Sony/ATV music boss predicts dealmaking surge
Martin Bandier says industry is ripe for consolidation, fuelled by growth of music streaming
Martin Bandier, chief executive of the largest music publisher that controls hits from The Beatles and Taylor Swift, has a message about the frenzy of investment and consolidation in the music sector: there’s more to come.
The industry is ripe for consolidation, said the chief executive of Sony/ATV, speaking from his office in New York, where figurines of Elvis and Johnny Cash line his desk.
“There’s been a ton of new entrants,” said Mr Bandier. “There must be 10 new companies that have invested money,” he added, thumbing through an internal presentation and rattling off recent deals.
“Shamrock Capital acquires Stargate Publishing catalogue, Reservoir Media acquires Isley Brothers catalogue . . . those all happened within the last six months. There’s opportunity here for consolidation.”
As streaming services like Spotify have fuelled growth in the music industry not seen in decades, private equity groups and other investors have scoured for lucrative copyrights that generate revenue when songs are played in commercials, films and restaurants.
This means music is back in vogue with investors. Vivendi is looking sell up to half of Universal Music, the biggest record label, to cash in on the optimism.
Deals so far have ranged from small family-owned assets to the $2.3bn that Sony is paying to increase its stake in EMI, a publisher with more than 2m songs.
Prices have soared — EMI was valued at $4.7bn in the deal Sony announced in May, more than double that of 2012.
Mr Bandier said the pricetag reflected frothy valuations across the industry, as Wall Street analysts have inflated expectations. “If you ask Goldman Sachs, they will tell you that the number of [music streaming] subscribers 10 years from now will be astronomical,” said Mr Bandier. “That’s part of the reason that people are spending a lot of money,” he said, citing the sale of Songs, an independent music publisher, for $150m this year.
The Songs deal was “totally baffling” he said. “What an incredible sum of money for a company that didn’t have a lot in terms of [copyrights]. I can’t point to anything [Songs] had other than The Weeknd.”
“There were some things [Sony] looked at and thought it was too much money. And then they sold for 15 per cent higher than we had valued it at,” he said, declining to provide examples of assets that Sony/ATV had considered buying.
Music publishers collect small royalties when their songs are used in films, radio, restaurants and other outlets, offering investors predictable returns for hits that stand the test of time. The pennies add up: Sony/ATV makes revenue of about $600m annually; Mr Bandier said it was on track for its “best financial year yet”.
Since taking charge of Sony/ATV over a decade ago he has built it from the fourth-largest to the top music publisher in the world, striking deals such as buying out the estate of Michael Jackson to expand Sony’s catalogue.
Mr Bandier is stepping down in March. At 77, he hints at starting his own venture, but declines to provide details: “I can’t picture myself on a beach, and my golf game sucks. Maybe if I’m out there I can consolidate.”
AAs digital streaming has revived the industry, music executives like Mr Bandier have been striving to claim their stake of the riches.
Songwriters have had some victories too. They fought hard in Washington to earn a bigger cut of streaming sales, and won a big pay rise at the start of 2018.
A US court ruled to give them at least a 15.1 per cent share of the revenues from streaming on platforms such as Spotify, up from the 10.5 per cent rate that was set in 2012.
However, dealing with Spotify has been “tough” said Mr Bandier. “We always wind up doing a deal [with Spotify], but there’s a lot of friction while we’re in the process,” he said.
“The music business used to be a relationship business but . . . the power has shifted from the heads of record companies to streaming services. Now it’s important to know Daniel Ek [the CEO of Spotify].”