wave press launch, “Simply Introduced: Strategic Partnerships with Brookfield Asset Administration and CAA!“, October 6, 2022, accessed: 2025-05-28.

[8] Selection, “Enrique Iglesias Sells Music Catalog to Affect Media in Reported 9-Determine Deal”, December 6, 2023, accessed: 2025-05-28.

[9] BlackRock press launch, “BlackRock to Purchase HPS Funding Companions to Ship Built-in Options Throughout Public and Non-public Markets”, December 3, 2024, accessed: 2025-05-28.

[10] Carey & Morris, 2012, King of Capital, p. 45.

[11] New York Occasions, “Firm Information; Vivendi Finishes Sale of Houghton Mifflin to Traders”, January 1, 2002, accessed: 2025-05-28.

[12] New York Occasions, “Firm Information; Blackstone Buys Majority Stake in Columbia Home”, Might 14, 2002, accessed: 2025-05-28.

[13] New York Occasions, “Blackstone to Purchase Hilton Resorts for $26 Billion”, July 7, 2007, accessed: 2025-05-28.

[14] New York Occasions, “Blackstone Founders Put together to Rely Their Billions”, June 12, 2007, accessed: 2025-05-28.

[15] Blackstone, 2024, Annual report for the fiscal yr ending December 31, 2023, p. 98.

[16] Billboard, “Was Blackstone’s SESAC Acquisition a $1 Billion Deal?”, January 6, 2017, accessed: 2025-05-28.

[17] Enterprise capital is a type of personal fairness and a kind of financing for startup corporations and small companies with long-term progress potential; see Investopia, “What Is Enterprise Capital? Definition, Professionals, Cons, and How It Works”, October 18, 2024, accessed: 2025-05-28.

[18] Japan Hana Actual Property, “Blackstone Buys $1B Japan Portfolio from PAG”, December 6, 2020, accessed: 2025-05-28.

[19] Blackstone press launch, “HH World Declares Settlement by Blackstone to make a £100m Strategic Minority Fairness Funding”, December 3, 2020, accessed: 2025-05-28.

[20] Pitchbook, “Blackstone Core Fairness Companions”, n.d., accessed: 2025-05-28.

[21] Blackstone Tactical Alternatives Advisors, 2024, Brochure of Blackstone Tactical Alternatives Advisors L.L.C., Kind ADV, Half 2A, submitted to Funding Adviser Public Disclosure (IAPD) of the US Securities and Change Fee (SEC) on March 28, 2024.

[22] Pitchbook, “Blackstone Tactical Alternatives Fund I”, n.d., accessed: 2025-05-28.

[23] Ibid.

[24] Ibid.

[25] Music Enterprise Worldwide, “New Mountain Capital-led group closes acquisition of BMI”, February 8, 2024, accessed: 2025-05-28.

[26] Monetary Occasions, “Dealmaker Steven Klinsky Quietly Hits Residence Runs Away from ’80s Limelight”, June 30, 2024, accessed: 2025-05-28.

[27] AUM 13F, “New Mountain Capital LLC”, n.d., accessed: 2025-05-28.

[28] New York Occasions, “Ex-Drexel Executives Organize Assist for Fruit of the Loom”, August 24, 1990, accessed: 2025-05-28.

[29] Apollo Historical past, “Apollo expands into actual property”, n.d., accessed: 2025-05-28.

[30] Ibid.

[31] New York Occasions, “Mine Firm Sells U.S. Unit”, April 12, 2007, accessed: 2025-05-28.

[32] Reuters, “Apollo chief says bought 9 p.c of agency to Abu Dhabi”, November 8, 2007, accessed: 2025-05-28.

[33] Reuters, “Apollo’s upsized IPO raises $565.4 million”, March 30, 2011, accessed: 2025-05-28.

[34] New York Occasions, “McGraw-Hill to Promote Training Unit to Apollo for $2.5 Billion”, November 26, 2012, accessed: 2025-05-28.

[35] Selection, “twenty first Century Fox and Apollo Seal Deal to Merge Shine, Endemol and Core”, October 10, 2014, accessed: 2025-05-28.

[36] CNET, “Yahoo has a brand new proprietor, once more”, September 1, 2021, accessed: 2025-05-28.

[37] CNBC, “Apollo World to purchase annuities supplier Athene in $11 billion deal”, March 8, 2021, accessed: 2025-05-28.

[38] Music Enterprise Worldwide, “Right here. Come. The. Giants.”, October 7, 2021, accessed: 2025-05-28.

[39] Music Enterprise Worldwide, “HarbourView ups credit score facility capability by $100m to purchase extra music rights”, December 5, 2023, accessed: 2025-05-28.

[40] Music Enterprise Worldwide, “Strap in. Blackstone is able to bid $1.5 billion for Hipgnosis Songs Fund”, April 20, 2024, accessed: 2025-05-28.

[41] Music Enterprise Worldwide, “Apollo leads $700m funding into Sony Music Group partnership. (It’s a sort of magic!)”, July 26, 2024, accessed: 2025-05-28.

[42] Burroughs, Bryan and John Helyar, 1989, Barbarian on the Gates. The Fall of RJR Nabisco, New York: Harper & Row. The screenplay adaptation was written by Larry Gelbart and directed by Glenn Jordan.

[43] New York Occasions, “Safeway Buyout: A Success Story”, October 21, 1988, accessed: 2025-05-28.

[44] New York Occasions, “Kohlberg Kravis Set to Supply $1.2 Billion for Cable Maker”, January 24, 1997, accessed: 2025-05-28.

[45] New York Occasions, “Siemens Unit Is Bought”, October 23, 1999, accessed: 2025-05-28.

[46] New York Occasions, “Three Companies Are Stated to Purchase Toys ‘R’ Us for $6 Billion”, March 17, 2005, accessed: 2025-05-28.

[47] Bloomberg, “Capital Companies Conform to Purchase SunGard Information in Money Deal”, March 29, 2005, accessed: 2025-05-28.

[48] Reuters, “KKR, Texas Pacific-led group to purchase TXU Corp.”, August 9, 2007, accessed: 2025-05-28.

[49] Reuters, “KKR makes first retail real-estate funding”, April 19, 2012, accessed: 2025-05-28.

[50] The Hollywood Reporter, “Non-public Fairness Big KKR Buys Herbert Kloiber’s Tele Munchen Group”, February 21, 2019, accessed: 2025-05-28.

[51] Reuters, “KKR turns into Axel Springer’s greatest shareholder”, August 26, 2019, accessed: 2025-05-28.

[52] CNN Enterprise, “After attempting for 3 years, Paramount lastly unloads Simon & Schuster for $1.6 billion”, August 7, 2023, accessed: 2025-05-28.

[53] Billboard, “EU clears Bertelsmann, KKR music rights JV“, September 9, 2009, accessed: 2025-05-28.

[54] Billboard, “Bertelsmann Buys Out BMG for $390M“, March 1, 2013, accessed: 2025-05-28.

[55] Music Enterprise Worldwide, “KKR buys majority stake in Ryan Tedder catalog, marking funding big’s return to music rights possession“, January 11, 2021, accessed: 2025-05-28.

[56] A distressed debt fund invests in obligations of corporations which have filed for chapter or are very prone to file for chapter within the close to future, which bears a excessive default danger, however with the change of extraordinarily excessive potential returns. See Investopia, “Why Hedge Funds Love Investing in Distressed Debt”, June 16, 2023, accessed: 2025-05-28.

