Are Music Companies Underestimating the Power of Their Old Catalogs?
The music industry may need to collectively rethink how it approaches its traditional release cycles.
For a long time, the emphasis on marketing new records over dated catalog was justifiable. Prior to the contemporary algorithm era, there were fewer mechanisms to incentivize the discovery of older music (by industry standards, “older” can signify anything > 7 months old).
As such, it never made much sense for labels to invest into the performance and merchandising of older records, unless they were classic hits already ingrained into our collective consciousness. Even then, we’re talking about a fraction, volume-wise, of the whopping catalogues that these IP owners sit on top of.
Contrast that to today, where listeners’ consumption of music is largely fueled by algorithm-driven discovery, which is not bound by chronology, and you can see why labels and music companies are deploying more resources towards servicing their catalogs.
To compound this effect, the “tiktokification” of social media has allowed for songs to go viral regardless of their release dates. Older records that trend on social media reappear, and sometimes even debut, on the charts.
This has created the perfect storm for companies like Blackstone-backed Hipgnosis Songs Fund to pop up. Founded in 2018, the UK-based firm is investing over $1B into buying up music catalogs. To date, they’ve acquired songs from coveted names such as hit songwriter Mark Ronson, RZA of the Wu-Tang clan, music producer Timbaland, among others.
As founder Merck Mercuriadis would put it, the premise behind Hipgnosis centers on the idea that “people look at songs as being inanimate objects; I don’t” and that they “deserve to be managed with the same level of responsibility that human beings do.”
In recent years, we’ve witnessed big catalog deals sell for lofty multiples, sometimes to the tune of 10–20x or more, as streaming has facilitated the process of predicting music revenues. With TikTok, YouTube, Spotify and other DSPs becoming the de facto music discovery hubs, it’s opened up a lane for labels to revisit and promote older records. After all, the release date and overall traction that a record generates in the past does not necessarily define its merit as a work of art, or is even an entirely accurate predictor of future commercial performance. Look no further than Kate Bush’s “Running Up The Hill” as an example of how placement in a popular medium like a Netflix show can catalyze a chart resurgence. In the case of Bush, the record has performed better in 2022 than during its release year in 1985.
The question that then follows is: why should music labels dedicate the bulk of their resources towards promoting new product, when marketing older catalog may potentially be less risky and more rewarding for their bottom lines?
In truth, there’s an argument to be made for both sides. Proponents of a more traditional approach would highlight the importance that marketing new music has on artist development, and that “breaking an act” should be the priority for any label in the business, and is what produces the highest asymmetrical returns. It’s the way the “big 3” major labels (Universal, Sony, and Warner) are able to continuously reinvent themselves and stay relevant. That sort of perspective, though, still fails to explain why leaving old, quality catalog sitting idle makes sense, especially when the same marketing tactics that are used for new records could be applied to this older catalog, and with a potentially much greater degree of confidence in performance.
Even if not immediate, this gradual shift in how we perceive the value of music IP will have long-lasting ramifications, and we are sure to see other players and solutions that intend to capitalize on it.