The Next Bet in Music: Artist Services
April 29 2021 - 9:29AM
Dow Jones News
By Anne Steele
Downtown Music Holdings, one of the biggest independent
rights-management and music-services companies, is moving out of
the owned-copyright business.
This week, Downtown sold a library of 145,000 owned copyrights
of hit songs recorded by artists including Adele, Aretha Franklin,
Beyoncé and Lady Gaga for $400 million, according to a person
familiar with the matter. The company is shifting focus to what it
says will be a more valuable business: artist services, a catchall
term for distributing, marketing, licensing, financing music and
collecting royalties on behalf of musicians.
New York-based Downtown is exiting the copyright market at a
moment when investors are paying top dollar for high-profile
catalog sales by Bob Dylan, Stevie Nicks and Neil Young. Its new
direction is a bet that the proliferation of streaming means more
artists will need help getting their music out and making money
from it.
During the era of CDs and digital downloads, signing to a label
was essentially the only way for an artist to have their music
distributed, played on the radio and promoted. In a standard record
deal, the label typically takes ownership of any music recorded by
the artist in exchange for an advance and taking on the risk of
signing that artist. The rise of streaming services, such as
Spotify Technology SA and Apple Inc.'s Apple Music, has made it
easier for artists to release their music as they like, with or
without a label's help.
Most global hit songs are still products of the major-label
system, but scores of smaller and midsize artists are finding
success -- and careers -- on their own. Many up-and-comers kick off
their careers as independents, landing more lucrative label deals
once they have gained traction on SoundCloud, Spotify, YouTube or
TikTok. But even in those deals artists are demanding more,
including retaining ownership over their music, further supporting
Downtown's proposition.
"The motivation to sell your rights at the onset of your career
is falling out of fashion," said Downtown founder and Chief
Executive Justin Kalifowitz. "While it is true the top of the
pyramid, the top 1% of creators, are selling their copyrights, the
general theme of the music business today is 'how do I own and
control my music?'"
Independent artists represent the fastest-growing part of the
recorded-music business. Revenue from indie labels and artists grew
27% in 2020, increasing their combined streaming market share to
31.5%, according to industry data-provider Midia Research. Artists
who distributed music without any label grew 34.1% last year to
become a billion-dollar market for the first time. Independent
artists out-released major labels last year at a ratio of eight to
one, according to a study from Spotify's former chief economist
Will Page.
All that suggests a need for servicing those artists, Mr.
Kalifowitz said. "The capital coming into music hasn't focused on
this explosion in creativity and what that volume of music is doing
out in this world."
Downtown engaged merchant bank Raine Group LLC last year to
explore strategic options, including a potential sale. That process
helped highlight how the company's services business is growing
more than 30% a year, compared with the mid-single-digit returns
typical of music IP. The business is profitable and projected to
generate more than $600 million in revenue for Downtown this year,
the company said.
Dozens of companies, including Tunecore Inc., Stem Disintermedia
Inc., Vydia Inc. and Create Music Group Inc., are helping
independent artists distribute, promote and even fund their work in
the form of artist services. These offerings, which either charge a
fee or a cut of royalties, but don't take ownership of music, can
be as hands-on or hands-off as artists want.
Downtown has brought several such companies under its umbrella,
in recent years acquiring distributors CD Baby, Soundrop, FUGA and
DashGo; music-data analytics firms AdRev and Simbals; and
digital-marketing platform Found.ee. Songtrust, its
music-publishing administration platform, represents more than
three million songs and more than 350,000 songwriters. In all,
Downtown manages more than 23 million music assets on behalf of
more than one million artists and 2,500 enterprise clients
globally.
It also still administers the copyright of several superstar
artists, including the estate of George Gershwin, John Lennon and
Yoko Ono, Miles Davis, John Prine, Wu-Tang Clan, hit producer Ryan
Tedder and OneRepublic.
Write to Anne Steele at Anne.Steele@wsj.com
(END) Dow Jones Newswires
April 29, 2021 09:14 ET (13:14 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
Spotify Technology (NYSE:SPOT)
Historical Stock Chart
From Sep 2024 to Oct 2024
Spotify Technology (NYSE:SPOT)
Historical Stock Chart
From Oct 2023 to Oct 2024