[57] Pitchbook, “KKR Dislocation Alternatives Fund”, n.d., accessed: 2025-05-28.

[58] Music Enterprise Worldwide, “Confirmed: Kobalt sells catalog to new KKR enterprise, Chord, for $1.1 billion”, October 19, 2021, accessed: 2025-05-28.

[59] Music Enterprise Worldwide, “BMG and KKR are able to spend $1bn on music copyrights – and that’s only for starters …“, April 6, 2021, accessed: 2025-05-28.

[60] Music Enterprise Worldwide, “3 observations on… Common Music Group’s $240m wager on Chord Music (and the actual story, Dundee Companions)”, February 20, 2024, accessed: 2025-05-28.

[61] The Carlyle Group Ltd., 2024, Annual report of The Carlyle Group for the fiscal yr ending December 31, 2023, p. 7.

[62] New York Occasions, “Navy Contractor Bought to Buyout Agency”, August 27, 1997, accessed: 2025-05-28.

[63] Los Angeles Occasions, “Qwest to Promote Directories Enterprise for $7 Billion”, August 20, 2002, accessed: 2025-05-28.

[64] New York Occasions, “Ford Completes Sale of Hertz to three Companies”, September 13, 2005, accessed: 2025-05-28.

[65] The MBS Group Information, “Carlyle buys 50% stake in skate model Supreme”, October 9, 2017, accessed: 2025-05-28.

[66] The Wall Road Journal, “Carlyle Costs IPO at Decrease Vary”, Might 2, 2012, accessed: 2025-05-28.

[67] Music Enterprise Worldwide, “Keith City sells recordings catalog to $500m-backed Litmus Music”, December 13, 2022, accessed: 2025-05-28.

[68] Pitchbook, “Carlyle Credit score Alternatives Fund II”, n.d., accessed: 2025-05-28.

[69] Music Enterprise Worldwide, “$500m-backed Litmus Music acquires music rights from Benny Blanco”, June 28, 2023, accessed: 2025-05-28.

[70] Music Enterprise Worldwide, “Katy Perry sells music rights to Litmus Music in $220m+ deal”, September 18, 2023, accessed: 2025-05-28.

[71] Music Enterprise Worldwide, “Litmus Music acquires Opus, proprietor of Juice WRLD and Maluma rights, after extending credit score facility to $400m”, September 4, 2024, accessed: 2025-05-28.

[72] Music Enterprise Worldwide, “Carlyle-backed Litmus Music buys Randy Newman’s publishing, recorded music pursuits”, October 17, 2024, accessed: 2025-05-28.

[73] Worldwide Listing of Firm Histories, 2005, Brascan Company Historical past, vol.67. St. James Press, accessed: 2025-05-28.

[74] The Globe and Mail, “What’s in a reputation? Loads if it’s Brascan”, September 16, 2005, accessed: 2025-05-28.

[75] Reuters, “Brookfield Enterprise Companions to purchase Westinghouse for $4.6 billion”, January 4, 2018, accessed: 2025-05-28.

[76] Reuters, “Brookfield to purchase most of Oaktree to construct juggernaut to rival Blackstone”, March 14, 2019, accessed: 2025-05-28.

[77] Brookfield Asset Administration Ltd., 2024, Annual report of Brookfield Asset Administration for the monetary yr ending December 31, 2023, p. 156.

[78] Brookfield Company press launch, “Brookfield Company Efficiently Completes Distribution of 25% Curiosity in its Asset Administration Enterprise”, December 9, 2022, accessed: 2025-05-28.

[79] Music Enterprise Worldwide, “Main Wave raises $375m funding from Oaktree Capital, sells minority stake“, June 11, 2021, accessed: 2025-05-28.

[80] DWS Group, Geschäftsbericht 2023, p. 6.

[81] Funding Adviser Public Disclosure web site, “DWS Worldwide GmbH”, January 14, 2025, accessed: 2025-05-28.

[82] Music Enterprise Worldwide, “Irving Azoff’s GMR simply struck a $3.3 billion personal fairness deal, say MBW sources”, September 19, 2024, accessed: 2025-05-28.

[83] See Hellman & Friedman, “Portfolio”, n.d., accessed: 2025-05-28.

[84] Pitchbook, “Hellman & Friedman Capital Companions XI”, n.d., accessed: 2025-05-28.

[85] Funding Adviser Public Disclosure web site, “Francisco Companions Administration L.P.”, Might 28, 2024, accessed: 2025-05-28.

[86] Music Enterprise Worldwide, “Kobalt Music Group bought to US-based personal fairness agency Francisco Companions”, September 7, 2022, accessed: 2025-05-28.

[87] New York Occasions, “They’re Only a Bunch of Common Media Moguls”, September 14, 2003, accessed: 2025-05-28.

[88] Funding Adviser Public Disclosure web site, “Windfall Fairness Companions LLC”, July 26, 2024, accessed: 2025-05-28.

[89] Music Enterprise Worldwide, “Confirmed: Warner buys majority stake in Tempo (simply as MBW advised you it could)”, February 6, 2025, accessed: 2025-05-28.

[90] Northleaf Capital Companions, “Historical past & Key Milestones”, n.d., accessed: 2025-05-28.

[91] Ibid.

[92] Music Enterprise Worldwide, “Slicing Edge Group secures $500m to fund music rights acquisitions”, April 15, 2024, accessed: 2025-05-28.

[93] Music Enterprise Worldwide, “One other huge music deal, as Spirit Music Group father or mother strikes $500m alliance with Northleaf Capital Companions”, October 14, 2021, accessed: 2025-05-28.

[94] Music Enterprise Worldwide, “Slicing Edge and Blantyre Capital commit $125m to amass movie and TV music rights”, January 4, 2022, accessed: 2025-05-28.

[95] Blantyre, “Who We Are”, and “Funding Portfolio”, n.d., accessed: 2025-05-28.

* This weblog put up relies on the report IP Finance within the Music Business, which was commissioned by the World Mental Property Rights Group (WIPO).

Spotify’s Enterprise Mannequin – Music Enterprise Analysis

Spotify’s Enterprise Mannequin – Music Enterprise Analysis

by | Mar 29, 2025 | Entertainment Law, Music Business, Podcast News


The important thing to understanding the music streaming economic system is the enterprise mannequin of the music streaming companies, which has emerged within the negotiations between the foremost music rights holders and Spotify. It’s based mostly on advance funds {that a} music streaming service has to pay to the rights holders, that are offset towards the revenues from streaming. This leads to a price construction for the streaming companies that makes it troublesome to generate earnings in any respect. This episode of the weblog sequence on the music streaming economic system explains why that is the case and the way the enterprise mannequin of the streaming companies works, utilizing Spotify for instance.

The Music Streaming Financial system – Half 10: Spotify’s Enterprise Mannequin

From the outset, Spotify needed to develop to outlive economically. Nonetheless, it was not solely the variety of registered customers that mattered, as lots of them had merely signed up as soon as after which remained inactive, but additionally these customers who streamed music repeatedly and have been thought of energetic customers for a sure interval, for instance monthly. These are known as Month-to-month Energetic Customers (MAUs).[1]

Determine 1: Variety of Spotify customers, 2012-2023

Supply: Music Enterprise Worldwide, “How Spotify can develop into worthwhile”, Could 11, 2015, Music Enterprise Worldwide, “Spotify revenues topped $2bn final yr as losses hit $194m”, Could 16, 2016 and annual stories by Spotify Expertise S.A. 2018-2023, accessed: 2024-08-18.

