This Week In Music: It’s Got A Good ROI And You Can Dance To It
Back in the days when the music business was starting to evolve from its wilder entrepreneurial early days into a more corporate environment, there was an eternal lament that the real record guys were being pushed out by corporate suits.
As more and more multinationals swallowed up the business, that change became more and more apparent. But still, it was somewhat forbidden to publicly be anything but a music-loving, freewheeling “record guy” who was always looking for the next big thing
Apparently, that taboo is no longer in vogue.
In a revealing interview last week with Music Business Worldwide, BMG CEO Hartwig Masuch said his strategy of focusing on established artists who are already popular will be the new trend in music, particularly as some conglomerates look to maximize shareholder value by perhaps splitting up their new repertoire divisions and catalog.
That’s even as BMG is enjoying pop music success for the first time in a while.
The back catalog strategy is hard to argue with, given BMG’s financial returns. It has a consistent EBITDA margin. Streaming is a big part of that, with recorded music streaming revenues up 26% YoY, with catalog accounting for 49 percent of that.
But that relentless focus on returns is something that would have a few of the older record guys up in arms, not to mention the actual fans
“I think we’ll see more companies having to acknowledge that the reality of music consumption goes way beyond hits – therefore the whole perspective of the industry must also change,” Masuch said. “For some, that’s definitely something to worry about – for others it’s something to be happy about. We are happy!
“We want to support the development of new artists, but I don’t want to put all our bets on ‘Hey, we have X% market share in contemporary pop.’” he added. “That sort of metric is flawed when most of the consumption on streaming today is geared towards catalog.”
In an investor-driven world, Masuch argues that will lead to some “interesting discussions” among financial backers. Should they focus on new music, or work ever harder on the material driving the bulk of the revenue?
“Focusing on catalog [over frontline] has the advantage that it gives you stronger leverage with music industry [partners] too: if catalog is increasingly what listeners are interested in, that approach doesn’t leave your success or otherwise at the mercy of being on a ‘music of the week’ playlist.
Of course, without hits, there’s no real future growth, financially or creatively.
“I think, honestly, the whole industry needed this big wake up call to realize that, yes, it’s absolutely exciting to break new artists – but if that comes at the expense of paying attention to what actually pays the bills, it can’t have a happy ending.”
Perhaps the record industry has gotten too big at the very top. That may be good news for the young upstarts who no longer rely on physical distribution.
But no one with a soul was ever inspired to get up and shake it by a quarterly return or fell in love to a good fiscal year. Perhaps some have forgotten that in today’s music industry. It all starts with a song, as the artists always say. That’s a lesson that shouldn’t be forgotten.
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