In the industry equivalent of changing from winter to summer clothes in the closet or re-planting the flowers in the garden, the music publishing biz is in a spring fever of buying and selling, with companies changing hands with a frenzy over the past few weeks. The newcomer with a basket full of cash, BMG Rights, bought up Cherry Lane Music; Bicycle Music grabbed up the TVT masters and songs from the closet of that legendary music company Prudential Securities Credit Corp. (where the catalog had been placed for safe-keeping after being lost in a long-disputed bankruptcy case), and S1 Songs and State One Music, along with it’s money-men over at First State Media Group, were acquired by Chrysalis Music. And of course, that doesn’t even address the rumors swirling around EMI Music Publishing and BMG.
None of this spring cleaning is entirely unexpected. The pressure of the falling revenues in the record industry; the impatience of some of the investors who bought heavily into music publishing several years ago only to find that this seemingly safe and steady business is neither; the credit crunch that set in last year; and the recession’s effect on the advertising, broadcasting, and media businesses that make up much of the music market these days, have all done considerable damage over the long two or three year winter of our discontent. Now, everyone’s wandering out into the backyard, surveying the damage, and getting out some pruning shears and fertilizer to see what gets burned, what can be saved, and what it would take to actually get things growing again.
The interesting thing is that most of the recent acquisitions have not involved the usual suspects. The major companies like Sony ATV, Warner Chappell, Universal and EMI have not been making any big purchases. Maybe they’re saving their pennies for that rainy day when something really exciting goes on the block, like EMI, or a handful of the catalogs from EMI. Maybe they’ve got their own financial pressures, as most of the major publishers’ parent companies have been buffeted by the storms at their associated record labels, electronics companies, or film studios. Nor have some of the most active independent players, like Imagem, been involved in the recent hunting and gathering. This could reflect a desire to consolidate what’s already been acquired before going out to buy more. It could be that the current crop of catalogs for sale just wasn’t all that attractive. Or perhaps BMG Rights, in an effort to get on the map, is buying at a premium price, and simply outbidding everyone else.
So what does all this mean to the music weasels and those who love/hate them? Other than a reassuring statement that life does indeed go on, that even in the deadliest of times there are new things coming to life, or perhaps that there is a sucker born every minute, the spring season shopping spree also confirms a couple of inescapable facts:
1. At the moment, this is a shrinking business when it comes to employment opportunities.
While only Chrysalis has made a public statement about “synergies” and a “reduction in the overall cost base” (which in office-speak means “chopping heads”), it’s obvious that most of these moves will result in a few less weasels on the job. That’s not new news to those in the A&R world, who have seen constant cutbacks both in numbers and in salary over the past years. A word of career advice to those graduating this spring: A&R is not a growth sector. If you think you have an ability to recognize and develop talent, become a manager. Book clubs or festivals. Start your own company. Do NOT spend your time applying for jobs at major record labels or music publishers. It’s like becoming a blacksmith at the dawn of the Automobile Age.
2. Songs last. Companies don’t.
No one purchases a music publishing company because of its brilliant infrastructure, executive team, or efficient operation. They buy ‘em for the songs. Other than the BMG purchase of Cherry Lane, which may have been partly an effort to acquire a North American office and infrastructure, most of the recent purchases and acquisitions are about what music acquisitions have always been about: music. A few years from now, no one other than the people directly involved with the company will remember the existence of S1 Songs. But radio will still be playing Sheryl Crow’s “Everyday Is a Winding Road” and people will be dancing to “Disco Inferno”. Indeed, “Take Me Home Country Roads” and “Leaving On A Jet Plane” had been with Dreamworks Music Publishing (remember those guys?) before Dreamworks went to Dimensional Music and then on to S1, and now to Chrysalis. I rest my point.
