Sony Music’s spent $1.4bn on acquisitions within the final six months… and Rob Stringer’s not stopping there
Last month, MBW estimated that Sony Music Group (SMG) had spent around $ 3 billion on three recently closed music deals.
These deals included the acquisition of AWAL and Kobalt Neighboring Rights for $ 430 million, the acquisition of Brazilian label Som Livre for $ 255 million, and the acquisition of Paul Simon’s song catalog by Sony Music Publishing for an undisclosed ( but definitely a nine-digit) sum.
Now we know exactly how much Sony has spent on music acquisitions (on the above and other deals) over the past six months: $ 1.4 billion. And more will happen, according to SMG chairman Rob Stringer.
At Sony Corporation’s Investor Relations (IR) day today (May 27), Stringer confirmed the $ 1.4 billion figure and also spoke about Sony’s investment activity and the broader music market.
Grilled by an investor about what the Sony Music Group wants to spend its money on in the future – and where it wants to invest geographically – Stringer replied “everything and everywhere”.
He added, “We have not only bought catalogs in the major western markets, but also recently [also] bought catalogs in China and India.
“We have bought merchandising companies in every market in the world. We recently bought management companies in Germany and Mexico. Our eyes are on the world … wherever we believe there is a deal that will improve our ecosystem, we will be there. “
Here are eight more things MBW learned from Stringer on Sony’s IR day …
1) Stringer predicts that Sony Music Group’s profit margins will “outperform our competitors” – although artists and songwriters make more money over the years
Stringer stated that despite the expectation of “further margin pressure” […] Due to rising costs for artists and songwriters ”, Sony Music Group is confident that it will be able to“ compensate ”for these effects on its profit margins.
The company will do so, he said, “by continuing to grow sales, adopt a highly disciplined approach to cost management, leverage our cost base as the business expands, and improve the efficiency of A&R and marketing through data and analytics.”
He added: “With this strategy we can continue to achieve margins that exceed those of our competitors in the future.”
2) Sony calculates that over $ 7 billion was spent on catalog acquisitions in the music industry in the first four months of 2021 – more than all of 2020
According to Sony calculations, M&A and catalog investment activity in music was over $ 7 billion in the first four months of this year alone, Stringer said.
According to Sony estimates, that figure of $ 7 billion was “almost all of the investment in the twelve months of 2020,” he added.
3) Speaking of aggressive A&R investments … Sony Musics’ roster size has grown 40% over the past three years
Stringer said SMG “is aggressively building our global music roster of recording artists and songwriters around the world” and that Sony’s roster size “has grown 40%” over the past three years.
The Orchard alone, which Sony acquired for $ 200 million in 2015, represents over 17 million tracks from 26,000 independent labels, he said.
Stringer added, “Building on our success with the orchard, we are increasing our support for the independent community with the proposed acquisition of AWAL, which is a catalog of nearly half a million recordings.
“The addition of AWAL will immediately add nearly 1,000 artists to our artist services space and give us a leading platform with 14,000 artists in the fast-growing DIY segment.”
4) Fitness, social media and gaming brought in $ 400 million for Sony in the past fiscal year
Across three areas of social, gaming and fitness – through partnerships with companies like Peloton, Fortnite, etc. – Stringer announced that Sony Music generated nearly $ 400 million in the past fiscal year. The Sony manager now expects these revenue streams to “become an even more important part of our revenue base.”
He added, “Music plays an enormous role in enriching the user experience [social, gaming and fitness] and we work with these partners to ensure that we properly monetize the use of the music and copyrights recorded by our artists and songwriters wherever music is used. “
5) Sony has invested in the Beatstars beat market
In April last year Sony Music Publishing (then Sony / ATV) announced that it had entered into a partnership with the music production market BeatStars.
Founded in 2008 by Abe Batshon (pictured), BeatStars received a lot of media attention in 2019 as he was the source of the track used for Lil Nas X’s global hit Old Town Road.
As part of the deal announced last year, Sony announced that it would create original songs and beats for dubbing and recorded music on behalf of BeatStar’s customers. It was also announced that it would provide Beatstar’s global publishing and management services.
Rob Stringer confirmed that there was one more element to the deal. He stated during his presentation that Sony Music Publishing had “invested” in the platform but stopped short to specify the value of that investment.
Said Stringer: “With the acquisition of Kobalt Neighboring Rights and the participation of Sony Music Publishing in Beatstars, an online marketplace for beats, we are finding and creating new sales opportunities for artists and songwriters.”
6) Sony’s takeover of the orchard for USD 300 million is a “differentiating point” for Sony in the “new chapter in streaming growth”.
Stringer was asked by the investor what sets Sony Music apart from the other two majors, Warner Music Group and Sony Music Group.
He pointed out that Sony bought music distribution company The Orchard in 2015 (for around $ 300 million on two deals) as the “earliest point of differentiation”. Stringer identified The Orchard as key to how Sony Music can stop its market share from being watered down, as the 60,000 tracks are now uploaded daily to Spotify and other services.
Stringer said, “Our earliest differentiation into the new chapter in streaming growth was that we bought The Orchard at the right time. That’s a leader. This way we can stop the watering down of the music by the number of songs and tracks that go into Spotify. “
He added: “Our market share is increasing. It’s hard to do, so we think it’s a sign of differentiation from our competitors. “
7) Sony has considered starting its own music streaming service – but does not want to be “punished” for it by Spotify et al
Stringer was asked if Sony Music was interested in its own direct-to-consumer music platform, ie its own music streaming platform.
Sony Music has already released its own service in Japan called Mora Qualitas, which offers high definition music streaming on demand, but there has been no word about the global expansion of this platform.
“We appreciate that the more competitors we have for our content, the better.”
When asked, Stringer told the investor that a D2C platform is “something we are discussing all the time, but we still want to be on all platforms”.
He added, “We should be very careful not to disrupt the landscape with our own platform and be punished by the multitude of DSPs and different platforms around the world.
“Today we have a more diverse platform marketplace in the world than ever before, so we welcome that the more competitors we have for our content, the better and this is where we are today.”
8) Stringer believes that Sony’s music competitors “may do things differently because of the IPO”.
Stringer was also asked about his strength over rival Universal Music Group in light of its upcoming Amsterdam listing later this year and Warner Music Group (which was listed on NASDAQ last June).
“We believe we are on a faster growth curve than our competitors.”
“We believe we are on a faster growth curve than our competitors,” said Stringer. “Obviously, our two competitors are in an IPO situation. We will learn from it. We will understand it differently.
“They may do things differently because of the IPO, but when it comes to our short-, medium- and long-haul plan, we are very clear about the rapid growth we need and we obviously feed ourselves primarily from the streaming growth.
“But as I explained in my presentation, we think we are different at every level of the company.”Music business worldwide