“Ain’t singin’ for Pepsi / Ain’t singin’ for Coke / I don’t sing for nobody / Makes me look like a joke.” So goes the first verse of Neil Young’s 1988 hit “This Note’s for You.” In the second verse, this shitlist expands to cover Miller, Bud, politicians, and Spuds, the latter referring, of course, to Bud Light’s late-eighties canine mascot Spuds MacKenzie, rather than the humble and blameless potato. I suppose I’d always interpreted these lines as a sample of the wide range of stuff Neil Young is unwilling to sing for, implying a more general indictment of pop music’s increasingly shameless integration with advertising and corporate branding. I never presumed there was a corresponding list of business interests he would sing for, but what do you know? There is, and it includes Morgan Stanley, Brewin Dolphin, BNY Mellon, and the investment arm of the Church of England.
All of the above are investors in Hipgnosis Songs Fund Limited, a UK-based “song management” company creating shareholder value by buying and exploiting the copyrights to successful music catalogs. At the start of this year, they paid around $150 million to acquire 50 percent of Neil Young’s publishing rights. Now, every time we purchase or stream one of his songs, half the royalties that would previously have gone to Young as songwriter are instead paid out to Hipgnosis. Quite simply, Hipgnosis and its backers are now part owners of Neil Young. When he sings, they make bank.
But it isn’t really fair to single out Young for ridicule. We’re living through the Götterdämmerung of the rock-and-roll era. Faced with the exigencies of estate planning, Bob Dylan, Stevie Nicks, and Paul Simon have all elected to cash in their catalogs and ascend to a higher plane of megawealth. The sums on offer from Hipgnosis and other firms can easily be dispersed among heirs, invested in property and stocks, or used to build an extremely fancy sarcophagus. All a songwriter has to do in return is hand over their life’s work to a gang of grinning suits. This deal is so compelling that even younger artists are taking it up. When a songwriter like Joel Little (Lorde, Taylor Swift) or Andrew Watt (Justin Bieber, Miley Cyrus) sells out to Hipgnosis, they are trading away decades of potential future income in return for a lump sum. This money will spend regardless of whether anyone is still listening to their stuff in the grim darkness of the later twenty-first century, a risk now shouldered wholly by the buyer and their investors.
Indeed, the entire business model of Hipgnosis and their competitors rests on the counterintuitive idea that the songs we’re listening to today will sustain (or even improve) their currency well into the distant future. Bob Dylan may have received the official stamp of timelessness from the Nobel committee, but does this really mean that today’s teenagers will be listening to “Stuck Inside of Mobile with the Memphis Blues Again” in 2041? How much would you bet? Well, Hipgnosis has spent almost $2 billion over three years to acquire its roster of some sixty-five thousand tracks, vying with traditional music publishers and major record labels for control of the most valuable catalogs. Billions of dollars are flowing into the industry—and barely a cent is going toward the creation of new music. Instead, this money is being spent securing ownership of intellectual property which may, for all we know, be to future generations what fifties lounge music is to us today.
Ask any of these investors what they’re thinking, and you’ll get roughly the same line: streaming has saved the music industry by establishing a way to charge consumers for digital music. Rather than buying new albums, listeners pay a monthly subscription for access to a vast library of recorded sound. This has effectively transformed music from a discretionary to a utility purchase, like electricity or water, producing a revenue stream so reliable that song royalties can now be considered an “uncorrelated” asset, providing investors with steady returns regardless of the general state of the market.
This is not so much an explanation as a sales pitch. If song rights have value as an asset class, this is not because streaming has “solved” the industry. As we all know by now, only the very biggest recording artists make decent money on a platform like Spotify, where a single stream in 2019 represented about $0.00348 in revenue. At the same time, Spotify has never posted an annual profit, and its main competitors—Apple Music, Amazon Music Unlimited, and YouTube—are propped up by the balance sheets of global megacorps. Without constant infusions of outside capital and the pitiless exploitation of musicians and songwriters, this “sustainable” status quo would fold in an instant.
