BTS, UMG, and Recorded Music’s Bright Future

Hello, hello readers. One last newsletter to cap off 2021. I didn’t mention this in November, but we passed the fourth anniversary of this newsletter. Never quite expected this to go on for this long or reach so many people, so I wanted to say thank you very much. If you do continue to enjoy it, please forward it along. The other bit of house cleaning is that I’ll be on holiday for the next few weeks, so the next issue will arrive on January 12th. Very much need a little break after this exceedingly long year, and even I'm fairly sick, but let’s get into the essay before closing up shop.

BTS cannot complain about 2021. Sure the K-Pop group would’ve enjoyed hitting more international tour dates but the group, and by proxy, their label HYBE, formally Big Hit, squeezed out multiple Billboard no. 1 hits and ditched Columbia Records, for Universal Music Group. A label that also, while still recovering from the 2020 Covid-19 dip, went public with a valuation of over $50 billion. Yet, that crossover success of BTS did invite some considerate skepticism.

Tom Breihan over at Stereogum called out the fact the boy band’s single “Butter”, which sat for weeks atop the Billboard charts, was fueled by fans double-dipping with a $0.69 digital single and instrumental. The coordinated fan behavior was even seen in “Butter” racking up over 20 million plays on Spotify, but only 11 million counted towards the company’s charts because nearly half were just BTS fans spamming plays on the track. (Spotify’s charts reportedly only count 10 plays within a 24 hour period for an artist.) The blogger Sonny Says dove into this month's long trend, where despite little radio play, gamed digital sales, and fan-inflated digital streams BTS were able to hold the crown for the most popular song in the United States all summer.

Chart shenanigans are nothing new, which Slate’s charts scholar Chris Molanphy quickly pointed out in his initial coverage of the single’s rapid rise. Still, Breihan and Sonny’s concerns over blatant chart manipulation and that BTS are now signed to the world's biggest record label. Since the advent of digital download streaming, the Billboard charts, and others across the globe, have struggled to account for a method of music consumption with such a low barrier to entry. Even if record labels didn't themselves envision the streaming-first future, they were ready to exploit the model once it proved successful.

Meet the New Record Industry

The IPO of Universal Music Group signaled a marked shift in the record industry’s narrative. No longer was the industry in a protracted recession but the market was in fact chomping at the bit to join in on the action. This could be seen in the increased share price of Warner Music Group, which did tumble back down a bit, but Believe, one of France’s biggest independent labels, also went public, and the billions of dollars being raised for music catalog purchases shows there’s little reason to be too bearish on the industry.

On the podcast Money 4 Nothing, when discussing UMG’s going public, the two hosts Sam Backer and Saxon Baird, began to tease out what this new era of the record industry might look like. Sam posited that in many ways you can define the record industry from the mid-1920s until the 90s as one dominated by record sales, which began to decline in the early 00s started to decline with the consolidation of the industry into three major labels, sky-high promotional costs for singles, the rise of digital platforms like iTunes, and the advent of music streaming. The digital shift to music is often framed as a moment of major disruption and one where labels were flat-footed to the changes brought on by iTunes, YouTube, and Spotify. Yet, as the podcast laid out, the record industry’s core business is around intellectual property ownership but that now manifests beyond getting discs onto shelves.

Now the “record” business is shaped by large licensing deals with technological firms, where different rates of pay, marketing agreements, and more are codified into tediously long agreements. Tim Ingham at Music Business Worldwide keenly pointed out this shift when looking at the quarterly earnings from labels where new arenas of growth can be found. Right now streaming dominates industry revenue, but there is a growing pile of cash to be found in deals with social media platforms, fitness companies, gaming firms, and potentially even in the world of crypto/NFTs. This highly unregulated, but potentially lucrative part of the industry is where the record industry is looking to offset looming streaming revenue stagnation.

The success of these mega-sized labels and streaming platforms is what’s led to an increased industry-wide reform from the United Kingdom to the United States. It’s from the UK Parliamentary inquiry in the digital music business that a note from the Music Managers Forum explicitly called out this concern. They wrote: “With some social media services that are still working out how they plan to actually use music, the advance may be a one-off lump sum payment covering a set period of time. No additional payments are made during that time period and what music has actually been streamed may not be reported.” This quote stuck with me all year in seeing a future where record industry profits are increasingly driven not by streaming, an already abstract and regressive way of allocating money to musicians, but through these massive deals and settlements with tech firms that exist well outside of the purview of most musicians.

Now, what about all of that “Butter”? The impulse of BTS fans to rack up streams, downloads, or whatever measurement to boost up their favorite boys up the charts is one built out of an older industry. Sales charts aren’t infallible, Molanphy is correct to say that, but the global audience of people pulling money and time into shooting songs up the charts feel a bit off. Universal Music Group, who’ll now be the main benefactors of such passion, don’t need fans to do any of this, because the deals they’ve signed with Spotify and others secure their market position, so fans can keep streaming, streaming, and streaming while UMG collects endless free publicity.

