Hartwig Masuch, Chief Executive of BMG, gave a wide-ranging interview at Midem in Cannes last week (June 5), in which he claimed that his company now considers itself the “fourth major”.
Financially speaking, that’s a fairly bold claim.
Across its dual music publishing and records businesses, BMG turned over $573m last year.
Although that was up 22% year-on-year, Warner Music Group – the smallest of the three major music companies – turned over $3.70bn in the same calendar 12 months, more than six times as much as BMG. (Warner also happens to be BMG’s worldwide recorded music distribution partner.)
Yet according to Masuch, on a practical level – ie. what his company can deliver for its individual artists – it’s a fair comment.
“I think we can do whatever you think a major should be able to do,” Masuch told Variety Executive Editor, Shirley Halperin, during their on-stage Midem chat. “Getting the perspective right, yeah, we are the fourth major.
“Our DNA – by acquiring a lot of very important independent companies – is that we share the values of [those] independent companies, so we have an appreciation of creativity and artists. But our ambition is that we are a major, because being a major for me means you have global access to the markets, and you are able to give artists a global perspective on several parameters [across] recording and publishing.
“It would be foolish to say we’re the leading independent – that would shy away from the real ambition we have.”
Masuch was also questioned on the topic of publishing acquisitions, and whether companies in the space are starting to become over-valued.
To date, ‘new’ BMG – which launched in 2008 – has acquired over 100 independent music companies.
However, it hasn’t participated in many of the recent high-stakes recent M+A activity in the publishing world – which has seen Round Hill buying Carlin for nearly $250m, Kobalt buy SONGS for around $160m, Concord buy Imagem for over $500m and Sony Corp snap up a 60% chunk of EMI Music Publishing for $2.3bn.
Masuch warned of “parameters that might create a bursting bubble” in the space, including rising interest rates or the emergence of inter-territory trade barriers.
He commented: “Saying [the market] is over-valued is always very dangerous, there are a lot of of factors that play into a valuation. [But] if you look at it historically, you could say it’s very, very aggressively valued [today].
“The question is, can you really make sense of if you are a buyer? I would doubt it for at least 5-10 years going forward, simply because of [unpredictable] parameters that have an influence on your publishing income – global performance [revenues], based on radio and TV, might be very challenged.
“So if people right now say the music industry is growing 7-10%, publishing might be growing much less… I’d personally rather be careful right now.”
Other topics covered during Masuch’s discussion included BMG’s reputation for working with ‘legacy’ artists – although that’s clearly not a word the company itself would choose.
Said Masuch: “Here’s a pretty interesting commercial discussion: what actually drives value in music companies? Is it what happens in the Hot 100 in Billboard? We think [catalogue] is a completely under-managed part of the business.; [we] deal with artists who have a 25 year career, who make a lot of money from live, but might not be [an A&R’s] entry into the glory world: ‘Oh, he broke whatever name.'”
Masuch also talked about BMG’s growth as a dual recorded music company and music publisher, and why he feels having integrated teams across both sides is a commercial advantage.
“Going forward all of the music companies have to take a more integrated approach and [think]: Does an artist really want you to make a big differentiation between services in publishing and recorded?
“No, you want to be represented on whichever metric you put your repertoire to your partners. And that’s what we want to achieve – even extended to books, audio-visual content, we want to be a really integrated company that deals with the output of our creative clients.
“It’s a big advantage: you don’t run two separate cost bases. [At BMG] some people have more publishing experience, some people have more experience of marketing recordings, but they really work together on a global level.”
Music Business Worldwide