In fact, it is precisely the dysfunction of the modern music economy that makes it such an appealing prospect for investors. Impoverished artists make pliable targets for buyouts, while the digital transition has undermined the power of traditional industry gatekeepers, making space for outsiders like Hipgnosis. The fund’s CEO Merck Mercuriadis likes to present himself as an advocate for songwriters, but at best he’s no more than an opportunist profiting off their precarity. At worst, the activity of his firm and others like it will intensify the most pernicious tendencies of this already rotten industry, with material consequences for the kinds of original songs that get recorded, promoted, and circulated. The scale of the current buying spree may be large, but there is nothing new about treating music copyrights as a tradeable asset. Quite the contrary—the industry of today is the product of a century’s worth of IP acquisitions and expropriations, with song rights confiscated from artists and concentrated in the hands of an ever-more-exclusive rentier cartel. If we find ourselves disgusted by the prospect of investment firms claiming ownership of our musical heritage, then it is necessary to recognize that this is only the latest expression of the role copyrights have always played in the power structure of the recording industry.
Tale of the Troika
Enshrined in the noble bombast of the Constitution, the ostensible point of copyright law is “to promote the progress of Science and useful Arts” by balancing the competing interests of authors, publishers, the state, and the public in the context of a market economy. Part of this means ensuring that the producers of original works are properly remunerated for their efforts, not simply because they are the proprietors of their creations but because new advances in science or the arts are understood to be a public good of benefit to all. A fine principle—but from the pressing of the first wax cylinder to the latest TikTok video, the actual function of copyright in the economy of recorded music has not been to reward and sustain creativity, but to enable global corporations to exercise market power and generate monopoly rents.
Recorded music is peculiar among intellectual properties because it involves two kinds of copyright: “publishing rights” and “master rights.” Publishing rights refer to the song as a composition, and pay out when it is performed or covered, while master rights apply to the sale or use of the recording, but in many instances both apply simultaneously. When a song is downloaded or streamed, both master and publishing royalties are due, but in differing ratios depending on the context. As if this weren’t enough of a farrago, ownership is typically divided across multiple entities—record labels, music publishing companies, musicians, songwriters, and now song funds, who have predominantly concerned themselves with the acquisition of publishing rights, which are far more likely to be owned by artists and hence are available for purchase.
By far the largest owners of music copyright are the so-called “Big Three” major labels—Warner, Sony, and Universal. Between them, these conglomerates occupy roughly 66 percent of the world market for music streaming and sales (though, as musician and campaigner Tom Gray points out, this figure is much higher if you discount China and India, where their footprint is relatively small). These behemoths are the product of sixty-odd years of blob-like assimilation, a numberless multitude of small and medium-sized record labels rolled up through a series of mergers and acquisitions into an undifferentiated mass of capital and IP representing more or less the entire history of recorded music.
We’re living through the Götterdämmerung of the rock-and-roll era.
While the major labels control the three biggest music publishing companies (organizations that own publishing rights or administer them on behalf of songwriters), their most prized assets are their voluminous catalogs of master rights. These holdings are the legacy of the standard contract which the majors have historically imposed on musicians, under which they’re forced to hand over their master rights to the label in perpetuity. In return, the label kicks the artist an advance and fronts the capital to record, press, and sell their album. All these costs must be paid back by the artist out of their share of the master royalties (the UK government’s recent report estimated that modern record contracts offer a royalty rate of between 20 and 24 percent), meaning that they often remain indebted long after the label has started turning a profit on the recording. Many performers don’t see much money beyond their initial advance. By owning the master rights, the label is not only entitled to the majority of the revenues associated with the recording; they also get to decide how it can be used, reproduced, and sold in the future. As Prince once put it, “If you don’t own your masters, your master owns you.”
The majors were able to inflict these terms upon artists because they held an effective monopoly on the capital resources required to launch and sustain an international pop career, and if you wanted to make it big, it was necessary to pass through this vertically integrated obstacle course. This enabled the majors to accrue vast hoards of music copyright, which they could in turn leverage to bolster their control over the industry, whether through lobbying Congress “on behalf of rightsholders” for favorable legislation or wrangling with manufacturers to make sure new music formats both protected and extended their profit margins. This virtuous cycle reached its apogee with the creation of the CD, which could be produced for a couple of dollars and flipped for fifteen, powering the industry through the Caligulan excesses of the eighties and nineties.
Global revenues peaked at $38 billion in 1999, but the rise of digital music derailed the gravy train—a crisis having far more to do with the majors’ inability to unite around a new business model than with the effects of “piracy.” The twin birth of the MP3 and filesharing created an immaterial music format that could be cheaply produced and delivered direct to consumers, weakening the labels’ monopoly over manufacture and distribution and thereby depriving them of control over how their product was packaged and circulated. This left them unable to inflate their profit margins through grotesque markups on sales of physical media. In the United States, revenues from music sales and licensing plummeted from $14.6 billion in 1999 to $6.3 billion ten years later.
