News that London-based Hipgnosis Songs Fund has raised $262m to buy music catalogues, ahead of a public flotation, is the latest reminder of the impressive valuations (and interest from the corporate world) around publishing catalogues in 2018. But could that interest spill over into a ‘bubble’ that will eventually burst?
Consultancy firm Midia Research’s latest report raises the prospect. “There is a risk that we are in a catalogue bubble. Acquisitions are on a rapid rise… and will likely continue to rise over coming years, as illustrated by Hipgnosis, though given that the average transaction value for catalogues is $140 million the initial $260 million may not go that far,” suggests the company.
“The risk with the current market is that valuations are being built using the models that were shaped in the distribution era and that don’t properly reflect the dynamics of streaming. Also, there is a finite number of decent sized catalogues for sale, which means it is a sellers’ market, thus driving prices up further still.”
Midia’s blog post expands on the idea of the distribution vs streaming issue: from listening habits redefining the sense of which catalogues are valuable (more than 70% of ‘catalogue’ streams in the UK come from after 2000) to the ongoing arguments over publishing’s small share of streaming payouts.