Spotify’s person development is spectacular. In eleven years, the variety of energetic month-to-month customers has grown by virtually 3,000 per cent and the variety of paying subscribers by as a lot as 4,600 per cent. This represents a mean annual development price of 272 per cent and 418 per cent respectively. Nonetheless, a more in-depth look reveals that development has slowed lately. Between 2017 and 2020, the expansion price for energetic customers monthly was round 30 per cent, falling to a stage of 23 per cent in 2023. The decline in development charges for Spotify’s paid subscribers is much more vital. Whereas development was nonetheless at 40 per cent in 2017 and 35 per cent in 2018, it fell to round 15 per cent between 2021 and 2023. Because of this Spotify’s growth into new markets, equivalent to Asia and Africa, has enabled it to proceed to see vital person development, however fewer of the newly acquired prospects are keen to pay for the streaming service, preferring as an alternative to make use of the ad-supported free mannequin.

Why is that this distinction between paying and non-paying Spotify customers so essential? Spotify’s financial success relies upon not solely on the variety of customers, but additionally on the conversion price from non-paying to paying premium customers. The significance of this conversion will be measured by the metric of common income per person (ARPU).

Determine 2: Spotify’s ARPU, 2012-2023

Supply: Music Enterprise Worldwide, “How Spotify can develop into worthwhile”, Could 11, 2015, Music Enterprise Worldwide, “Spotify revenues topped $2bn final yr as losses hit $194m”, Could 16, 2016 and annual stories by Spotify Expertise S.A. 2018-2023, accessed: 2024-08-18.

In 2012, Spotify earned yearly EUR 75 per person of one in all its subscription fashions, however solely EUR 3.70 per person of its ad-supported freemium providing. Though the income per free person may improve to over EUR 4.60 by 2023, that is nonetheless a tenth of the income per subscriber. As well as, the ARPU per paying person has been declining through the years and stood at EUR 49 in 2023. This is because of discounted subscription fashions equivalent to household plans and the like. Subsequently, it isn’t shocking that Spotify raised the costs of its subscription fashions in 53 nations by 10 % in July 2023 for the primary time in its historical past.[2] Spotify’s enterprise mannequin is due to this fact based totally on promoting subscription streaming fashions, which generate most of its income, as proven in fig. 3.

Determine 3: Spotify’s income, 2012-2023

Supply: Music Enterprise Worldwide, “How Spotify can develop into worthwhile”, Could 11, 2015, Music Enterprise Worldwide, “Spotify revenues topped $2bn final yr as losses hit $194m”, Could 16, 2016 and annual stories by Spotify Expertise S.A. 2018-2023, accessed: 2024-08-18.

Though income from the ad-supported freemium mannequin has elevated through the years, it accounted just for 13 per cent of complete income in 2023. Spotify’s financial survival, due to this fact, is determined by income from premium subscription and changing non-paying prospects into paying prospects. This has all the time been the core of Spotify’s freemium enterprise mannequin, which has enabled its financial rise, and mirrored in its quickly rising revenues.

Complete income grew from round EUR 10 million to EUR 97.5 million from 2009 to 2010, and in 2011 it already reached EUR 244.5 million.[3] Till Spotify’s IPO in 2018, the common annual income development was 56 per cent. In 2014, annual income exceeded EUR 1 billion for the primary time, in 2018 it was already greater than EUR 5 billion, and in 2022 income exceeded EUR 10 billion for the primary time. Nonetheless, this exponential development in income was additionally accompanied by an exponential development in expenditure. As will be seen in fig. 4, with one exception in 2021, expenditure has all the time been greater than income, that means that Spotify has solely damaged even as soon as since its basis.

Determine 4: Spotify’s revenues and expenditures, 2012-2023

Supply: PrivCo, “SPOTIFY’s Simply –Closed-12 months Financials Obtained”, October 5, 2012, Music Enterprise Worldwide, “How Spotify can develop into worthwhile”, 11. Mai 2015, Music Enterprise Worldwide, “Spotify revenues topped $2bn final yr as losses hit $194m”, Could 23, 2016 and annual stories by Spotify Expertise S.A. 2018-2023, accessed: 2024-08-18.

Determine 5: Spotify’s working revenue, 2012-2023

Supply: PrivCo, “SPOTIFY’s Simply –Closed-12 months Financials Obtained”, October 5, 2012, Music Enterprise Worldwide, “How Spotify can develop into worthwhile”, 11. Mai 2015, Music Enterprise Worldwide, “Spotify revenues topped $2bn final yr as losses hit $194m”, Could 23, 2016 and annual stories by Spotify Expertise S.A. 2018-2023, accessed: 2024-08-18.

The losses are primarily attributable to value of gross sales, i.e. the bills immediately associated to income technology. Though Spotify doesn’t disclose the composition of its value of gross sales in its annual stories, it may be assumed that these are primarily royalty funds to rights holders, particularly the music majors. Though value of gross sales as a share of complete revenues has been lowered from 104 % (!) in 2010 to lower than 80 %, it was nonetheless a considerable 75 per cent in 2023. Because of this the scope for spending on advertising and marketing, R&D and overheads is proscribed, as will be seen in fig. 6.

Determine 6: Spotify’s expenditures’ construction, 2012-2023

Supply: PrivCo, “SPOTIFY’s Simply –Closed-12 months Financials Obtained”, October 5, 2012, Music Enterprise Worldwide, “How Spotify can develop into worthwhile”, 11. Mai 2015, Music Enterprise Worldwide, “Spotify revenues topped $2bn final yr as losses hit $194m”, Could 23, 2016 and annual stories by Spotify Expertise S.A. 2018-2023, accessed: 2024-08-18.

In consequence, Spotify wanted to chop prices to liberate spending to put money into R&D and advertising and marketing and gross sales. As such, the announcement in early 2023 that it supposed to chop greater than 500 jobs globally got here as much less of a shock.[4] In June 2023, it was then introduced that Spotify can be shedding an additional 200 individuals to restructure its struggling podcast enterprise.[5] The massive bang got here in December 2023 yr when Daniel Ek himself needed to announce {that a} additional 1,500 workers can be launched within the coming weeks. In complete, Spotify had lower round 2,300 jobs by 2023, representing a discount in its world workforce of round 23 per cent.[6]

Nonetheless, the job cuts have been only one measure to cut back prices. Spotify introduced in October that from 2024 it could solely distribute cash to these rights holders who have been capable of generate greater than 1,000 streams previously yr to cut back the executive effort concerned in distributing income shares to rights holders.[7] In a weblog submit, this measure is justified with the combat towards streaming fraud and so-called white noise (i.e. non-music equivalent to recordings of rain, thunderstorms and different pure sounds), however Spotify additionally calculates how a lot cash will be saved with this measure: “Right now, Spotify hosts effectively over 100 million tracks. Tens of hundreds of thousands of them have been streamed between 1 and 1,000 occasions over the previous yr and, on common, these tracks generated $0.03 monthly. As a result of labels and distributors require a minimal quantity to withdraw (often $2-$50 per withdrawal), and banks cost a price for the transaction (often $1-$20 per withdrawal), this cash usually doesn’t attain the uploaders. And these small funds are sometimes forgotten about. However in combination, these small disregarded funds have added as much as $40 million per yr, which may as an alternative improve the funds to artists who’re most depending on streaming income.”[8] Studying between the strains, it’s clear that Spotify is just not solely seeking to save on financial institution transaction prices, however that the payouts for a lot of rights holders are so microscopic that they don’t even attain them. In doing so, Spotify can be not directly responding to the recurring criticism that artists see little monetary profit from Spotify, a criticism voiced by some well-known stars within the media shortly after the Swedish streaming service’s launch.