As they prevaricated over the problem of how to charge consumers for digital music files, the majors doubled down on protecting their sole remaining source of leverage within the industry—their glittering hoard of intellectual property. Throughout the 1990s, they had lobbied Congress to pass a series of laws to shore up their position. Those efforts culminated in the Digital Millennium Copyright Act (DMCA) of 1998, a bill furnishing rightsholders with a new toolset for defending their property online, from digital rights management software to lawsuits directed at filesharing websites and individual consumers. So long as they could protect the value of their copyrights and present a united front, the majors would still be in a position to negotiate with the tech companies that would take over music distribution in the years to come.
To secure its market share in the nascent streaming economy, Spotify set out to provide access to (give or take) every song ever recorded for $10 a month—a promise that only the major labels, as the monopoly owners of nearly all of pop music’s back catalog, could deliver. A leaked copy of a 2011 contract between Spotify and Sony reveals what the new platform had to trade for a comprehensive licensing agreement with the Big Three: up to $42.5 million in advances, free ad space, and the ability to automatically renegotiate if any other label gets a better deal. It has also emerged that, divided between them, the majors received a total 17 percent equity stake in the new streaming platform. Thanks to this last item, the Big Three took on a substantial interest in their number one customer—a completely normal arrangement in no way conducive to market manipulation.
So while the streaming platforms cop a lot of blame for the inequities of the modern music industry, we’d do well to reserve some brickbats for the major labels, who have leveraged their IP assets to shape this new economy in their favor. Once the streaming platform has taken its 30 percent off the top, the remainder goes to the traditional industry stakeholders, and thus far the major labels have ensured that they continue to receive the lion’s share. The main way they achieve this is by insisting that every stream counts as a discrete sale, equivalent to a download or a CD single. By maintaining this position, they were able to carry forward into the digital age the same royalty split that applied to physical media—roughly 55 percent for the master rightsholder and 15 percent for publishing. And every time we press play on a song, we set off another cycle of these payments. The sums attached to a single stream are of course infinitesimal relative to the sale of a physical record, but on the other hand, they will keep paying out until the heat death of the universe—or until people finally get sick of “Mr. Brightside,” whichever comes sooner. As the monopoly controllers of master rights, record labels rake in these revenues on a global scale: in the first fiscal quarter of this year, Sony posted $2.33 billion in revenue, nearly 40 percent of that from streaming. Meanwhile, recording artists and songwriters are left to scrape together a living from the shavings they leave behind.
Full Stream Ahead
For the major labels, this is about more than just the bottom line: master rights are also their primary source of leverage over artists and tech platforms alike. But there are signs that other industry stakeholders are increasingly unwilling to acquiesce to this status quo. This July, the UK Department for Digital, Culture, Media, and Sport published the findings of its inquiry into the streaming economy, calling for a “complete reset” of the system and recommending explicitly that the government explore the possibility of implementing “equitable remuneration” for digital streams, an alternative royalty split that would direct more money toward performers and songwriters.
Billions are flowing into the industry—and barely a cent is going toward the creation of new music.
Curiously, among the various campaign groups that spoke in favor of these reforms was Hipgnosis. Putting aside their admirable rhetoric that “artists are completely left out of the economic equation” and the importance of giving artists and songwriters “a seat at the table,” the main appeal of royalty reform from the perspective of Mercuriadis and company is that it would more than double the value of their assets overnight, while diminishing the revenues and market power of the major labels. This would bring Hipgnosis one step closer to becoming a big enough player to negotiate with Spotify, Apple, et al. on its own behalf. Far from improving the lot of artists, Mercuriadis’s aim is to acquire market power by leveraging his IP—just as the major labels have always done.
Hence the current scramble to buy up the most valuable and prestigious song catalogs. For the song funds, this represents an unprecedented opportunity to become real players in today’s IP-driven culture industry, or at the very least to make a quick buck. Their mounting aggression has forced the labels to play defense, preemptively buying the rights of venerable figures like Bob Dylan, Paul Simon, and, er, David Guetta to keep them out of the hands of Mercuriadis and his ilk. Meanwhile, Wall Street giants are starting to put money behind these deals: Hipgnosis recently received investment from Morgan Stanley, and in January of this year, the private equity outfit KKR bought a majority stake in the catalog of writer and producer Ryan Tedder. As a result, the short-term prices of song catalogs seem to be headed in only one direction.
