Image source @ Visual China
Wen 丨 Music Herald (ID: nakedmusic), author 丨 贰叁三, Editor 丨 Fan Zhihui, Titanium Media is authorized to publish.
On October 27, NetEase Cloud Music is planning to report to the relevant national regulatory authorities about south Korea's SM company adhering to the exclusive copyright model, refusing to open up music copyright authorization, or involving the use of music copyright to maintain the "two alternatives" monopoly.
Sm ignored the explicit requirements of Chinese regulators and refused to sign a contract with any platform after the exclusive agreement was ordered to be terminated according to law, the source said, in order to forcibly continue the discriminatory music licensing policy and maintain the high advance profits in China for many years. On another level, after losing the high prepayment brought about by exclusivity, most copyright companies will not have a good life in the future.
On the other hand, the overseas copyright "gold rush" that has lasted since the second half of last year has ushered in a larger capital player. Half a month after the news broke, Blackstone, the world's largest alternative investment firm, confirmed that it was investing about $1 billion in new private equity fund Hipgnosis Songs Capital to acquire music rights by partnering with Merck Mercuriadis, founder of hipgnosis Songs Fund, a music rights investment firm.
On October 29, according to the Financial Times, DAVID BOWIE's estate management company was negotiating to sell the legendary artist's song rights. At present, the negotiations are "in the late stages", and the price of the quku is "about 200 million US dollars".
On the one hand, the sudden royalty contraction under the introduction of the policy, on the other hand, the capital hot money caused by the anti-risk ability of copyright under the epidemic situation, such a contrasting scene at home and abroad, is indeed an industry spectacle.
<h2>Domestic: Antitrust copyright pain, royalties shrank sharply</h2>
Since the "strictest copyright order" in 2015, the exclusive copyright war has slowly begun.
Even as the leader of the online music field and successfully listed in the United States, the high copyright expenditure is still an extremely difficult cost to recover for Tencent Music, which is a big business. Other platforms are even more miserable, in the past few years, Domi Music, Shrimp Music, etc. have been defeated in the copyright competition war, and finally left the scene dismally.
The situation of NetEase Cloud Music is not better. The song turns gray, which will inevitably cause users to complain, and in order to retain users, NetEase Cloud Music can only spend huge amounts of money to bid for copyrights. However, in the fierce copyright war, NetEase Cloud Music, which focuses on original music, completely removed all copyrights of Modern Sky in 2018, and once lost the important territory of original music. Many "Yuncun refugees" have also been forcibly displaced.
Behind all this, executive job hopping and department changes are commonplace.
This year, the copyright landscape has changed again. On July 24, Tencent received an anti-monopoly administrative penalty letter from the State Administration for Market Regulation, mainly involving Tencent's acquisition of the equity of China Music Group, constituting an illegal implementation of business operator concentration, etc., and was fined 500,000 yuan, and required Tencent not to reach or covertly reach an exclusive copyright agreement with the upstream copyright owner.
Behind this penalty is not only for the music industry, but a microcosm of the strict implementation of a series of anti-monopoly policies of the state.
On August 31, Tencent Music issued the "Statement on Waiving the Exclusive Licensing Right of Music Copyright", which mentioned that Tencent has officially sent the "Notice of Termination of the Music Copyright Licensing Cooperation Agreement" and the "Reminder Letter of Cancellation of the Music Copyright Licensing Cooperation Agreement" to the relevant upstream copyright owners by email, and sought to terminate the exclusive agreement with the relevant upstream copyright owners as soon as possible.
On October 19, the copyright of Modern Sky was returned to Yuncun. Previously, some media reported that NetEase threw an olive branch of non-exclusive copyright cooperation to more than a dozen major record companies, but none of them received a positive response. After Tencent Music gave up the exclusive copyright, NetEase first successfully won the modern sky copyright, which is enough to prove that the audience groups of the two themselves overlap highly, and resuming cooperation is a win-win for each other.
Many media refer to the moment when the exclusive copyright war is over as the "post-copyright era", but they do not know that another form of music copyright competition has just begun.