Endnotes

[1] As well as additionally DAUs (Each day Energetic Customers) and WAUs (Weekly Energetic Customers) are in use as metrics.

[2] Music Enterprise Worldwide, “Spotify is elevating its value within the US and 52 different markets. How a lot cash will that make the music trade?”, July 24, 2023, accessed: 2024-08-18.

[3] PrivCo, “SPOTIFY’s Simply –Closed-12 months Financials Obtained”, October 5, 2012, accessed: 2024-08-18.

[4] Music Enterprise Worldwide, “Spotify to slash over 500 jobs worldwide, as Daybreak Ostroff exits streaming platform”, January 23, 2023, accessed: 2024-08-18.

[5] Music Enterprise Worldwide, “Spotify cuts 200 jobs because it restructures its podcast division”, June 5, 2023, accessed: 2024-08-18.

[6] Music Enterprise Worldwide, “Spotify has laid off 2,300 workers this yr. That’s a shock – but additionally sort of inevitable”, December 4, 2023, accessed: 2024-08-18.

[7] Music Enterprise Worldwide, “Spotify is altering its royalty mannequin to crush streaming fraud and introduce a minimal cost threshold. Its plan? To shift $1 billion in payouts in direction of ‘working artists’ over the subsequent 5 years”, October 24, 2023, accessed: 2024-08-18.

[8] Spotify blogpost, “Modernizing Our Royalty System to Drive an Further $1 Billion towards Rising and Skilled Artists”, November 21, 2023, accessed: 2024-08-18.

Grasp- and Publishing Rights in Music Streaming – Music Enterprise Analysis

Grasp- and Publishing Rights in Music Streaming – Music Enterprise Analysis

by | Mar 8, 2025 | Entertainment Law, Music Business, Podcast News


Music rights are the principle gasoline of the music streaming economic system. Music streaming providers want licences to make use of the rights with a view to launch and maintain their operations. As we’ve already seen within the case of Spotify, the most important rights holders – labels and music publishers – demand princely sums for licensing their music catalogues. This a part of the collection will study how the system of licensing music rights works.

The Music Streaming Economic system – Half 12: Grasp- and Publishing Rights in Music Streaming

Mainly, there are two sorts of rights that an on-demand music streaming service like Spotify has to license: (1) the rights to the music recording, also referred to as the grasp rights, that are held by the document corporations and (2) the copyrights to the musical work, that are both managed by the authors themselves or, as is often the case, are commercially exploited by the music publishers, also referred to as the publishing rights. Allow us to first have a look at the licensing of the grasp rights to the sound recordings. Because the streaming providers provide both a freemium mannequin with a paid and a free element, as within the case of Spotify, or as a pure subscription service with a month-to-month flat price, as within the case of Apple Music or Amazon Music, the licences can’t be calculated on the premise of a wholesale or retail worth, as is the case with sound recordings and music downloads, however moderately on the premise of income shares. As many streaming start-ups weren’t initially in a monetary place to satisfy the licensing calls for of the labels, a licensing deal consisted and nonetheless consists of no less than 5 parts:[1]

  1. Income share: The labels obtain 55-60 % of all revenues of a streaming service which can be attributable to their grasp catalogue.
  2. Minima ensures: A music streaming service should pay a contractually agreed mounted quantity to the label, no matter how a lot income a music streaming service generates.
  3. Upfront money advance: To be licensed by the labels, a streaming service should pay an advance, often within the thousands and thousands of US {dollars}, which is later recouped by future royalty funds.
  4. Fairness within the firm: So long as the music streaming providers had been within the start-up part, they had been typically unable to afford the advance funds. In return, the labels acquired shares within the firm, which could possibly be monetised by the labels within the occasion of a sale or IPO of the streaming service, as we’ve proven within the case of Spotify.
  5. Administration or know-how charges: These are funds to the labels to cowl the executive/technical prices of offering the music content material to the streaming providers.

Within the case of freemium fashions, the licence offers distinguish between the paid and the ad-supported free fashions. The royalties for the paid model are increased than for the ad-supported ones. In each circumstances, nevertheless, it’s mandatory for the streaming providers to report commonly (often on a month-to-month foundation) the utilization figures of the labels’ music catalogues. The next data have to be offered to the document corporations on a contractual foundation:[2]

  1. Whole variety of subscribers.
  2. Whole revenues after gross sales tax has been deducted.
  3. Whole variety of streams.
  4. Whole variety of streams from the label’s catalogue.
  5. Proportion of whole streams that got here from the label’s catalogue

The streaming providers use this data to calculate how the full income is distributed to every document firm in line with their repertoire share, also referred to as the professional rata mannequin. For instance, if streams from Common Music Group’s grasp catalogue account for 40 per cent of the full variety of streams, the most important will obtain the contractually agreed 55-60 per cent of 40 per cent of the streaming service’s whole income after VAT. If this quantity is lower than the minimal assure, the label will obtain the latter mounted quantity.

Missing the market energy of the majors, unbiased labels (indies) are unable to implement the majors’ beneficial offers or demand complete reporting from streaming providers. To offer the indies a stronger negotiating place vis-à-vis the digital music service suppliers (DSPs), influential indie labels based the digital rights administration company MERLIN in 2007,[3] which now represents tens of 1000’s of music labels in 70 international locations, overlaying round 15 per cent of the world’s recorded music repertoire,[4] and is subsequently in a position to negotiate equally advantageous offers with the streaming providers because the majors.

The licensing of publishing rights is way more difficult than that of grasp rights, as a result of licensing practices differ from nation to nation. Whereas within the US, collective and obligatory licensing of publishing rights to streaming providers is widespread observe, numerous types of licensing coexist in Europe. Specifically, the business publishers of the music majors have based joint ventures with giant accumulating societies that licence the Anglo-American repertoire on to the music streaming providers in Europe. There’s a three way partnership known as SOLAR Music Rights Administration between Sony Music Publishing the British PRS and the German GEMA, which represents Sony’s Anglo-American publishing catalogue throughout the EU.[5] There are related joint ventures between Common Publishing and the French SACEM (DEAL) and between Warner/Chappell and the British PRS (Pan European Digital Licensing – P.E.D.L.).[6] BMG Rights Administration additionally based a three way partnership with GEMA in 2012 – Anglo-American Rights European Service Company (ARESA)[7] – to licence Anglo-American publishing rights within the European Financial Space (EEA) in a one-stop store. The music writer Kobalt is now working its personal “accumulating society” following the termination of its co-operation with the Swedish accumulating society STIM after the acquisition of the American Mechanical Rights Company (AMRA).[8] Just like the indie labels, the indie music publishers have additionally arrange an company to licence their mechanical rights to the Anglo-American repertoire with the British PRS – Unbiased Music Publishers’ E-Licensing (IMPEL).[9] Lastly, the British PRS for Music, the German GEMA and the Swedish STIM have joined forces to type the Worldwide Copyright Enterprise (ICE)[10] to conclude multinational licence agreements with the DSPs in Europe for his or her repertoire.[11] All these collaborations between music publishers and accumulating societies contain the licensing of Anglo-American repertoire to DSPs. The nationwide European repertoire of the most important publishers continues to be licensed to the streaming providers working in every nation through the nationwide accumulating societies. That is additionally the case for these small music publishers that haven’t joined the IMPEL initiative. Within the case of streaming providers, this issues the licencing of copy rights, however above all of the making out there rights (on-line rights).[12]

A music streaming service that desires to supply a complete service in a European nation should signal licensing agreements with the most important accumulating companies SOLAR, DEAL, P.E.D.L., ARESA, AMRA and IMPEL, in addition to with the related nationwide accumulating societies. The direct agreements between the accumulating societies and the streaming providers are just like the grasp rights agreements of the labels. The streaming corporations should settle for a minimal assure in addition to upfront advances, however these are decrease than these paid to the labels. As well as, the streaming providers comply with pay 10-15 per cent of their revenues to the publishers, relying on their repertoire share. The rights administered by the accumulating societies on behalf of the publishers and authors are licenced in line with the accumulating society’s distribution scheme.[13]

The music streaming economic system subsequently rests on two pillars: (1) the licensing of the grasp rights to the sound recordings and (2) the licensing of the publishing rights, as proven in fig. 1.