3. There are still bulls in the china shop.
As fragile as the music publishing business feels at the moment, with mechanical incomes plummeting, film and television fees falling, performance fees stagnating in the face of dropping revenues at the broadcasting companies, and even the concept of copyright being under attack, the investment community has not given up on music publishing. Or at least not entirely. While a number of investment-backed publishing companies like S1 have long been on the selling block, there are others who have had enough success in the music industry to re-up their financial stakes, and seek out new buying opportunities. Bicycle Music is one of these, as is BMG Rights, which is funded by Kohlberg Kravis Roberts & Co. As is usually the case, alot of money men went into the jungle– a few played sensibly and conservatively and are still standing on solid ground. Others overpaid, over-borrowed, or over-promised and found themselves knee-deep in something less than terra firma.
More importantly though, what does all of the buying and selling mean to small independent music publishers? For most of us, there are no wolves at the door, but no big benefactors either. It’s easy to assume that what’s happening with the bigger players doesn’t impact us. But to do that would be to miss some opportunities that may grow out of the March and April madness. Here are a couple of things to consider:
1. It’s a good time to build your team.
While no one likes the idea of people losing their jobs, the prospect of a lot of idle weasels out on the street could mean a chance for you to pick up a few additions to your own company at a very low cost. While you probably won’t be looking to hire people at their old salaries, you may be able to employ some very experienced people on a short-term consulting basis to help you address challenges in your business, make a few key introductions, or expand into markets where you lack experience. If you need help in a specific area, try putting an ad in the Billboard classified section, or an online posting for “help wanted”. You may be surprised at the people you hear from.
2. Keep an eye out for investors that might be in buying mode, and build your network of music attorneys to help you find them, or them find you.
Now that the economy is rebounding, Wall Street is bonusing, and interest rates are staying relatively low, there will be people with money looking at buying up copyrights. As we said earlier, for all the problems, music publishing still looks like a sound (heh heh) investment to the financial wizards. After all, these are the guys that thought mortgage-backed securities were a great place to park money. At least with music publishing, they can hang out at clubs with musicians and feel cool. If you can find even one or two wealthy backers not afraid to make a modest investment, you may be able to go out and acquire a few solid, proven catalogs or copyrights that will add huge value to your business.
The key to finding either prize (the money-bags investor or the songs for sale) is to build your network, particularly among music lawyers. The attorneys are the ones on the front lines of daily deal-making, and all information flows through them: who’s buying, who’s selling, who’s looking to get into the business and who’s desperate to get out. The more solid and extensive your lines of communication with the music legal community are, the better your chances of meeting a potential buyer, or hearing about an upcoming sale.
4. Sometimes it’s good to be the little guy. Look for writers who want personal attention and service with a smile.
Having been through several purchases and mergers myself, the one thing I can guarantee is that this summer and fall, chaos will reign. Companies who have made big purchases will be faced with the prospect of trying to absorb thousands of new copyrights into their already overwhelmed systems. Employees will be consumed with trying to figure out who their new boss is, and how long he, she or they will be around. And songwriters, faced with the absence of the A&R person that signed them, will be completely lost in the shuffle and be searching wildly for any way out.
If you can offer a well-organized, aggressive, small publishing operation with an emphasis on personal attention, you may be a very attractive option, even to writers with big hits on their discography. In fact, the big writers may be the ones most interested in working with you, as they have less need for a big advance upon signing. Despite what many in the corporate world think, most songwriters are not impressed by big offices or the size of a company. They’re looking for people who understand their music, are as ambitious and driven as they are, and who pick up the phone when they call. That’s going to be hard for them to find as all of these mergers start to overwhelm the companies involved. Don’t underestimate the power of the personal touch.
The real truth about music publishing is that bigger is better only when the company is up for sale– on a day to day level, most songwriters are far happier at a small or mid-size publisher that can focus on them and their music, rather than on the logistical challenge of administering thousands, or hundreds of thousands of copyrights. In truth, most creative executives are happier in a smaller environment as well. And in a rapidly-changing industry in which lean and mean is a necessity, and speed and adaptability are survival skills, many of the light-weights will fare better than the heavy-weights. It’s going to be a busy spring and summer in the music publishing world. My advice is: keep one eye on the action, and the other on the prize. When everyone is cleaning house, they’re bound to leave some good stuff behind…