MBW Reacts is a series of analytical commentaries from Music Business Worldwide written in response to major recent entertainment events or news stories. MBW Reacts is supported by JKBX, a technology platform that offers consumers access to music royalties as an asset class.
This article is partly an analysis of a significant music biz news story. It’s also partly an X-ray of the decrepit state of what supplement-shilling, table-thumping YouTubers like to deride as “the mainstream media”.
On Friday, May 26 – as you’re likely aware – Music Business Worldwide broke a major global exclusive: Discussions were happening between Queen’s representatives and certain companies, Universal Music Group included, over the potential $1 billion-plus sale of Queen’s catalog.
That catalog, we reported, combined both publishing and recorded music rights, all jointly and equally owned by the band’s surviving ‘classic’ line-up (Brian May, Roger Taylor, John Deacon) plus the estate of Freddie Mercury.
We warned that any potential deal would be complicated by the fact that Disney (via its ownership of Hollywood Records) owns Queen’s recorded music rights in North America; the band owns them everywhere else in the world.
Two days after MBW’s report was published, on Sunday, May 28, an oddly similar-looking report landed on CNN. Headline: “Queen’s music catalog could sell for over $1 billion, source says.”
That report essentially, erm, ‘mirrored’ the bulk of MBW’s report, but with one fallacious error: CNN reported that Universal Music Group was in discussions to acquire Queen’s catalog for $1 billion… from Disney.
This wrinkled our brow: It is the band’s representatives, not Disney, that are engaged in discussions over the sale of Queen’s catalog, according to MBW’s sources. (It was no surprise to us that Disney subsequently denied CNN’s story.)
Sadly, CNN’s report was then consequently parroted by a parade of media, including The Daily Mailand The Times – with that clanging Disney misunderstanding front and center.
Had any of these titles possessed a better understanding of modern music rights M&A, they’d have likely been able to smell a rat here – because, generally speaking, blockbuster recorded music rights today trade for lower multiples than blockbuster music publishing rights.
This could be seen very clearly in the famous two-part sale of Bob Dylan’s catalog: Universal Music Group acquired the publishing rights to his songs in 2020 for around $300 million – $400 million, according to sources; the following year, Sony Music Groupacquired Dylan’s recorded music catalog for around $150 million.
The reasons why publishing catalogs often command greater acquisition multiples can be complex, but one key factor is obvious: If you buy a publishing catalog, you receive royalties for every monetized version of an owned song (whether live or recorded… or AI-created) for decades to come.
With a recorded music catalog, remixes aside, you only receive royalties for the use of that one particular recording.
Sources indicate that the portion of Queen’s recorded music catalog owned by Disney is worth around a third of said recorded music catalog’s annual global royalties.
Could it ever be possible in 2023 that a minority portion of the recorded music catalog of any single artist could be worth anywhere near a billion dollars? Nope.
On the flip-side, could it ever be possible that a majority portion of an artist’s recorded music catalog – plus ownership of their entire music publishing rights, worldwide – could be worth over a billion dollars?
In the case of Queen, especially when you factor in name & likeness rights, yes, it could.
Why that $1 billion-plus figure might make sense
MBW understands that Queen’s royalty income flows into two separate UK-based companies: Queen Music Ltd (for publishing only), and Queen Productions Ltd.
Royalties from Queen’s recorded music rights definitely flow into Queen Productions Ltd.
It’s likely that royalties from Queen’s music publishing rights also flow into Queen Productions Ltd, via Queen Music Ltd.
That’s because filings on UK Companies House reveal that Queen Music Ltd. moves substantial sums – GBP £23 million in 2021, and GBP £27 million in 2020 (see below) – into “entities under the control of [Queen’s members]” each year.
Said “entities” likely refer to one company: Queen Productions Ltd, where – and this is an educated guess – Queen’s recorded music and music publishing royalties are both represented in a single set of annual accounts.
An annual filing from Queen Music Ltd shows that the company paid out GBP £23m in 2021 to other entities owned by Queen
If we take all of that as true, estimating the value of the recorded-music-plus-publishing catalog that Queen has to sell is a worthwhile exercise.
First, here are the annual recent numbers for Queen Productions Ltd, as reported by that company on UK Companies House in GBP.
The purple bar is the important bit – a specific number reported for the amount of royalty revenue collected by Queen’s company each year.
As you can see, Queen Productions Ltd saw a spike in revenue in FY 2019 (the company’s FY runs to end of September each year), due to the effect of the Bohemian Rhapsody movie on the firm’s coffers (and the band’s popularity.)