Unlike in the mid-20th century when record labels needed tangible sales success or they might be looking over their shoulder at an angry banker or another label ready to scoop them up. Major labels over the last couple of decades constructed a world where there is no competition even amongst labels. Publishers may be gearing up to fight over catalogs, which is just an exercise in who can raise quick capital. Eventually, these fans will be in a similar position except outbidding each other for NFTs sold by publicly-traded companies. If an every shrinking cluster of executives inking deals shapes most industry revenue, then there's a lovely rhyme that a small group of devoted fans can do the same to the charts. Just don’t get too bummed when your favorite artist is begging you to keep bidding higher and higher so they can top the weekly NFT charts, the guys in the soft collars shifts made them do that.

Unheard Labor

MP Kevin Brennan got his streaming reform bill discussed in front of UK Parliament earlier this month, much to the chagrin of British recorded music which appears ready to leave the island for good if it made any progress forward. Luckily for them, the bill isn’t about to become law but it served its purpose of an early trial balloon and signal that the UK government is eyeing real reforms to the recorded music industry.

Meanwhile, in the United States, the Copyright Royalty Board ruled that services like Pandora and iHeartMedia will have to pay songwriters more for “non-interactive” streams. A bit of good news, and another signal of some headwinds of changing at the board towards unfreezing mechanical royalties. The Writers Guild of America West produced a report on media consolidation within the television and film world and asked for a number of policy solutions to address this issue. It’s great to see a union do the research and explain again how detrimental mergers are to entertainment industry workers.

A Note of Financialization

One last roundup of private equity firms, asset managers, and financial institutions spending top dollar on song rights for 2021. BMG reportedly paid $90 million, or maybe $150 million, for the “entire recording catalog” of 80s hair metal band Mötley Crüe; I'm curious on what wasn't included here. Hopefully, someone will report on that. Primary Wave recently inked a few deals by spending $20 million on the “majority stake in the royalties from the Grammy winner’s entire music publishing catalog, and rights to many of its legendary songs” from Jim Peterik of the band Survivor and The Ides of March. The company also picked up an undisclosed stake in the recording, publishing, and name and likeness (!) of r&b singer Teddy Pendergrass. And last, the company paid $90 million for the cluster of rights from the legendary rock and r&b star James Brown. Personally, I’ll be sleeping a little better knowing a private equity firm is collecting checks every time someone listens to one of the 20th century’s greatest musicians.

Mojo Music & Media, a lesser-known independent publisher, picked up the catalog of Garret “Jacknife” Lee. Doing a bit of research I could only find a single report on them attempting to raise money in 2019 to help with catalog purchases but no other details. As always curious about these smaller firms that are still picking up catalogs but without the big name headlines. Speaking of those bigger names. Hipgnosis announced a publishing joint venture with Godmode, who’ve worked with artists like Yaeji and JPEGMAFIA, so I guess even Pitchfork-approved artists could see their works enter into the Hipgnosis portfolio. (Disclosure I guess, I used to write for Pitchfork years ago.)

Before we close out I wanted to make a special callout for the French independent record label Believe. Last week, the company paid $26 million for 15% of the Philippian label Viva Music and Artists Group, and only a couple of weeks prior they put down $14.6 million for 76% of Think Music, an Indian record label. And while a French record label making sure it’ll profit from these soon be further globalized record labels might ring some historical bells, they also picked up 25% of the French indie label Two Play. Record industry consolidation doesn’t believe in borders.

6 Links 2 Read

“Malbeconomics”: Taking Stock of the Twentieth Anniversary of the 9.99 Price Point - Will Page

Our boy Will Page explores the economic impacts of the persistent “9.99” streaming subscription price. Showing that over the last couple of decades the value of music streaming’s gone down while offering more, while the price of wine quietly doubled. Certainly, a strong hook and Page is on the money that the cost of streaming is low for what is being provided to fans but the fact Lucian Grainge pocketed over $150 million when Universal Music Group went public would show there are still a number of ways to split this pie.

Comedy Takedowns on Spotify Raise Questions Over Licensing for Spoken Word - Billboard (Subscription)

An increasingly curious development happening in the space of comedians’ relationship with streaming platforms. Certainly will be keeping an eye on this!

The Problem with Live Music - Dada Drummer Almanach

Big credit to Damon for helping to see the other side of the stage in terms of the dynamics of a touring musician. That is a world of consolidation in live music promotion, the shuttering of smaller-scale venues, and a push for ever farther out venues only makes for higher profits, not deeper fan connections with music.

Open Questions re: The Future of Music NFTs - Matthew Chaim

An exploration of music NFTs with a keen eye towards longer-term economic and artistic implications of these diverging methods. I’ll say more on the role of NFTs within the music space next year but I continue to appreciate the more thoughtful thinkers in this niche.

How did China’s Digital Music Industry Become the Second Largest in the World? - South China Morning Post

There is a slight irony that Tencent Music and NetEase’s Cloud Village are struggling on the stock market due to Chinese tech reforms but are probably the more financially stable streaming-first global music platforms. Can’t win for trying out there.

Rethinking “gamification” for DAOs - Cherie Hu

Water and Music, an excellent music and tech focused research group, continues its slow transformation into a Decentralized Autonomous Organization (DAO). Cherie, its founder, wrote a few thousand words articulating what that means for the research project’s future. Been a big fan and supporter of Cherie’s work for years so I wanted to highlight what an exciting initiative they’re pursuing.