Sony is buying EMI Music Publishing, adding two million songs from artists like Alicia Keys, Kanye West and Queen to its already-vast publishing catalog and cementing its position as the world’s largest music publisher. The Japanese corporation is paying around $2 billion for a 60 percent equity stake in EMI, it said on Tuesday.
Sony said in a company filing that the “music business has enjoyed a resurgence” thanks to the rise of paid subscription streaming and that Sony is focusing on building a strong intellectual properly portfolio. The company’s new CEO Kenichiro Yoshida said in a news conference that the “investment in content intellectual property is a key stepping stone for our long-term growth.”
That one music company is buying another isn’t new or unusual – since the 2000s, the industry has become a consolidated landscape of just a handful of players steadily gobbling up the rest – but what is significant is the size of the deal, and what that indicates for the future. Yoshida’s mission is to stabilize the profit from the entertainment side of Sony’s business, so it makes sense for the corporation to control more rights to songs as well as their recordings. (Publishing and recording yield separate revenue streams.)
But for the last 20 years, as digital downloads and piracy usurped physical music, the music business had been hemorrhaging money, making it irresponsible to make any big acquisitions. Now off the back of streaming, the business is finally creeping back up. Sony’s big play on Tuesday is a promising sign for the health of the whole industry.
“This is certainly on the high side of what we previously expected,” David Dai, an analyst, told Bloomberg. “It is a high price to pay for the strategy to shift from hardware to content.” Sony, which recently sold half its Spotify shares for an estimated $750 million when Spotify went public this year, certainly has the cash to strike such a deal, but the $2 billion it’s shelling out for EMI is not pocket change, and it reveals the company’s optimism and faith for the industry’s future growth. Macquarie analyst Damian Thong said in a report that the “rise in digital streaming is also expanding songwriter royalty revenues, with Sony capturing value as manager of the copyrights backed by direct deals with the likes of Spotify, Apple Music, Google Play, SoundCloud and YouTube.”
Sony already owned around 2 million copyrights – including the coveted Beatles catalog – and its EMI acquisition will double its publishing business. On the record label side of its business, Sony’s market share is about 32 percent, coming in after Universal (42 percent) but ahead of Warner (26 percent).