Determine 1: The rights and licencing construction within the music streaming economic system

Supply: After Music Managers Discussion board (MMF 2015: 45).

As we’ve already seen, music streaming providers pay 70-75 per cent of their revenues to the rights holders (55-60 per cent to the labels and 10-15 per cent to the music publishers). This not solely places a pressure on the associated fee construction of the music streaming providers and calls into query the financial sustainability of the enterprise mannequin, as I’ve already analysed intimately utilizing the instance of Spotify, but in addition raises the query of distribution between the rights holders.

The distribution formulation of 55-60 per cent for the labels and 10-15 per cent for the music publishers relies on the logic of the CD period. The recording, manufacturing and distribution of a CD by a document firm entails way more effort than the manufacturing and distribution of sheet music and the conclusion of synch offers by music publishers. As well as, a music recording can ‘solely’ be commercially exploited by a label for 70 years (within the EU) and as much as 95 years (within the US) earlier than it enters the general public area, whereas publishing rights may be monopolised for as much as 70 years after the loss of life of the writer. Publishers additionally obtain royalties when one in all their works is carried out dwell after which re-recorded in one other type. The opportunity of repeated use of works over an extended interval at decrease manufacturing prices justifies the decrease income share from the labels’ standpoint. Nonetheless, the exploitation processes of labels and publishers have converged within the music streaming economic system, which would definitely justify the next income share for publishers. Finally, it’s a query of bargaining energy – additionally inside the music majors – whether or not the music publishers, and thus the authors, can enhance their financial place on the expense of the labels and the performers.[14]

One other side is the division between the copy proper and the efficiency proper. Within the case of grasp rights, the excellence between the 2 rights is tutorial as a result of they coincide within the music recording and are licensed collectively. Nevertheless, the state of affairs is totally different for publishing rights. Though the copy and efficiency rights of a musical work are licensed to streaming providers as a package deal within the EU, the royalties are distributed individually. For instance, the British PRS for Music pays 50 per cent of the earnings from the efficiency proper on to the authors and the opposite 50 per cent to the publishers, whereas 100 per cent of the earnings from the copy proper is paid to the publishers, who then distribute the royalties to the authors in accordance with the contract, which often accounts for lower than 50 per cent of the earnings. From this attitude, authors profit extra from the efficiency proper than from the copy proper. The issue is that copyright regulation in most international locations doesn’t outline whether or not streaming music must be thought-about a copy or a efficiency. Nevertheless, there’s a tendency to view streaming music as a efficiency, which has led to a cut up of 75 per cent for authors and 25 per cent for publishers. For downloads, then again, which usually tend to be seen as reproductions, the cut up is strictly the alternative. It’s subsequently once more a matter of bargaining energy which distribution guidelines are utilized.[15]

Endnotes

[1] See Music Managers Discussion board (MMF), 2015, Dissecting the Digital Greenback, half 1. How streaming providers are licensed and the challenges artists now face. Ashford: Hartley Brothers, pp 42-43.

[2] Ibid., p 43.

[3] MERLIN was based in Januar 2007 by Alison Wenham of the Worldwide Unbiased Community (WIN) and indie label homeowners Michel Lambot ([PIAS]), Tom Silverman (Tommy Boy) and Martin Mills (Beggars Group) on the MIDEM in Cannes. MERLIN’s first CEO was Charles Caldas. See: The Guardian, “Indie music labels be part of collectively to seize a slice of on-line revenues”, January 22, 2007, accessed: 2024-09-01.

[4] MERLIN, https://merlinnetwork.org/de/, accessed: 2024-09-01.

[5] SOLAR, https://www.celas.eu/, accessed: 2024-09-01.

[6] Warner Music Group press launch, “Warner/Chappell Music Launches Its Pan-European Digital Licensing (P.E.D.L.) Initiative”, June 2, 2006, accessed: 2024-09-01.

[7] ARESA, https://www.aresa-music.com/, accessed: 2024-09-01.

[8] New York Occasions, “Going to the Ends of the Earth to Get the Most Out of Music”, June 8, 2015, accessed: 2024-09-01.

[9] IMPEL, https://www.impel-music.com/ accessed: 2024-09-01.

[10] ICE, https://www.iceservices.com/, accessed: 2024-09-01.

[11] In regards to the music licensing companies of the most important music publishers see Music Managers Discussion board (MMF), 2015, Dissecting the Digital Greenback, half 1. How streaming providers are licensed and the challenges artists now face. Ashford: Hartley Brothers, pp 44-46.

[12] Ibid., p 44.

[13] Ibid.

[14] Ibid., pp 52-54.

[15] Ibid., p 55.

The Music Modernization Act of 2018 – Music Enterprise Analysis

The Music Modernization Act of 2018 – Music Enterprise Analysis

by | Feb 15, 2025 | Entertainment Law, Music Business, Podcast News


Within the US, the advance of music streaming has revealed the restrictions of the present copyright system, which was nonetheless fully centered on the report economic system. Particularly, the mechanical rights that needed to be obtained by labels when a musical work was recorded defied the logic of music streaming. This brought on authorized uncertainty not just for the rights holders, however particularly for the customers of the rights, i.e. the music streaming companies, which quickly needed to take care of billion-dollar lawsuits for copyright infringement. The response to this was the Music Modernization Act, which was enacted in 2018 and established authorized certainty within the US for all gamers within the music streaming economic system.

The Music Streaming Economic system – Half 13: The Music Modernization Act of 2018

Historic Context

Initially, the mechanical proper was created within the US Copyright Act of 1909 in order that the then younger and economically rising phonographic corporations needed to pay a charge to music publishers to be allowed to report their music. The legislation required phonogram producers to pay US $2 to rights holders for every replica of a non-musical dramatic work. As soon as a label had paid this mechanical licence charge, another label may produce a canopy model of the musical work with out additional licensing.[1] In Europe, as an alternative of direct compensation between the labels and music publishers, a unique strategy was chosen by establishing particular accumulating societies for the licensing of mechanical rights, such because the Mechanical Copyright Safety Society (MCPS) in the UK in 1911 or STEMRA within the Netherlands in 1936.[2]