Just two days after the State Administration for Market Regulation asked Tencent to give up exclusive rights on July 24 this year, major media began to report that ByteDance had set up a new music agency distribution platform "Galaxy Ark". The platform focuses on uploading songs and videos at one stop, making it easy to list on global platforms. This also means that ByteDance, which has laid out the music industry through Resso overseas, has long been preparing to enter the domestic music market and has been waiting for opportunities.
After the cancellation of the exclusive, NetEase Cloud Music still encountered a lot of resistance in the process of recovering the lost copyright. In particular, overseas copyright owners are still unwilling to give up the high income of the previous "exclusive copyright", which has led to the news that NetEase reported that South Korea's SM company insisted on exclusive copyright.
This move by overseas copyright owners is not difficult to understand, and the cost difference from exclusive copyright to non-exclusive copyright is extremely large, let alone 2-3 times the difference, and may even reach 10 times the gap. In the analyst conference call after NetEase released its 2021 second quarter financial report, NetEase CEO Ding Lei once "shouted" Tencent Music to give up exclusive rights: "NetEase is very much looking forward to this is a sincere decision that does not contain any yin and yang. ”
It is worth noting that this exclusive copyright ban excludes independent musicians or new song releases. This also means that the incubation of independent musicians or song incubation will become an important battlefield for differentiated competition between several major platforms.
On October 14, NetEase Cloud Music established the "Musician Training Class" and opened the first batch of student recruitment. According to public information, the musician training class is completely free, with the goal of cultivating high-quality professional singers and improving the platform's ability to "promote new" and "star-making". This plan is a bit like the meaning of the previous TVB artist training class, excellent students can also get the opportunity to sign a contract, customized songs, traffic support, training system and other resources, to be a musician with five insurances and one gold.
On October 15, Tencent Musicians, Together with WeChat Video Account Creation, and TME's QQ Music, Kugou Music, and Kuwo Music, jointly launched the "Same Frequency Plan". According to reports, the program will invest in millions of cash pools and exclusive flow support to motivate independent musicians to license songs, publish videos, and provide multiple opportunities for musicians such as cash rewards, exposure stages and professional teaching.
For the copyright owner, after canceling the exclusive, the possibility of getting a high prepayment in advance is reduced, and the platform begins to implement traffic settlement with the copyright owner. This also means that the value of music copyright will gradually return to the data of usage and listening.
You know, many record companies that are difficult to generate listening and usage have used the advantage of quantity and copyright scarcity to get high prepayments; if they rely on data settlement, many copyright companies are likely to be unable to settle any income. More importantly, some insiders have questioned that the data transparency of music platforms may cause traffic settlement to be "unfair". Previously, Music Herald had reported that some distribution companies were hiding real data.
If all are settled according to traffic, for the current situation, most of the songs that can make money through traffic are short video hot songs.
Generally speaking, the production cost of short video hot songs is low and the production cycle is short, but through promotion, you can get a lot of traffic to settle the copyright fee. This is also the profit model of many copyright companies at present. But for record companies that pay high production costs to produce music, in the mode of data settlement, record companies are obviously squeezed into living space, and it is difficult to recover production costs through copyright.
As a result, record companies that once relied on copyright sales to account for the company's main revenue will face huge existential challenges.
<h2>Abroad: Copyright value is bullish, and capital giants are accelerating their influx</h2>
Compared with the pain of domestic copyright owners losing prepayment, overseas copyright business has been doing well.
According to a June earnings report from music rights investment firm Hipgnosis Songs Fund, the company's total copyright library is valued at $2.21 billion. As of March 2021, the fund has a total of 64,555 songs in a total of 138 sub-copyright libraries.
Hipgnosis said that in the 12 months until March 2021, the company acquired 84 copyright libraries for $1.06 billion , an average of $12.6 million per transaction. At the same time, according to data analysis, Hipgnosis is more willing to buy the copyright of classic old songs in the near future. In the 2020 financial year, Hipgnosis Songs Fund's net revenue increased by 66% to $138.4 million.