In February, Mercuriadis estimated that Hipgnosis has around two years to acquire its target catalogs before the market gets so hot that their purchases will no longer be cost-efficient. Whether or not his timeline is on the money, he’s right that at some point in the next few years, the bubble will burst. At this point, the song rights frenzy will transition into its next phase, wherein the various entities who have spent millions acquiring these catalogs try to figure out how to get the best returns on their investment.
This will be a brutally competitive process, driven by the imperatives of shareholder value and measured against the performance of every song fund and record label simultaneously milking its musical assets. Hipgnosis in particular has staked its reputation on being a judicious steward of the songs it acquires, but it remains to be seen whether the promises they’ve made to the songwriters they bought from will hold when the squeeze really begins. Mercuriadis’s company has been buying catalogs at around fifteen times their yearly value, a pricing model which is based on some pretty bullish assumptions about their future prospects: streaming revenues from songs that are ten years old or more are projected to increase by 21 percent this year, then 18 percent in 2022, and 17 percent in 2023. While they clearly expect this growth to be driven by broader market trends, they can’t just sit around and hope. If Hipgnosis and their competitors are banking on this degree of asset appreciation, they’re going to have to go out and make it happen.
Sell That Song for Parts
This is where the concept of “song management” comes in. In one sense, it’s no different from what music publishing firms have been doing for the past seventy years—maximizing revenues by placing songs in ads, film, television shows, and so on. However, the digital music economy has created a range of new possibilities for generating income from musical IP, incentivizing a strategy with even fewer scruples about the integrity of the songs being licensed.
The success of the song funds will depend to a great extent on their ability to get their hands on the levers of online success, transmogrifying those Shakira album tracks into memeable paydirt.
One of the trends that Hipgnosis and others are relying on to juice the value of their assets is the expansion of licensed music into digital spaces outside of the traditional streaming platforms. TikTok is very much the tip of this particular spear—a disruptive platform that has in short order established a symbiotic relationship with the wider digital music economy. With its capacity for rapidly creating new viral trends and boosting the profile of previously unknown artists, TikTok has come to serve as a proving ground for new performers and a test bed for new brand alignments and marketing campaigns. For rightsholders, the dream is that a previously dormant piece of IP may end up being interpolated into a viral craze, replicated in a million mutant variations all across the platform. Success on TikTok does not only represent a revenue stream in itself but a pipeline to success on streaming services. Last year, Fleetwood Mac’s “Dreams” was streamed 8.47 million times in a single week after featuring in a video by TikTok user 420doggface208.
In the coming years, there will be increasing pressure on song managers to engineer these apparently spontaneous juxtapositions in line with their bosses’ growth projections. TikTok is a highly managed ecosystem, its staff collaborating closely with both creators and record labels to orchestrate viral campaigns, driven by data analytics and careful manipulation of the platform’s infrastructure. The success of the song funds will depend to a great extent on their ability to get their hands on the levers of online success, transmogrifying those Shakira album tracks into memeable paydirt.
TikTok will be a model for the upcoming expansion of licensed music into new digital spaces, as competitive pressures drive rightsholders to strike deals with video and messaging apps, on-demand entertainment, video game developers, vlogging platforms, podcasting, e-fitness, productivity and mood-enhancement, virtual and augmented reality, and more. These different platforms will inevitably impose their own rhythms on featured music, as we’ve already seen in the form of the so-called “TikTok effect,” which privileges songs built around a repetitive hook featuring an easy-to-follow command. The really valuable songs, however, will be those which attain that meta quality that allows them to translate across all these different platforms while retaining a recognizable musical signature—the tune that works as well on Peloton as it does on WhatsApp, Twitch, and Roblox. These songs will effectively be used in the same way that Disney treats the IP from its Star Wars or Marvel franchises—endlessly recycled and recombined in an effort to chivvy users from one site of accumulation to the next without ever taking the risk of exposing them to something original.