The state of affairs within the USA was sophisticated that labels and rights holders may additionally agree on a decrease licence charge than the statutory one. So as to gather the mechanical royalties, the Nationwide Music Publishers Affiliation (NMPA) based the Harry Fox Company (HFA) in 1917, which additionally managed the publishers’ synchronisation rights.[3] This licensing and assortment system labored effectively within the US so long as royalties had been tied to the replica of sound recordings. Nevertheless, the digital revolution sophisticated the state of affairs. Digital downloads may nonetheless be integrated into the system as a result of there was nonetheless a hyperlink to replica and the Copyright Royalty Board (CRB), consisting of a panel of three judges, set the licence charge for downloads. Nevertheless, early types of music streaming brought on issues. These might be solved, sind each MusicNet and Pressplay had been owned by the key corporations, and the settlement of mechanical rights between in-house labels and music publishers might be dealt with internally.[4] With the rise of non-interactive music streaming companies, akin to Pandora, streaming was thought of a public efficiency analogous to broadcasting and it was not essential to pay for mechanical rights. Nevertheless, a brand new accumulating society, SoundExchange, needed to be created for this goal as a result of there isn’t a compensation for using music recordings on the radio within the US.[5]

The Rightsholders Sue Spotify

The rise of Spotify and different on-demand streaming companies brought on the present system of licensing and cost for mechanical rights to break down. Labels not felt answerable for paying for using their work in a streamed music recording, and music publishers, fearing an enormous lack of income, threatened authorized motion towards streaming companies for unauthorised use of their music. Spotify, which was aware of the European system of Mechanical Rights Organisations (MROs), believed it may meet its obligations by getting into right into a licensing settlement with the Harry Fox Company.[6] Spotify was positive that each one the mandatory rights had been licensed within the US. Nevertheless, Spotify had did not bear in mind that the Harry Fox Company (HFA) doesn’t symbolize your complete world repertoire like its European counterparts within the US, however solely these rights house owners who’ve signed a rights administration settlement with the HFA.[7] After its launch within the US, Spotify entered legally unsure territory, because the Swedish firm quickly discovered the arduous method. On 28 December 2015, David Lowery, the frontman of two US rock bands, “Camper Van Beethoven” and “Cracker”, filed a lawsuit in a Californian district courtroom towards Spotify for copyright infringement, claiming that the corporate had did not clear the rights to his compositions within the US and to use to the US Copyright Workplace for a obligatory licence for his songs. As his music was distributed by Spotify to 75 million customers, Lowery sought damages of at the very least US $150 million for using the mechanical rights in his songs embodied in sound recordings.[8] Spotify’s response from its head of communications, Jonathan Prince, was evasive, but additionally mirrored the fragmented authorized state of affairs within the US for the licensing of mechanical rights: “We’re dedicated to paying songwriters and publishers each penny. […] Sadly, particularly in the USA, the info mandatory to substantiate the suitable rightsholders is usually lacking, mistaken, or incomplete. When rightsholders are usually not instantly clear, we put aside the royalties we owe till we’re in a position to affirm their identities. We’re working carefully with the Nationwide Music Publishers Affiliation to search out one of the best ways to accurately pay the royalties now we have put aside and we’re investing within the sources and technical experience to construct a complete publishing administration system to unravel this drawback for good.”[9]

Nonetheless, shortly afterwards, in early January 2016, Spotify confronted the following related lawsuit. On 8 January 2016, US music writer and songwriter Melissa Ferrick filed a copyright infringement lawsuit within the US District Court docket in Los Angeles, alleging that Spotify had been enjoying and distributing her compositions with no licensing settlement for the previous three years. Within the lawsuit, she criticised Spotify for failing to “[…] to license all the songs embodied in phonorecords which it ingests and distributes via interactive streaming and short-term downloads.”[10] This pertains to the unlicensed mechanical rights of musical works embodied within the sound recordings. Based on the lawsuit, Spotify ought to need to US $200 million as compensation to Ferrick. Ferrick’s attorneys outlined within the lawsuit how Spotify ought to have acted in licensing the mechanical rights. The corporate may have both licensed the rights to the compositions instantly from the rights holders, particularly Melissa Ferrick’s publishing firm, or filed a Discover of Intent (NOI) for a obligatory licence with the US Copyright Workplace underneath Part 115 of the US Copyright Act – 30 days earlier than the music recording was distributed – however Spotify failed to take action.[11] As an alternative, Spotify delegated its licensing obligations to the Harry Fox Company (HFA), not realising that the HFA didn’t maintain all of the mechanical licences within the US. Though Spotify subsequently filed NOIs for the aforementioned songs, it missed the statutory deadlines.[12]

The lawsuit’s argument is each revealing and an indictment of the US licensing system for mechanical rights. Based on the lawsuit, Spotify ought to have both cleared the mechanical rights for tens of millions of songs individually with the rights holders earlier than launching within the US, or alternatively utilized for “notices of intent” for all these songs. Both would have been an enormous administrative burden and would have massively delayed, if not made unimaginable, Spotify’s launch within the US. Copyright guidelines can thus change into a market entry barrier for corporations exterior the US. In Could 2016, the pending Lowery and Ferrick lawsuits mixed them into one case as a result of the allegations had been the identical.[13] This additionally improved the probabilities of an out-of-court settlement, which was reached between Spotify and the plaintiffs on the finish of Could 2017. Spotify agreed to arrange a US $43.4 million fund to compensate songwriters and publishers whose mechanical rights had not been accurately licensed.[14] Shortly earlier than, Spotify had additionally reached a US $30 million take care of the Nationwide Music Publishers’ Affiliation (NMPA) to keep away from claims of unpaid royalties for the mechanical rights of NMPA members. Just like the Lowery-Ferrick case, Spotify agreed to arrange a US $30 million compensation fund over two years, which was to be routinely prolonged for one more two years in 2019.[15]

If Spotify thought it had put the problem of unpaid mechanical rights behind it, it was very a lot mistaken. The mud had not but settled when, in July 2017, songwriter and co-founder of “Frankie Valli and The 4 Seasons” Bob Gaudio filed a lawsuit towards Spotify in a Nashville district courtroom over unpaid mechanical royalties.[16] Music writer Bluewater Music Providers Company joined the lawsuit on the identical day.[17] The plaintiffs’ arguments had been just like these in earlier lawsuits that Spotify had simply settled out of courtroom, however Spotify went on the offensive. In a counterstatement, the corporate’s attorneys questioned whether or not any mechanical rights royalties needs to be paid for streams in any respect, arguing that streaming music is extra like listening to the radio and subsequently a public efficiency lined by already licensed rights: “Briefly, the act of streaming doesn’t reproduce copies of sound recordings or musical compositions, and equally doesn’t distribute copies of both sound recordings or compositions.”[18] Spotify didn’t object to the contradiction, having nearly recognised with an out-of-court settlement that it had not paid for the mechanical rights. The opposite aspect’s attorneys had been fast to level this out.[19]

The US-Congress Intervenes

Nevertheless, the brand new authorized interpretation of a stream took the proceedings to a brand new stage, which now additionally known as for political and legislative motion. On 21 December 2017, Congressman Doug Collins launched the Musical Works Modernization Act (MWMA) within the Home Judiciary Committee.[20] All events agreed that they wanted to discover a resolution to the issue of licensing mechanical rights rapidly. The brand new laws arrange a state-run non-profit organisation to construct a database for licensing mechanical rights within the USA. This could be some extent of contact for streaming companies to make clear mechanical rights. In return, streaming companies can be obliged to pay a blanket royalty charge for using mechanical rights to the brand new licensing company, with out having to acquire the consent of the rights holders. Nevertheless, streaming companies would nonetheless be capable to negotiate decrease charges instantly with the rights holders in the event that they needed to.[21]