"Our goal when we went public three years ago was to :1) use songs as an asset class; (2) use the leverage of our fund and good songs in our copyright library as catalysts to change the position of songwriters in the economic model for the benefit of songwriters and shareholders; and (3) replace the traditional songwriting agency model with song management operations and add value." "Since its inception, the company has provided a total return of 41% to its shareholders, and in fiscal 2020, the company's net asset value increased by more than 11%.
It was reported on Oct. 14 that Blackstone was investing $1 billion in Hipgnosis Songs Capital. In addition, Blackstone is investing an undisclosed amount of money in Mercuriadis' Hipgnosis Song Management. Blackstone's senior managing director Abbas is very optimistic about the future value growth of music rights, and he believes that it is in the early stages of an explosive increase in the value of songs, and a bigger rise is still to come.
Mercuriadis also "connotated" three major record labels in public channels: several major record companies to the detriment of songwriters in order to maintain the company's financial power. This has also been confirmed in China, where songwriters Wu Xiangfei and Peter Chen have both complained about the falsification of Universal Music data in Taiwan through public channels.
On October 19, private equity giant KKR and co-investment partner Dundee Partners (the investment arm of Hendel Family) established the platform Chord Music Partners, through which it acquired KMR Music Royalties II's library for $1.1 billion, which contains the rights to more than 62,000 songs.
It is understood that KKR is currently managing more than $230 billion in assets, and in March this year, KKR and copyright company BMG reached a partnership to establish an acquisition alliance, which will acquire copyrights with more than $1 billion. Over the past year, KKR has begun to make a big splash in music: in June 2020, it led a $48 million investment in artlist, a royalty-free music and content platform, and in January, the company acquired a majority stake in Ryan Tedder's copyright library, which was reported to be worth about $200 million.
Of course, Blackstone and KKR are just representative players in the copyright "Gold Rush". After experiencing the epidemic, overseas industries have also suffered a lot of shocks, and capital is more inclined to focus on more stable choices, such as the third type of industry, which is less susceptible to related impacts, such as music copyright, and has taken more frequent acquisitions in the past two years. (Review the old story: music copyright "gold rush").
<h2>Does the investment logic of music copyright work in China? </h2>
In recent years, the financing pace of domestic music companies has slowed down significantly, and a few transactions have basically come from ByteDance's investment in music copyright companies.
As we all know, ByteDance's short video platform Douyin has boosted the production of a large number of popular songs in recent years, in a sense, if you want to create explosive songs, you must rely on Douyin. After mastering the lifeblood of the music traffic password, It is reasonable for ByteDance to invest in the music company Wisdom Big Dog and Zhongshi Mingda. In particular, the traffic performance of many music influencers under Zhongshi Mingda is very good, and there are new talents like Yan Renzhong who started from short video music.
With the explosion effect of short video platforms highlighted, offline performances stopped at any time, and musicians became more and more difficult to become famous, the music industry also spawned a number of companies aiming to produce blockbuster songs. But this kind of music that targets data and traffic is also controversial in the industry, whether music companies should produce products or works of art? Using data alone as a criterion to make music and measure the value of works is undoubtedly a disservice to truly high-quality creators, and how long this model can last is also a question mark.
In other words, the basic logic of foreign copyright investment is that high-quality classic copyrights that have stood the test of time have high risk resistance, while the data generated by streaming media and downloads can help assess the value of songs, making their future earnings estimates more transparent. Although hot songs can help copyright companies convert traffic into money more quickly and efficiently, they are not ideal targets for long-term investment.
In addition, the value of domestic music copyright is also largely dependent on the value of the artists themselves. Since 2021, the practitioners of the performing arts industry have been strictly controlled, many musicians have been condemned by public opinion for private morality, and even songs have been taken down from domestic platforms to be recovered for copyright prepayment, and their copyright value has plummeted, and it can even be said that it is "worthless". Therefore, the potential risks of artists have also led to great uncertainty in copyright investment.
But whether it is the "post-copyright era" or the "post-exclusivity era", the battle for music copyright is continuing in another form. Although domestic copyright owners are now experiencing the pain of losing high prepayments and are in deep trouble, the "gold rush" of overseas copyrights also indicates that the real high-quality music content in China will also produce the same investment value.