New Tune, Old Tricks: The Evil Of Private Equity In Music
WFY BUREAU USA: Have you ever had the impression that every piece of music you hear on the radio, in a movie, or on your phone sounds exactly the same? There is, in fact, an explanation for that. For profit, private equity firms are reviving classic hits by purchasing the rights to them and bringing them into the modern era. These corporations are notorious for their destructive attitudes towards enterprises, job losses, and the nursing homes they acquire. The music landscape has become much duller as a result of these financiers’ focus on the past rather than the future. Consequently, it’s much more difficult for up-and-coming artists to break through and further enrich our culture.
Consider Whitney Houston’s 1987 number one single, “I Wanna Dance with Somebody (Who Loves Me).” Two private equity firms sponsored Primary Wave, a music publishing company, and they paid $50 to $100 million for this tune in late 2022. “I Wanna Dance with Somebody,” a biopic about the singer, has revived the song’s popularity. This film boosted both her hit count and the number of people listening to the song. Among Primary Wave’s many ventures are the launch of a Whitney Houston Signature Fragrance and a nonfungible token based on an unreleased Houston recording. These ventures involve publishing rights, image rights, and recorded-music revenue streams, among others.
Buying the rights to previous hits, giving them a new lease of life, and then reselling them as films may make a good impression on shareholders at a conference, but it won’t do anything to keep the music industry thriving. This method saps our creative energy, just like farmers fighting winter storms.
The music industry has received billions of dollars from private equity groups that see it as a safe haven for their money. Over the past decade, investors have spent a total of $12 billion on music licences, but in 2021, that sum was surpassed. Despite the amount’s negligibility in comparison to the industry’s $2.59 trillion in uninvested assets, music industry veterans saw it as a sign of support for a sector that was slowly making a comeback after a dark period of decline. Stevie Nicks and Shakira were inspired to sell their catalogues for hundreds of millions of dollars by a combination of the industry’s upbeat environment, the loss of revenue from live concerts owing to the COVID-19 pandemic, and concerns about prospective tax rises.
So, how much of an impact has Wall Street had on this takeover? Private investment firms like Carlyle, Blackstone, and Eldridge are becoming richer every time you listen to songs like “Firework” by Katy Perry, “Can’t Stop the Feeling” by Justin Timberlake, or “Born to Run” by Bruce Springsteen on streaming services like Spotify or Apple Music. Even the worldwide smash “Despacito” by Luis Fonsi has given Apollo a cut in revenues. And “Do Ya Think I’m Sexy,” Rod Stewart’s hit single, is actually profitable for HPS Investment Partners, in case you were wondering.
Taking a page out of Hollywood’s book, the new kings of music are monetizing their purchases by building elaborate multimedia universes based on songs, many of which were popular during the Cold War. Imagine super-expensive biopics of famous people, concerts with holographic versions of dead musicians, and TV series tie-ins. These financial behemoths inundate our cultural consciousness with nostalgic sounds, leaving emerging artists vying for algorithm-dictated scraps. Actually, Spotify, the music streaming behemoth, recently did away with royalties for tracks that get less than a thousand listens annually.
The harmful practice of prioritising profit-driven acquisitions over encouraging new forms of creativity further undermines an industry that offers little financial incentive for innovation. According to Jenny Toomey, an independent record label entrepreneur and musician, selling 10,000 copies of an album in the 90s might bring in about $50,000. In 2024, earning the same amount would require a full album to garner one million streams. That is to say, every single song would have to be in the top 1% of Spotify’s playlist. The streaming platforms’ business models unfairly benefit mega-superstars at the expense of up-and-coming artists, despite the fact that major labels are still making record-breaking revenues.
Thankfully, the scene is changing due to certain macroeconomic shifts. The once-dazzling music industry gold rush is beginning to lose its sheen due to rising interest rates. The private equity behemoth KKR was reportedly stepping away from the music industry in February, according to reports. Hipgnosis Songs Fund, owner of Rick James’s catalogue, famous for hits like “Super Freak,” had to discount its portfolio by more than 25% because of shareholder disapproval not long ago. We still haven’t seen the much-anticipated sales of Pink Floyd and Queen’s catalogues.
I suppose it’s for the best that way. Outside of the domain of legal proceedings and corporate boardrooms, there is a long history of musical borrowing that is evident in all musical compositions. But private equity’s insistence on paying artists at rates comparable to the 1990s for repeated content makes it harder and harder to justify financially rewarding those who are already rich. Maybe more space would be available for new and exciting sounds to thrive in the music industry if “Bohemian Rhapsody” and “Dark Side of the Moon” weren’t part of it.
Additionally, as streaming services like Apple Music and Spotify reach their maximum viable user base, we anticipate a deceleration in subscriber growth. The value of music rights may eventually level out as a result of this. If this is the case, there may be additional funding available to help aspiring musicians launch their careers.
The music industry and the tech corporations that distribute its products treat songs like unending scrolling dopamine hits, notwithstanding the value of music itself. Consequently, musicians receive appropriate compensation. Including Wall Street in this equation did not start the systematic depreciation of music, but it did highlight this terrible fact. Despite initial optimism, private equity’s involvement in music rights has become a harbinger of the industry’s doom.
Groups representing musicians have been pushing for higher royalties from streaming services as a means to attain more equitable compensation. Democratic Reps. Rashida Tlaib of Michigan and Jamaal Bowman of New York presented a bill earlier this month to increase streaming compensation for musicians. Nevertheless, strong resistance is anticipated to these endeavours. Still, something has to change immediately in the music industry if it wants to rediscover the value of music production. Only then will we inspire young people to pick up the guitar and become the next John Lennon.
