MBW Reacts is a series of analytical commentaries from Music Business Worldwide written in response to major recent entertainment events or news stories. Only MBW+ subscribers have unlimited access to these articles.The below article originally appeared within the latest MBW+ Monthly Review email, issued exclusively to MBW+ subscribers.
If Bloomberg is to be believed, Sony Music Group is currently in discussions with Queen’s representatives over a potential acquisition of the legendary band’s catalog. Sony, reports Bloomberg, has an as-yet-unnamed financial partner willing to co-invest in the deal, which could cost, depending on the number of rights included, USD $1 billion.
You might remember MBW breaking the news that Queen’s reps were in discussions with various parties over a potential $1 billion-plus catalog sale last year. At that point, Universal Music Group was said to be the front-runner for the deal; the world’s biggest music rightsholder since seems to have walked away from discussions.
Rob Stringer, Chairman of Sony Music Group, declined to directly discuss the Queen rumors during a presentation for Sony Corp investors on May 30. But he certainly made a nod in its direction.
Credit: Sony Music Group
“We are undoubtedly the most aggressive major music group in M&A.”
Rob Stringer, Sony Music Group, speaking May 30
During Stringer’s presso, he noted the increasing importance of older music to today’s commercial music industry. He pointed out two stats: (i) According to Luminate, 73% of streaming consumption in the US last year was of catalog music; and (ii) Some 41% of Spotify‘s annual global 200 biggest tracks in 2023 were released more than two years previously.
Stringer, glint in his eye, then stated: “Through targeted investments, we believe catalog is the base of our strategy to navigate a successful path to all future tech trends in the music space… In the coming year, we’ll be smart in our purchases that are curated to this approach.”
Aka: Don’t stop me now.
This, though, wasn’t the quote from Stringer that would have most rattled Sony’s rivals.
That crown was reserved for these words from the Sony exec: “We are undoubtedly the most aggressive major music group in M&A.”
On the catalog side of things, in recent years, Stringer’s statement is undeniable.
If Sony Music Group reaches a deal with Queen, it will be the biggest single music catalog deal in history. The biggest, in fact, since SMG’s reported acquisition of a 50% interest in Michael Jackson’s catalog for $600 million towards the end of 2023. That MJ deal, meanwhile, was the biggest single-artist music catalog deal since Sony acquired Bruce Springsteen’s publishing and recorded music catalogs – helped by co-funding from Eldridge Industries/Todd Boehly – for north of $500 million.
However, Stringer’s “most aggressive M&A” jibe wasn’t exclusively about music catalog deals. It also referenced Sony Music Group’s astonishingly prolific corporate acquisitions over the past decade.
2018: Sony paid approximately$2.6 billion($2.3bn for Mubadala’s 60% stake, nearly $300 million for the Jackson Estate’s additional 10% stake) to acquire the 70% in EMI Music Publishing it didn’t already own. (These deals gave EMP a $4.75bn valuation at the time);
2021: Sony paid around$125 million (€102m) to acquire Universal Music Group’s 50% stake in Todd Moscowitz’s Alamo. (Sony likely paid more, directly to Moscowitz, to lock in majority-ownership of the company);
2022: Following regulatory clearances, Sony completed its $430 million deal to acquire Kobalt‘s AWAL(and the Neighboring Rights business now known as Kollective). Sony also paid $255 million to acquire Brazil’s Som Livre;
2023: Sony is understood to have acquired a 30% stake (for an undisclosed fee) in Rimas Entertainment, run by Noah Assad and home to Bad Bunny.
The selected cash deals itemized above cumulatively represent a corporate M&A spend from Sony of aroundUSD $4.5 billion. Even so, in retrospect, many of them look like bargains.
Throw in just four large catalog deals – the reported Michael Jackson catalog acquisition ($600m, 2023), the Bruce Springsteen acquisition (~$550m, 2021), the acquisition of Bob Dylan’s recordings (~$150m, 2021), and the acquisition of Paul Simon’s song catalog (~$250m, 2021) – and our by-no-means-comprehensive tally of Sony’s spending here soars above $6 billion.
That’s a huge number, highlighting that no other company in music rights has matched the scale of Sony’s M&A spending over the past ten years.
(This should quickly be caveated with the fact that, just before the last decade began, Universal, buying EMI Music from Citigroup for ~$1.9bn, and then Warner, buying Parlophone Label Group from UMG for ~$765m, made giant, transformative acquisitions.)
