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Why a $1 billion deal for Queen’s catalog is possible – and what CNN and The Daily Mail got drastically wrong

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MBW Reacts is a sequence of analytical (and infrequently opinionated) articles from Music Enterprise Worldwide written in response to main latest leisure occasions or information tales.

This text is partly an evaluation of a big music biz information story. It’s additionally partly an X-ray of the decrepit state of what supplement-shilling, table-thumping YouTubers prefer to deride as “the mainstream media”.

On Friday, Could 26 – as you’re possible conscious – Music Enterprise Worldwide broke a serious world unique: Discussions have been occurring between Queen’s representatives and sure firms, Common Music Group included, over the potential $1 billion-plus sale of Queen’s catalog.

That catalog, we reported, mixed each publishing and recorded music rights, all collectively and equally owned by the band’s surviving ‘basic’ line-up (Brian Could, Roger Taylor, John Deacon) plus the property of Freddie Mercury.

We warned that any potential deal can be sophisticated by the truth that Disney (through its possession of Hollywood Data) owns Queen’s recorded music rights in North America; the band owns them in all places else on this planet.

Two days after MBW’s report was printed, on Sunday, Could 28, an oddly similar-looking report landed on CNN. Headline: “Queen’s music catalog might promote for over $1 billion, supply says.”

That report primarily, erm, ‘mirrored’ the majority of MBW’s report, however with one fallacious error: CNN reported that Common Music Group was in discussions to accumulate Queen’s catalog for $1 billion… from Disney.

This wrinkled our forehead: It’s the band’s representatives, not Disney, which might be engaged in discussions over the sale of Queen’s catalog, based on MBW’s sources. (It was no shock to us that Disney subsequently denied CNN’s story.)

Sadly, CNN’s report was then consequently parroted by a parade of media, together with The Daily Mail and The Times – with that clanging Disney misunderstanding entrance and middle.

Had any of those titles possessed a greater understanding of recent music rights M&A, they’d have possible been in a position to odor a rat right here – as a result of, typically talking, blockbuster recorded music rights at present commerce for decrease multiples than blockbuster music publishing rights.

This may very well be seen very clearly within the well-known two-part sale of Bob Dylan’s catalog: Common Music Group acquired the publishing rights to his songs in 2020 for round $300 million – $400 million, based on sources; the next 12 months, Sony Music Group acquired Dylan’s recorded music catalog for round $150 million.

The the explanation why publishing catalogs typically command higher acquisition multiples could be advanced, however one key issue is apparent: For those who purchase a publishing catalog, you obtain royalties for each monetized model of an owned music (whether or not reside or recorded… or AI-created) for many years to come back.

With a recorded music catalog, remixes apart, you solely obtain royalties for using that one explicit recording.

Sources point out that the portion of Queen’s recorded music catalog owned by Disney is price round a 3rd of stated recorded music catalog’s annual world royalties.

Might it ever be doable in 2023 {that a} minority portion of the recorded music catalog of any single artist may very well be price anyplace close to a billion {dollars}? Nope.

On the flip-side, might it ever be doable {that a} majority portion of an artist’s recorded music catalog – plus possession of their total music publishing rights, worldwide – may very well be price over a billion {dollars}?

Within the case of Queen, particularly once you think about identify & likeness rights, sure, it might.

Why that $1 billion-plus determine would possibly make sense

MBW understands that Queen’s royalty revenue flows into two separate UK-based firms: Queen Music Ltd (for publishing solely), and Queen Productions Ltd.

Royalties from Queen’s recorded music rights positively circulate into Queen Productions Ltd.

It’s possible that royalties from Queen’s music publishing rights additionally circulate into Queen Productions Ltd, through Queen Music Ltd.

That’s as a result of filings on UK Corporations Home reveal that Queen Music Ltd. strikes substantial sums – GBP £23 million in 2021, and GBP £27 million in 2020 (see beneath) – into “entities below the management of [Queen’s members]” annually.

Stated “entities” possible refer to 1 firm: Queen Productions Ltd, the place – and that is an informed guess – Queen’s recorded music and music publishing royalties are each represented in a single set of annual accounts.

An annual submitting from Queen Music Ltd reveals that the corporate paid out GBP £23m in 2021 to different entities owned by Queen

If we take all of that as true, estimating the worth of the recorded-music-plus-publishing catalog that Queen has to promote is a worthwhile train.

First, listed below are the annual latest numbers for Queen Productions Ltd, as reported by that firm on UK Corporations Home in GBP.

The purple bar is the vital bit – a selected quantity reported for the quantity of royalty income collected by Queen’s firm annually.

As you may see, Queen Productions Ltd noticed a spike in income in FY 2019 (the corporate’s FY runs to finish of September annually), because of the impact of the Bohemian Rhapsody film on the agency’s coffers (and the band’s recognition.)

