BMG CEO Hartwig Masuch was the closing keynote speaker for the first day of the Midem conference in Cannes today, and he stayed true to his reputation for plain-speaking about the established companies in the industry that he is trying to disrupt. He was interviewed by Variety’s Shirley Halperin.
Is it an advantage to have such a familiar music brand, or is it a challenge to explaining how the company has changed? “It’s an advantage. BMG was started in the 50s, and in the 80s and 90s was definitely one of the big, big companies,” he said. “It’s an advantage to be able to draw on that legacy… It gives us a lot of credibility: a very serious investment into music by a very savvy media company.”
Is BMG now on the level of the majors? “I think we can do whatever you think a major should be able to do. Yes, we are the fourth major,” he said. “Our DNA by acquiring some very important independent companies is that we share the values of those independent companies… But our ambition is that we are a major. A major for me means you have global access to the markets, and you are able to give artists a global perspective on several parameters: recording and publishing. To say we’re the leading independent would be to shy away from the ambition that we have.”
He talked about BMG’s approach to publishing and recorded-music. “We want to be a really integrated company that deals with all the output of our creative clients,” he said, adding books into the mix as well as other kinds of content.
Are publishing businesses over-valued in the current market? “Saying it’s overvalued is always very dangerous, because there are a lot of factors that play into a valuation: interest rates, currency values… It’s very aggressively valued. But can you make sense of it as a buyer?” said Masuch. “If people right now say the music industry is growing by seven to 10 per-cent, publishing might be growing less… so I would be very careful right now… If you think the music industry is growing by 8%, what is actually growing? Yes, streaming may be growing by 8%, but that may not translate to publishing… We are a little more cautious there.”
Are we living in a bubble of growth right now? “Parameters that might create this thing into a bursting bubble, like interest rates that go up or trade barriers could have a very negative impact on the valuations, and you can see some signs of it,” he said.
He talked about legacy artists, and the interesting commercial decisions. “What drives value in music companies. Is it what happens in the Hot 100 in Billboard, or is it the catalogues of the established artists that drive it? We think it’s an entirely under-managed part of the business,” he said.
“It might not be your entry into the glory world: ‘Oh, you broke somebody!’ Actually you did a good service for someone who’s already been there for 25 years, and help him to navigate the complex business… We find it a very, very attractive business to work with artists who already have a brand, an audience, and who are very confident in their creative output.”
Blink-182 were an example of that for BMG, and Masuch sees more opportunities ahead, especially for artists who are regaining control of their rights. He also talked about BMG bucking some of the trends around declining physical-music sales.
“It’s a great opportunity. I understand why some competitors have an ambition to get out of the physical business. I know there’s a lot of complexity in supplying physical product. It doesn’t mean the fan isn’t interested in physical product,” he said. “It doesn’t mean they’re digital idiots, it just means they have a huge appetite for the right physical product.”
Masuch talked about BMG’s pitch for itself as a services company for artists, more than a traditional label “You could behave pretty disgracefully [in the past] in your relationship with the creative community, because you controlled bottlenecks,” he said. “We thought the digital world would suggest very different relationships. Artists can take over much more control than they ever had before… Actually, we shaped our company to be a service company. It’s very important that what we do is absolutely coordinated with what our clients want to do, and is in their interests… We are the good guys!”
He suggested that the artists who have survived have a “pretty good grip” of their careers and their businesses, which is what makes those partnerships interesting. “You have a very experienced person challenging your ideas, your strategies, and it becomes a situation where whatever you do is done in consent. You don’t overrule them… It is a dialogue, and I really enjoy that… And that’s absolutely the way forward for our industry. Otherwise we will be sitting in our lovely offices with gold records on the walls on our own. Because artists can walk out [and do it themselves].”
Is there space at BMG for emerging artists, and how will it work with them if so? “It’s a very clear proposition. Of course we invest in new artists, but what we have to learn is not to overload them with expectations. We want to create relationships that are sustainable for a couple of years, and don’t just last a year because you look at an unrecouped balance,” he said.
“If you look at the history of our industry, a lot of it was to do with time you had to develop… You need five years to develop, and get feedback and grow. Look at U2, how long it took to break. So for us, looking at new artists we want to work with, it’s on the premise that we will be able to stay around for three, four or five years, and not panicking because we spent a million on the first record.”
Masuch was also asked about whether BMG has any ambitions in Africa. “We have a strategy, and it’s just about to start: we’ve hired someone who’s in charge of strategy for Africa. We are trying to be more intelligent about what the market will require… you can’t adapt strategies from other markets one-to-one in emerging markets,” he said. “We’re working on it… We’ve had a lot of discussions about what we should do, and in the next 12 months we will have much more presence in the African markets.”