You’d expect to see a fall-off in revenues following that year, as Queen’s moment in the media sun naturally declines. And that’s what happens.
But in FY 2020 and FY 2021, the royalty income of Queen Productions Ltd was pretty consistent: GBP £41.7 million in FY 2020, and GBP £38.9 million in FY 2021.
If we call the rough average of those two numbers GBP £40 million, we can start applying standard music biz multipliers to the figure: A 20X multiple, for example – a common occurrence in music publishing M&A circles in recent years – would bring that GBP £40 million figure up to GBP £800 million, or USD $996 million at current exchange rates.
A 27-times multiple – in the region of that believed to have been paid by Universal for Bob Dylan’s publishing catalog in 2020 – would take that GBP £40 million up to GBP £1.08 billion or USD $1.35 billion.
Perhaps, however, any prospective buyer of Queen’s catalog (including UMG… maybe with the benefit of outside capital) would look to drive this multiple down below 20X using arguments such as:
The ‘decay curve’ for Queen’s music royalties post-the Bohemian Rhapsodymovie release hasn’t yet played out, and will result in smaller annual royalties in the years ahead than we saw in FY 2021;
The Disney situation is an impediment to any prospective buyer’s ability to control Queen’s recorded music rights and exploit them to the maximum potential yield;
The balance of recorded music vs. music publishing annual royalty income; if this swings in the favor of the former, it could potentially pull down the natural multiple offered;
The macro-economic situation in 2023, especially higher interest rates, and the general pressure this puts on cost of capital for borrowers.
Let’s say all of that reduces the multiple a company is willing to pay for Queen’s rights to 17X.
At our suggested GBP£40 million annual average royalty income figure, a 17X multiple would bring the hypothetical offer on our table to GBP £680 million, or USD $845 million.
However, MBW understands that the Queen rights ‘bundle’ currently up for sale in the marketplace also includes the band’s name & likeness rights.
In the case of Queen, these evidently carry substantial value – as proven by the global success of Bohemian Rhapsody movie, which took over $900 million at the Box Office.
How much would a Queen copycat of ABBA Voyage be worth in the years ahead?
Enough for Freddie Mercury’s name & likeness to take our hypothetical-17X-multiple-offer to over USD $1 billion?
The Michael Jackson case
All of the above hypothetical mathematics may ultimately be pointless in the quest to prove the value of Queen’s catalog, however – because there’s arguably a much more useful proxy in play.
As reported by Variety and Hitsand backed up by MBW sources, Sony Music Group has either finalized, or is close to finalizing, a deal to acquire around 50% of the Michael Jackson estate – including Jackson’s publishing rights to songs he wrote, plus his recorded music rights, plus his name & likeness.
The reported price for this MJ acquisition (via Variety) is between USD $800 million to $900 million.
MBW has heard from one well-placed source that the real price is smaller – closer to USD $750 million. But another of our sources argues it’s at the higher end of Variety’s estimate.
Regardless, if we broadly estimate that the price Sony is set to pay for half of Jackson’s rights is roughly $800 million, we can also obviously figure out that the approximate total valuation being slapped on the Jackson catalog (remember: publishing, plus recorded music, plus name & likeness) is around $1.6 billion.
Would Queen’s valuation for a similar bundle of rights – even if it doesn’t include Disney’s North American chunk of the band’s recorded music royalties – really be that far below this figure?
There are factors weighing in the favor of the Jackson catalog (and MJ’s name & likeness rights) carrying more of a premium than Queen’s.
For example, Jackson’s big-budget biopic is still in the works, while Queen’s is already out and had its theater run.
Also, the new-ish Jackson stage show, MJ: The Musical, is already a Box Office success, having taken more than $100 million in tickets, despite not yet launching outside the US.
There’s a big factor weighing in favor of Queen’s catalog vs. Jackson’s, however: Queen, if taken as a unit, wrote 100% of their biggest hits; Jackson wrote most of his, but certain standards (Thriller, She’s Out Of My Life, Man In The Mirror, Rock With You) were penned by outside songwriters such as Rod Temperton.
Either way, both Queen and Michael Jackson remain giants of modern music, comfortably more than 50 years since their careers in the business began.
As you read this, Queen have 47.8 million monthly listeners on Spotify, and are the service’s 49th most-popular artist globally; Jackson has 37.0 million, and is Spotify’s 77th most popular globally.