You’d count on to see a fall-off in revenues following that 12 months, as Queen’s second within the media solar naturally declines. And that’s what occurs.

However in FY 2020 and FY 2021, the royalty revenue of Queen Productions Ltd was fairly constant: GBP £41.7 million in FY 2020, and GBP £38.9 million in FY 2021.

If we name the tough common of these two numbers GBP £40 million, we are able to begin making use of customary music biz multipliers to the determine: A 20X a number of, for instance – a typical prevalence in music publishing M&A circles lately – would deliver that GBP £40 million determine as much as GBP £800 million, or USD $996 million at present trade charges.

A 27-times a number of – within the area of that believed to have been paid by Common for Bob Dylan’s publishing catalog in 2020 – would take that GBP £40 million as much as GBP £1.08 billion or USD $1.35 billion.

Maybe, nonetheless, any potential purchaser of Queen’s catalog (together with UMG… possibly with the good thing about exterior capital) would look to drive this a number of down beneath 20X utilizing arguments reminiscent of:

  1. The ‘decay curve’ for Queen’s music royalties post-the Bohemian Rhapsody film launch hasn’t but performed out, and can end in smaller annual royalties within the years forward than we noticed in FY 2021;
  2. The Disney state of affairs is an obstacle to any potential purchaser’s capacity to manage Queen’s recorded music rights and exploit them to the utmost potential yield;
  3. The stability of recorded music vs. music publishing annual royalty revenue; if this swings within the favor of the previous, it might doubtlessly pull down the pure a number of provided;
  4. The macro-economic state of affairs in 2023, particularly larger rates of interest, and the final strain this places on value of capital for debtors.

Let’s say all of that reduces the a number of an organization is keen to pay for Queen’s rights to 17X.

At our steered GBP £40 million annual common royalty revenue determine, a 17X a number of would deliver the hypothetical provide on our desk to GBP £680 million, or USD $845 million.

Nevertheless, MBW understands that the Queen rights ‘bundle’ at the moment up on the market within the market additionally consists of the band’s identify & likeness rights.

Within the case of Queen, these evidently carry substantial worth – as confirmed by the worldwide success of Bohemian Rhapsody film, which took over $900 million on the Field Workplace.

How a lot would a Queen copycat of ABBA Voyage be price within the years forward?

Sufficient for Freddie Mercury’s identify & likeness to take our hypothetical-17X-multiple-offer to over USD $1 billion?

The Michael Jackson case

All the above hypothetical arithmetic could finally be pointless within the quest to show the worth of Queen’s catalog, nonetheless – as a result of there’s arguably a way more helpful proxy in play.

As reported by Variety and Hits and backed up by MBW sources, Sony Music Group has both finalized, or is near finalizing, a deal to accumulate round 50% of the Michael Jackson property – together with Jackson’s publishing rights to songs he wrote, plus his recorded music rights, plus his identify & likeness.

The reported worth for this MJ acquisition (through Selection) is between USD $800 million to $900 million.

MBW has heard from one well-placed supply that the true worth is smaller – nearer to USD $750 million. However one other of our sources argues it’s on the larger finish of Selection’s estimate.

Regardless, if we broadly estimate that the value Sony is about to pay for half of Jackson’s rights is roughly $800 million, we are able to additionally clearly determine that the approximate complete valuation being slapped on the Jackson catalog (bear in mind: publishing, plus recorded music, plus identify & likeness) is round $1.6 billion.

Would Queen’s valuation for the same bundle of rights – even when it doesn’t embrace Disney’s North American chunk of the band’s recorded music royalties – actually be that far beneath this determine?

There are elements weighing within the favor of the Jackson catalog (and MJ’s identify & likeness rights) carrying extra of a premium than Queen’s.

For instance, Jackson’s big-budget biopic is still in the works, whereas Queen’s is already out and had its theater run.

Additionally, the new-ish Jackson stage present, MJ: The Musical, is already a Field Workplace success, having taken greater than $100 million in tickets, regardless of not but launching exterior the US.

There’s a giant issue weighing in favor of Queen’s catalog vs. Jackson’s, nonetheless: Queen, if taken as a unit, wrote 100% of their biggest hits; Jackson wrote most of his, however sure requirements (Thriller, She’s Out Of My Life, Man In The Mirror, Rock With You) have been penned by exterior songwriters reminiscent of Rod Temperton.

Both method, each Queen and Michael Jackson stay giants of recent music, comfortably greater than 50 years since their careers within the enterprise started.

As you learn this, Queen have 47.8 million month-to-month listeners on Spotify, and are the service’s forty ninth most-popular artist globally; Jackson has 37.0 million, and is Spotify’s 77th hottest globally.Music Enterprise Worldwide


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