Of course, musical form has always been a product of historical and economic forces. The three-minute pop song was a consequence of the storage limitations of shellac records and the demands of commercial radio, which wanted content streamlined to fit around their ads. With “song management,” however, this dynamic will attain a new intensity. Just like TikTok, most new venues for licensing digital music have no use for a whole song: they want only those snippets that create a certain dynamic effect or particular mood. With the use of data analytics and consumer surveillance, platforms and record companies increasingly believe it is possible to isolate which parts of a song generate what reaction in their listeners, and this feedback will inevitably be used to fillet longer compositions for use in apps and social media. The upshot of these commercial and technological pressures may be the fulfilment of a prediction made by music writer Cherie Hu back in 2018—that just as the rise of online music distribution at the turn of the millennium resulted in the “unbundling” of the album into individual songs, so will digital song management result in the “unbundling” of “an individual song itself into isolated vocal and instrumental parts . . . and bite-sized samples and loops.” Unbundling the song does not simply mean slicing it up into segments to be consumed in different digital contexts, but also creating an infrastructure that allows these segments to function as independent economic units. This has always posed considerable legal and technical complications—what kind of royalties should be attached to song fragments? How to ensure they are properly tracked and paid? What’s the smallest unit of a song that can be licensed? The rules around how royalties from social media platforms should be distributed are still up in the air. As David Turner has pointed out, “There’s potentially a whole shadow, or regulatory, industry that could be formed to fight over percentiles of TikTok revenues.”
Over the last couple of years, a range of companies have set themselves to addressing these issues. Songclip, for instance, “delivers fully compliant music to your application,” by which they mean a library of licensed five-to-thirty-second clips of popular songs and an API that integrates these snippets directly into dating sites, messaging apps, and social media platforms. These clips are organized by theme, mood, activity, and other tags that allow them to be matched with a range of use cases like “celebrate,” “flirt,” or “describe your perfect kiss”—a catalog of song fragments, pre-sliced, licensed, and ready to be monetized. Beyond these short clips, even more granular forms of music licensing are on the horizon. A number of start-ups are experimenting with markets for “stems”—individual song elements like a particular drum sound or guitar lick, isolated and resold for sampling and remixing. Many of these services offer stems on a royalty-free license, supported by a monthly subscription, but who knows what might happen to this model once the value squeeze hits? The risk is that stem marketplaces may just offer another surface for firms like Hipgnosis to apply their influence.
Unbreak My Art
The advent of the unbundled song threatens to intensify everything that is already terrible about the production of recorded music under capitalism. Increasingly aggressive rightsholders, driven to generate maximum returns on multimillion-dollar investments, will compete to ensure that their properties are exploitable across all available platforms. Ultimately, these pressures will not only shape the licensing of old music but also the production of the new, as original songs are engineered to function as modular assemblages of sound, designed to be broken up and inserted into as many digital niches as possible. The purpose of music across these different contexts will not be to delight and enthrall in and of itself but to lubricate a consumer activity—gaming, posting, scrolling, exercising, dating. The rhetoric will be of choice, customization, and consumer empowerment, but it will be at the cost of the creative autonomy of the artists who’ll soundtrack our drift through this late-neoliberal metaverse. Meanwhile, to the extent that royalties are extracted from ever-smaller fragments of sound, the revenues attached to each individual piece will shrink correspondingly, paying out pennies to performers and songwriters while mass copyright owners rake in big bucks from their consolidated holdings. Even more wealth will vanish up the financial funnel, away from the people who actually create the music that makes continued existence in this stagnant culture a halfway bearable prospect.
It’s easy to gape in horror at the sums splurged on professional mediocrities like David Guetta and Mark Ronson, but there’s an important lesson implicit in the current insanity. Song catalogs sell for millions because they represent more than mere economic value; they’re a source of power and leverage within the complex, increasingly multipolar world of the modern music economy. This leverage could be exerted on behalf of musicians and songwriters, if only they were able to act in concert. And amid the calamities of the past year and a half, there has been a heartening uptick in campaigning and union activity, with organizations like the Union of Musicians and Allied Workers, and the Broken Record campaign making demands that go beyond simply asking for a bigger share of the streaming pie to call for radical structural change in the industry.
The mere existence of a financialized market for song rights is proof positive that a total transformation of music copyright must be a part of this program. Labels and song funds won’t submit to this willingly; it will only be won through a united front of musicians, songwriters, and associated workers, visibly supported by everyone who cares about music as a good in itself, rather than a tool of capital accumulation.