The invoice was pushed ahead by each Republicans and Democrats within the US Congress in a uncommon present of unity. To this finish, the Musical Works Modernisation Act (MWMA) was linked to 2 different legislative initiatives: the CLASSICS Act,[22] which goals to supply constant copyright safety for music recordings made earlier than 1972, and the Allocation for Music Producers Act, which is meant to permit music producers, sound engineers and sound mixers to take part in SoundExchange distributions.[23]

On 25 April 2018, your complete legislative bundle, now referred to as the Music Modernization Act 2018, was authorized by the US Home of Representatives and forwarded to the Senate.[24] This was adopted by public hearings with representatives of the affected music streaming companies and satellite tv for pc radio stations, in addition to the key rights holders, held on 15 Could.[25] Regardless of opposition from US satellite tv for pc radio big SiriusXM and proprietor of the non-interactive music streaming service Pandora,[26] the Music Modernization Act was handed unanimously within the Senate on 19 September 2018.[27] President Donald Trump signed the brand new legislation on 11 October 2018, in a uncommon present of unity with Republican and Democratic Congress members, in addition to musicians and music business representatives, within the Oval Workplace of the White Home, as a press picture exhibits.[28]

Along with the creation of a not-for-profit authorities licensing company that was launched on 1 January 2021 as The Mechanical Licensing Collective (MLC) in Nashville, Tennessee,[29] the extension of mechanical rights to interactive music streaming was a very essential results of the brand new laws. The Music Modernisation Act clarified that an interactive music stream implies mechanical replica and should subsequently be compensated.[30] I feel Morrow & Nordgård are right in the event that they take into account the Music Modernization Act as a win-win-situation for each rights holders in addition to music streaming companies.[31] Mechanical rights house owners now obtain clearly regulated compensation, and music streaming companies have authorized certainty in return. The significance of this authorized certainty is demonstrated by the lawsuit filed by Wixen Music Publishing towards Spotify on 29 December 2017,[32] as a result of the invoice of 21 December stipulated that the legislation would apply retroactively till 1 January 2018. The lawsuit subsequently needed to be filed earlier than this deadline to prosecute Spotify for previous copyright infringements. Based in London in 1978 by Randall Wixen, the music writer represents a list of greater than 2,000 composers and songwriters, together with superstars akin to Neil Younger, The Doorways, Tom Petty and the Black Eyed Peas.[33] With this illustrious group of rights holders behind it, Wixen Music Publishing filed a copyright infringement lawsuit in a Californian district courtroom, searching for US $1.6 billion in damages for Spotify’s use of its rights catalogue.[34] With out the Music Modernisation Act, this very promising lawsuit would have set a precedent and different music publishers would have joined Wixen Publishing, threatening not solely Spotify’s IPO in April 2018, however its very existence. Nonetheless, Spotify needed to dig deep into its pockets as soon as once more to settle the lawsuit out of courtroom, although the settlement of 20 December 2018 was not made public.[35] Lastly, on the finish of June 2019, Spotify additionally managed to achieve an out-of-court settlement with Bob Gaudio and Bluewater Music Publishing to finish the 2017 copyright lawsuit.[36] Some huge cash can have flowed right here too.

The Mechanical Licensing Collective

As quickly because the Music Modernisation Act got here into pressure, the battle over the extent of compensation and the distribution of royalties started. Step one, nevertheless, was the creation of the Mechanical Licensing Collective (MLC), which the Act requires streaming music companies to pay for using mechanical rights, and which administers and distributes the cash. The US Copyright Workplace was answerable for its implementation, which instantly grew to become the goal of lobbying by the key music publishers and the Nationwide Music Publishers’ Affiliation (NMPA), curiosity teams representing musicians and particular person movie star musicians.[37] Nevertheless, it rapidly grew to become clear that the music business’s publishers would have the say within the new licensing company. In July 2019, the Copyright Workplace authorized the Nationwide Music Publishers’ Affiliation’s (NMPA) idea for the institution of the Music Licensing Collective (MLC), which is of course dominated by the music publishers Common, Sony and Warner. The affect of the music publishing business on the MLC can already be seen within the composition of the primary board, which incorporates Sony/ATV Publishing, Warner/Chappel Music, Common Music Publishing Group and the key indie music publishers akin to BMG, Peermusic, Harmony, Kobalt, Massive Machine and Pulse, in addition to representatives of some smaller publishers.[38]

Nevertheless, Spotify and Amazon had filed a authorized problem in March 2019 towards a choice by the US Copyright Royalty Board (CRB) on 27 January 2018, which set the charges for mechanical rights compensation for the following 5 years (the Phonorecord III provision). NMPA president David Israelite went as far as to say that “[…] Spotify and Amazon have declared battle on the songwriting neighborhood by interesting that call.”[39]

What was at stake? The three-judge panel of the CRB had set an general enhance of 43.8 per cent within the mechanical rights charge for the years 2018 to 2022, from 10.5 per cent in 2018 to fifteen.1 per cent in 2022.[40] This primarily affected music streaming companies, which till the Music Modernisation Act, as now we have seen, operated exterior the system which beforehand solely affected labels and music publishers. It may be assumed that these two gamers negotiated decrease charges in accordance with the legislation, as labels and music publishers are sometimes a part of the identical firm. The on-demand streaming companies felt that the comparatively massive enhance in CBR charges was disproportionate. Aside from Apple Music, which didn’t be part of the attraction, the opposite streaming companies, notably Spotify and Amazon, acted towards the CRB ruling.

Though it was the fitting of the streaming companies to attraction the ruling, it was not solely the music publishers and music business lobbies that publicly campaigned towards Spotify & Co. 90 songwriters additionally wrote an open letter to Spotify CEO Daniel Ek, saying they felt damage and dissatisfied as a result of he and his firm had at all times introduced themselves as allies of the creatives. The attraction towards the CRB ruling would now show the alternative and will be seen as an try to divide the songwriting neighborhood.[41]

In any case, the attraction delayed the entry into pressure of the brand new tariffs, which additional exacerbated the battle. It was not till the start of July 2022 that the CRB rejected the music streaming companies’ attraction and confirmed the Phonorecord III choice from 2018.[42] After the streaming companies needed to pay US $424.4 million to the Mechanical Licensing Collective (MLC) in 2021 for beforehand unpaid mechanical rights royalties, they needed to pay once more. In whole, the music streaming companies within the USA had underpaid rights holders by US $418.8 million for 2021 and 2022, with US $281 million regarding mechanical rights and US $137.8 million to efficiency rights. On the identical time, the MLC calculated that the on-demand streaming companies had overpaid royalties for the mechanical proper by US $28.8 million between 2018 and 2020, of which US $17.4 million went to Apple Music, US $7.4 million to Amazon Music, US $3.7 million to Spotify and US $2.8 million to YouTube Music.[43]

This put an finish to the controversy over the interpretation of mechanical rights within the US, and the negotiations between music publishers and streaming companies for the CBR’s Phonorecord IV provision proceeded calmly, leading to an settlement that the mechanical rights tariff shall be set at 15.35 per cent, with a gradual adjustment till 2027.[44] Nevertheless, Spotify tried to keep away from the tariff by arguing that its premium music choices had been bundled with podcasts and different content material, and subsequently a a lot decrease tariff ought to apply. This introduced music publishers within the US to the barricades and led to a lawsuit by the Mechanical Licensing Collective (MLC) towards Spotify for underpaying rights holders.[45]

Whatever the consequence of those proceedings, the brand new system of compensation for mechanical rights by streaming companies, which relies on the Music Modernisation Act, was established for the long run and opened up a brand new supply of revenue for music publishers and the music authors they symbolize. This gives the publishing sector with extra revenue to the traditionally anchored funds made by labels to music publishers for the mechanical replica of sound recordings and downloads, for which the speed was elevated from US c9.1 to US c12 per observe in Could 2022.[46] Total, the Music Modernisation Act has resulted in considerably more cash flowing into the music publishing sector, which can be confirmed by the MLC’s announcement that since its creation in 2021 till March 2024, US $2 billion has already been distributed to rights holders.[47]

Ennotes

[1] Peter Tschmuck, 2021, The Economics of Music, 2nd version, Newcastle upon Tyne: Agenda Publishing, pp 74-75.

