News | Berlin, 05/24/2023

BMG in Investment Mode

Boost@Bertelsmann: BMG

Thanks to the Boost strategy, Bertelsmann‘s music subsidiary is investing more than ever in catalog acquisitions and artist signings. And in 2022, BMG experienced greater and faster growth than ever before.

Music is many things in one: a universal language that is understood all over the world, and a versatile art whose diversity can be electrifying, delightful, comforting and relaxing as desired. Beyond its high emotional value, music also has enormous economic value: artists who actively market the result of their creative power and want to place it in good hands can command sums in the millions for their music rights – depending on their fame. The catalogs of icons like Pink Floyd, Sting, Bob Dylan, Genesis and David Bowie can even have a market value of half a billion euros and more.

BMG is a key player in this highly competitive market and has earned an excellent reputation in the industry with its focus on fairness, transparency and service as core values. The many hundreds of millions of euros in additional investment funds provided under its parent company’s Boost strategy empower BMG to be an especially fast and successful bidder. In the financial year 2022 alone, BMG completed 45 acquisitions, most of them “Boost deals.” The company acquired the catalogs and music rights of famous artists and bands including Peter Frampton, Jean-Michel Jarre, Fools Garden, Harry Nilsson, Simple Minds, Primal Scream and Chris Rea. At the same time, it signed new recording contracts and contract extensions with such renowned performers as Rita Ora, Logic, Julian Lennon, Nickelback and Jason Aldean. In the past three years, BMG has invested a total of 1.2 billion euros in music rights and artist signings.

Growth and competitive advantages thanks to Boost

BMG CEO Hartwig Masuch explains what the Boost funds do for BMG: “Investments at this level undoubtedly have an impact on our market position. As a broad-based global music company, we are by far the only serious alternative to the ‘big three,’ i.e., the traditional music companies.” Thanks to its high level of investment, he says, BMG is growing more dynamically than ever before, and can now simply act faster than the competition. The BMG CEO also sees positive effects in anchoring the company in the industry: “The more acquisitions we make, the closer our ties to the artist and songwriter community become, because ultimately, music is a people business,” says Masuch.

A good example is British rock legend Peter Frampton, whose musical legacy BMG recently acquired (as reported). The musician has previously worked with Harry Nilsson, whose music rights are also held by BMG, and with Ringo Starr, whose rights BMG represents on the publishing side, as well as with many other greats from the music world. Frampton also worked closely with David Bowie, who was most recently portrayed in the BMG film “Moonage Daydream” – a production that was named the world’s most successful documentary in 2022 (as reported). Cross-connections like this are invaluable, because in the music industry as elsewhere, a lot happens based on networking and personal recommendations.

Music rights: an attractive form of investment

But how does the purchase of such a sensitive asset as music rights in fact happen? Thomas Coesfeld, CFO and CEO-designate of BMG, oversees the Boost-fueled investment strategy together with Hartwig Masuch. “For each acquisition, we conduct an extensive due diligence process,” Coesfeld says. In other words, the targeted music catalog is carefully reviewed from an economic, legal, tax and financial perspective. For this purpose, BMG has an international M&A team that also coordinates closely with other departments and independent consultants. “Music rights are increasingly becoming an investment asset, so we apply exactly the same level of care that we would apply to any investment decision,” the top manager assures. For each music catalog, he says, there is a business plan with an associated valuation model.

Coesfeld has witnessed up close how music rights have attracted more and more interest from the investment world over the years. “Iconic music catalogs deliver stable and continuous income,” he says, explaining the trend. As a result he says, they are often untethered from movements in conventional capital markets. “Combine that with the positive effects of the streaming boom, and music catalogs are a very attractive form of investment - even for institutional investors at this point.” What makes BMG special, explains Coesfeld, is that the company is not a passive financial investor. “We are a music company that actively drives the growth of these music rights’ value, markets them systematically, and by doing so ultimately develops the artists’ cultural heritage long-term. We see ourselves as a partner and service provider.”

Personal relationships and trust as a “crucial plus“

Hartwig Masuch agrees that the fact that BMG, unlike purely financial players, is an industry insider and is used to talking to artists, is often a decisive factor in negotiations. “Catalogs may be assets on the one hand, but they are also much more than that,” he explains. “No matter how much money is at stake, selling music rights is always a very personal matter for an artist.”

This was, for example, the case with the “Queen of Rock ’n’ Roll” Tina Turner, one of the greatest and most popular artists in pop music history, who passed away in May. She entrusted an extensive rights portfolio to BMG in 2021, along with a mandate to nurture and develop this musical life’s work and thus preserve her inspiring legacy. “Tina Turner made it clear that for her, her music was an expression of her personal life’s journey,” recalls Masuch. “It was also critical to her husband and manager that the final buyer be a company they could trust. That is something that goes far beyond any financial valuation.” In the end, he says, it was this trustworthiness that proved the crucial plus for BMG.

And as part of a global media group, BMG has another plus to offer, adds Thomas Coesfeld. The acquisition of rights is “often only the first building block for a long-term partnership.” During bidding processes, he says, it’s always a question of what prospects and perspectives can be offered. “As a global music company, we know how to develop catalogs successfully and sustainably, especially in the streaming environments of Apple, Spotify and YouTube. But we also know how we can create synergies through our global networks and resources to open up completely new opportunities for our artists.”

For example, BMG can connect them with fellow Bertelsmann subsidiary Penguin Random House when the idea of a biography is on the table, or to RTL Group when a documentary or television appearances are under discussion. And BMG brings together music greats for new creative ventures as well: e.g., country stars like Lainey Wilson, Jimmie Allen, and Elvie Shane for the album “Stoned Cold Country: A Rolling Stones Tribute.” The singers re-recorded the Rolling Stones’ best-known songs to mark the band’s 60th anniversary – and in doing so paid tribute to the lifetime achievements of Mick Jagger and Keith Richards, whose rights BMG has represented for years.

“Artists are in good hands with us. They trust us,” says Coesfeld, who will take over the management of BMG from Masuch later this year and will be responsible for shaping the company’s future growth course.