If you believe everything you read — and the state of US politics suggests that, sadly, many people do — private equity has replaced money as the root of all evil. The truth, as usual, is a bit more complicated.
The latest piping hot take comes from The New York Times opinion section, in a piece arguing that “private capital is destroying our music ecosystem.” (No, not the ecosystem!) The problem seems to be that private equity, which often saddles companies with debt and can be unrealistic about their return targets — this is true, although it's not clear that public companies or other sources Funds are better — it's “gobbling up the rights to past successes and bringing them back into our present.” This sounds totally grotesque, what with gobbling and pumping and so on, but it's really just a flashy way of saying that companies with money buy the rights of creators as an investment.
This is bad for the ecosystem, the Times says, because the investors behind these deals—the most prominent example in the piece is Primary Wave's purchase of 50 percent of Whitney Houston's music and other rights—promote the songs they own in a way that somehow squeezes new music. If so, though, they're doing a terrible job. In 2023, a full 48% of US on-demand audio streaming came from music released between 2019 and 2023, according to Luminate. ONE Advertising sign Analysis of 2021 music consumption in the United States showed that post-2010 music accounted for 78.7% of on-demand streaming, music released in 2000 or later 90%, and all music recorded before 1980 accounted for less streams than drake.
This idea that new music is losing ground to old songs seems to come from a misunderstanding of the music catalog, which consists of tracks released more than 18 months ago. Directory market share has never been higher — it was 72.6% last year, down from 65.1% in 2020 and was much lower before streaming took off. But while many people associate the catalog with classic rock – AC/DC, the Eagles and the '60s and '70s acts that dominated the category in the CD era – that's an outdated notion. The music that drives this category isn't that “deep catalog,” but rather what many executives call “shallow catalog” — releases from the past five or 10 years, often by artists who are still active. Some journalists look at the size of some private equity deals and jump to the conclusion that classic rock is killing new music. Even by music entrepreneurship standards, though, that's bad math. When it comes to on-demand streaming, Drake isn't just bigger than the Beatles — he's more popular than all the music of the 60s, plus the 70s and 50s, combined.
The Times The opinion essay takes the trend backwards: Private equity doesn't make songs popular, they buy songs that are stable in the popularity they already have. Even before music streaming became big, some investors realized that classical songs generate stable royalties that are far less vulnerable to market cycles than most assets. American songwriters became more interested in selling their rights after 2006, when the IRS began treating income from catalog sales as capital gain, subject to a lower tax rate than personal income from publishing rights. Streaming has simply smoothed out the peaks and valleys of reissue revenue into predictable returns that appeal to investors — especially for songs that have stood the test of time.
Although private equity invests in song catalogs, it rarely manages them, and most of the executives come from the music industry. (At least some of what they're doing now isn't that different from what they did back then.) For that matter, most of the ways the op-ed says investors are “building expansive media universes around songs” aren't as young as I look. The Monkees and Alvin and the Chipmunks were both “multimedia universes” in their day, as was Tom T. Hall's “Harper Valley PTA,” a country hit (for Jeannie C. Riley) that inspired a movie, a TV show, Spanish and Norwegian translations, and a sequel song. Nicki Minaj built her 'Super Freaky Girl' hit around Rick James' 'Super Freak' — with 50% backing from owner Hipgnosis Songs Fund, according to Times — but James' song was the basis for a hit in the CD era. Remember the “Can't you touch this?” Hammer time?
The radical thing about on-demand streaming is that most of the music ever created is now readily available, in a way that its popularity can be measured by consumption rather than purchase. And it's become clear that the music of recent years is more popular with listeners than industry executives thought, especially in relation to brand new and older music. When older songs get airplay on streaming services, it's often less about promotion than quiet — Fleetwood Mac's “Dreams” returned to the Hot 100 in 2020 after a skateboarder's TikTok video went viral, and “Running Up That” by Kate Bush Hill reached No.3 two years later Stranger Things music supervisor Nora Felder decided it would be the perfect song to use as a plot device. And although many adults consider these songs classics, one reason they've become hits again is that, from the perspective of younger fans, they're new. This is not good;
There are many problems with streaming, including low payouts for most creators and difficulty breaking out new acts. But neither has anything to do with private equity — the former comes from how rights are distributed and consumers' reluctance to pay more for subscriptions, while the latter has more to do with how hard it is to stand out among the volume of new music coming online every day. More serious discussion about these issues is important, but bemoaning the fact that major creators are making so much money for the rights to their work is not the right way to start it.