[2] Ibid., p 75.

[3] Ibid.

[4] Serona Elton, 2019, ” Mechanical Licensing Earlier than and After the Music Modernization Act”, Journal of the Music & Leisure Business Educators Affiliation, vol. 19(1), https://doi.org/10.25101/19.1.

[5] Tschmuck, 2019, Economics of Music, p 97.

[6] Billboard, “Harry Fox Company Inks Deal With Spotify For Publishing Licensing, And Extra”, July 18, 2011, accessed: 2024-09-09.

[7] Man Morrow & Daniel Nordgård, 2022, “The Music Modernization Act: Mechanical Copyright within the Age of Music Streaming”, in: Man Morrow, Daniel Nordgård & Peter Tschmuck (eds), “Rethinking the Music Enterprise. Music Contexts, Rights, Information, and COVID-19, Cham: Springer Nature Switzerland, p 175.

[8] Lowery v. Spotify USA Inc., Class Motion Grievance for Damages and Injunctive Aid, US District Court docket for the Central District of California, Case 2:15-cv-09929, December 28, 2015.

[9] Cited in Billboard, “Spotify Hit With $150 Million Class Motion Over Unpaid Royalties”, December 29, 2015, accessed: 2024-09-09.

[10] Ferrick v. Spotify USA Inc., Class Motion Grievance for Copyright Infringement, US District Court docket for the Central District of California, Case 2:16-cv-00180, January 8, 2016, p 9.

[11] Ibid., p 2.

[12] Ibid., p 3.

[13] Billboard, “David Lowery and Melissa Ferrick’s Lawsuits In opposition to Spotify Get Mixed”, Could 24, 2016, accessed: 2024-09-09.

[14] Billboard, “What Will Spotify’s $43 Million Class Motion Settlement Imply For Songwriters and Publishers?”, Could 30, 2017, accessed: 2024-09-09.

[15] Billboard, “Spotify and Publishing Group Attain $30 Million Settlement Settlement Over Unpaid Royalties”, March 17, 2016, accessed: 2024-09-09.

[16] Gaudio v. Spotify USA Inc., Grievance for Copyright Infringement, US District Court docket for the Center District of Tennessee, Nashville Division, Case 3:17-cv-01052, July 18, 2017.

[17] Bluewater Music Providers Company v. Spotify USA Inc., Grievance for Copyright Infringement, US District Court docket for the Center District of Tennessee, Nashville Division, Case 3:17-cv-01051, July 18, 2017.

[18] Gaudio v. Spotify USA Inc., “Defendant’s Memorandum in Assist of Movement for a extra Particular Assertion”, US District Court docket for the Center District of Tennessee, Nashville Division, Case 3:17-cv-01052, August 30, 2017.

[19] Billboard, “Authorized Marketing campaign In opposition to Spotify Intensifies Forward of Firm’s Plan to Go Public”, September 13, 2017, accessed: 2024-09-09.

[20] US Music Modernization Act, H.R.4706 – Music Modernization Act of 2017, 115th Congress, 1st Session, vorgelegt dem Home Committee on the Judiciary on December 21, 2017.

[21] Ibid.

[22] US CLASSICS Act, H.R.3301 – Compensating Legacy Artists for his or her Songs, Service, and Vital Contributions to Society Act, 115th Congress, 1st Session, submitted to the Home Committee on the Judiciary on July 19, 2017.

[23] US AMP Act, H. R. 881 – Allocation for Music Producers Act, 115th Congress, 1st Session, submitted to the Home Committee on the Judiciary on February 6, 2017.

[24] Billboard, “Music Modernization Act Unanimously Passes US Home of Representatives”, April 25, 2018, Zugriff am 27.03.2024.

[25] US Music Modernization Act, S. 2334 – Music Modernization Act of 2018, 115th Congress, 2nd Session, submitted to the Committee on the Judiciary of the Senate on January 24, 2018.

[26] Billboard, “SiriusXM CEO Jim Meyer Explains the Hassle With The Music Modernization Act (Visitor Op-Ed)”, August 23, 2018, accessed: 2024-09-09.

[27] Music Enterprise Worldwide, “‘A momentous day’ as US Senate passes Music Modernization Act”, September 18, 2018, accessed: 2024-09-09.

[28] Wikipedia, “President Donald J. Trump indicators the Music Modernization Act on October 11, 2018”, official press picture by Joyce N. Boghosian, Public Area, October 11, 2018, accessed: 2024-09-09.

[29] The Mechanical Licensing Collective (MLC), “The way it Works”, n.d., accessed: 2024-09-09.

[30] Orrin G. Hatch-Bob Goldlatte Music Modernization Act, Pub. L. No. 115-264, 132 Stat. 3676 (2018), codified underneath US Copyright Act 17 USC § 115(e) (10).

[31] Man Morrow & Daniel Nordgård, 2022, “The Music Modernization Act: Mechanical Copyright within the Age of Music Streaming”, in: Man Morrow, Daniel Nordgård & Peter Tschmuck (Hg.), “Rethinking the Music Enterprise. Music Contexts, Rights, Information, and COVID-19, Cham: Springer Nature Switzerland, p 174.

[32] Wixen Music Publishing v. Spotify USA Inc., Grievance for Copyright Infringement, US District Court docket Central District of California Western Division, Case 2:17-cv-09288-GW-GJS, December 29, 2017.

[33] Wixen Music Publishing, “About Wixen Music”, n.d. accessed: 2024-09-09.

[34] Music Enterprise Worldwide, “Spotify sued for $1.6bn by Wixen in enormous copyright infringement lawsuit”, January 2, 2018, accessed: 2024-09-09.

[35] Music Enterprise Worldwide, “Spotify settles with Wixen, bringing $1.6bn lawsuit to an finish”, December 20, 2018, accessed: 2024-09-09.

[36] The Hollywood Reporter, “Spotify Settles Copyright Lawsuits Introduced by Songwriters”, June 27, 2019, accessed: 2024-09-09.

[37] Music Enterprise Worldwide, “When the Music Modernization Act turns into legislation, who’s going to care for it?”, January 7, 2019, accessed: 2024-09-09.

[38] Music Enterprise Worldwide, “NMPA-backed Mechanical Licensing Collective (MLC) authorized by US Copyright Workplace”, July 8, 2019, accessed: 2024-09-09.

[39] Music Enterprise Worldwide, “Spotify and Amazon ‘sue songwriters’ with attraction towards 44% royalty rise in the USA”, March 7, 2019, accessed: 2024-09-09.

[40] Music Enterprise Worldwide, “Main victory for songwriters as US streaming royalty charges rise 44%”, January 27, 2018, accessed: 2024-09-09.

[41] The open letter will be learn right here: Music Enterprise Worldwide, “Hit songwriters inform Spotify’s Daniel Ek they’re ‘damage and dissatisfied’ by CRB charge attraction”, April 11, 2019, accessed: 2024-09-09.

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