By the way, our $6 billion+ spending figure above doesn’t count many significant other corporate acquisitions from Sony in the past decade — from the major’s acquisition of Remex’s catalog in Mexico to its purchase of LA-based distie Human Re: Sources, plus Simon Cowell’s Syco music assets, a stake in Walter Kolm’s WK Records, and its buyout of UK/EU-based distributors, including Essential Music + Marketing, Phonofile, and Finetunes.
Another big takeaway from Stringer’s May 30 presentation? Sony’s aggressive M&A strategy hasn’t stopped in the past 12 months – and I’m not just talking about those Queen discussions.
Stringer verbally confirmed that Sony acquired Spanish distributor/label Altafonte in late 2023, continuing its heavy investment in both Latin music and companies that service independent artists.
Yet Stringer’s presentation also came with visual slides that confirmed that Sony has executed additionalkey acquisition deals in the past year. In the ‘Expansions’ section of Stringer’s presentation, you’d have found logos for companies including:
Drake’s own label, OVO Sound (which doesn’t house Drake’s solo recordings, but does include global hits from the likes of PARTYNEXTDOOR). It’s understood Sony (via Todd Moscowitz’s Santa Anna) acquired a back catalog from OVO while inking a go-forward distribution deal earlier this year;
The RECORDS label, led by Barry Weiss. Again, it’s understood that Sony acquired the historical catalog of this label (of which Sony already owned 50%) in late 2023. Today, Weiss continues to run RECORDS as a JV between himself and Sony – more newly-signed artists weren’t included in the 2023 acquisition;
Other logos included on Stringer’s ‘Expansions’slideincluded two much-respected indie labels: heavy metal house Napalm Records, and Mississippi-born Fat Possum, plus Triple Tigers, a country-focused JV that Sony formed with indie Thirty Tigers in 2016. A Sony spokesperson wouldn’t confirm the structure of the major’s M&A dealings with these three labels when I contacted them, but a source close to the situation said that Sony is now “heavily invested” in all of them. My guess? In each case, Sony replicated the catalog-acquisition-plus-partnering-on-future-releases structure it pulled off with OVO and RECORDS.
A slide from Rob Stringer’s May 30 presentation showed ‘Select Recent Expansions’ including Rimas, Fat Possum, OVO Sound, Triple Tigers, and Napalm Records
Elsewhere in his investor presentation, Rob Stringer discussed Sony’s prolific M&A strategy over the past decade: “We’ve had a window to be more aggressive — and I think we’ve taken that opportunity.”
That was a slightly cryptic comment, but my take was that he was referring to two things:
(i)Universal Music Group being ‘locked out’ of making significant corporate acquisitions in Europe for 10 years from 2012-2022 by regulators, following its industry-changing acquisition of EMI Music;
(ii) Some M&A caution that may have influenced Universal and Warner’s strategies, at different points, in the lead-up to/the wake of their respective IPOs in 2021.
To be clear, neither UMG nor Warner have been slouches in the acquisition stakes in the past decade.
Meanwhile, Universal famously spent the best part of $400 million buying Bob Dylan’s song catalog in 2021, before spending nine-figures apiece on the catalogs of Sting and Neil Diamond the following year. Elsewhere, UMG’s corporate M&A has included a sizeable payout to buy the Cash Money catalog, the acquisition of 49% of [PIAS], and a recent run of deals in emerging markets – including 2023’s nine-figure acquisition of a majority stake in Nigeria’s Mavin Records.
Today, with their respective 2021 public floatations firmly in the rearview mirror, there are signs that both UMG and Warner Music Group are set to increase their aggressiveness in the M&A space.
Universal says that it will be carrying out future catalog acquisitions via Chord Music – which UMG co-owns with Dundee Partners following a $240m deal in February – rather than from its own balance sheet. This should theoretically take the handbrake off UMG’s potential spending in the catalog marketplace (especially if Chord can raise substantial debt), which would have previously been affected by shareholder dividend expectations.
Warner, meanwhile, recently edged close to making a $1.8 billion bid for Believe. That offer didn’t happen, but it was a telling sign of WMG’s hunger and capacity for M&A acceleration.
Related: last week, Warner boss Robert Kynclannounced that he’d poached Michael Ryan-Southern to lead global M&A at WMG. Ryan-Southern not only brings experience from Goldman Sachs – he was also previously Mubadala’s handpicked finance whiz at both EMI Music Publishing and Hakkasan.
When Rob Stringer claims that Sony is the “most aggressive major music group in M&A”, the stats over the past decade back him up.
But the next 10 years in major-label-land are yet to be written. Music’s acquisitive competitive landscape could become fiercer than ever.
Can you hear those checkbooks thudding open as I type?Music Business Worldwide
