Why a $1 billion deal for Queen’s catalog is imaginable – and what CNN and The Day-to-day Mail were given greatly mistaken

MBW Reacts is a chain of analytical (and once in a while opinionated) articles from Song Trade International written in keeping with primary contemporary leisure occasions or information tales.

This text is in part an research of an important song biz information tale. It’s additionally in part an X-ray of the decrepit state of what supplement-shilling, table-thumping YouTubers love to deride as “the mainstream media”.

On Friday, Might 26 – as you’re most likely conscious – Song Trade International broke a primary world unique: Discussions had been going down between Queen’s representatives and sure corporations, Common Song Workforce integrated, over the prospective $1 billion-plus sale of Queen’s catalog.

That catalog, we reported, mixed each publishing and recorded song rights, all collectively and similarly owned through the band’s surviving ‘vintage’ line-up (Brian Might, Roger Taylor, John Deacon) plus the property of Freddie Mercury.

We warned that any attainable deal can be sophisticated through the truth that Disney (by way of its possession of Hollywood Data) owns Queen’s recorded song rights in North The united states; the band owns them in every single place else on the earth.

Two days after MBW’s file was once printed, on Sunday, Might 28, an oddly similar-looking file landed on CNN. Headline: “Queen’s song catalog may promote for over $1 billion, supply says.”

That file necessarily, erm, ‘reflected’ the majority of MBW’s file, however with one mistaken error: CNN reported that Common Song Workforce was once in discussions to procure Queen’s catalog for $1 billion… from Disney.

This wrinkled our forehead: It’s the band’s representatives, no longer Disney, which can be engaged in discussions over the sale of Queen’s catalog, in step with MBW’s assets. (It was once no marvel to us that Disney due to this fact denied CNN’s tale.)

Unfortunately, CNN’s file was once then as a result parroted through a parade of media, together with The Day-to-day Mail and The Instances – with that clanging Disney false impression entrance and heart.

Had any of those titles possessed a greater working out of recent song rights M&A, they’d have most likely been in a position to sniff a rat right here – as a result of, normally talking, blockbuster recorded song rights lately industry for decrease multiples than blockbuster song publishing rights.

This might be noticed very obviously within the well-known two-part sale of Bob Dylan’s catalog: Common Song Workforce bought the publishing rights to his songs in 2020 for round $300 million – $400 million, in step with assets; the next yr, Sony Song Workforce bought Dylan’s recorded song catalog for round $150 million.

The the reason why publishing catalogs continuously command better acquisition multiples may also be complicated, however one key issue is plain: If you are going to buy a publishing catalog, you obtain royalties for each and every monetized model of an owned tune (whether or not reside or recorded… or AI-created) for many years to return.

With a recorded song catalog, remixes apart, you simplest obtain royalties for the usage of that one explicit recording.

Assets point out that the portion of Queen’s recorded song catalog owned through Disney is price round a 3rd of mentioned recorded song catalog’s annual world royalties.

May it ever be imaginable in 2023 {that a} minority portion of the recorded song catalog of any unmarried artist might be price any place close to one thousand million greenbacks? Nope.

At the flip-side, may it ever be imaginable {that a} majority portion of an artist’s recorded song catalog – plus possession in their complete song publishing rights, international – might be price over one thousand million greenbacks?

Relating to Queen, particularly while you consider identify & likeness rights, sure, it will.

Why that $1 billion-plus determine would possibly make sense

MBW understands that Queen’s royalty source of revenue flows into two separate UK-based corporations: Queen Song Ltd (for publishing simplest), and Queen Productions Ltd.

Royalties from Queen’s recorded song rights without a doubt drift into Queen Productions Ltd.

It’s most likely that royalties from Queen’s song publishing rights additionally drift into Queen Productions Ltd, by way of Queen Song Ltd.

That’s as a result of filings on UK Corporations Area expose that Queen Song Ltd. strikes really extensive sums – GBP £23 million in 2021, and GBP £27 million in 2020 (see beneath) – into “entities underneath the regulate of [Queen’s members]” each and every yr.

Mentioned “entities” most likely refer to 1 corporate: Queen Productions Ltd, the place – and that is an informed bet – Queen’s recorded song and song publishing royalties are each represented in one set of annual accounts.

If we take all of that as true, estimating the price of the recorded-music-plus-publishing catalog that Queen has to promote is a profitable workout.

First, listed below are the once a year contemporary numbers for Queen Productions Ltd, as reported through that corporate on UK Corporations Area in GBP.

The pink bar is the necessary bit – a selected quantity reported for the volume of royalty income amassed through Queen’s corporate each and every yr.

As you’ll be able to see, Queen Productions Ltd noticed a spike in income in FY 2019 (the corporate’s FY runs to finish of September each and every yr), because of the impact of the Bohemian Rhapsody film at the company’s coffers (and the band’s recognition.)

You’d be expecting to look a fall-off in revenues following that yr, as Queen’s second within the media solar naturally declines. And that’s what occurs.

However in FY 2020 and FY 2021, the royalty source of revenue of Queen Productions Ltd was once beautiful constant: GBP £41.7 million in FY 2020, and GBP £38.9 million in FY 2021.

If we name the tough reasonable of the ones two numbers GBP £40 million, we will be able to get started making use of same old song biz multipliers to the determine: A 20X a number of, as an example – a not unusual incidence in song publishing M&A circles lately – would convey that GBP £40 million determine as much as GBP £800 million, or USD $996 million at present alternate charges.

A 27-times a number of – within the area of that believed to were paid through Common for Bob Dylan’s publishing catalog in 2020 – would take that GBP £40 million as much as GBP £1.08 billion or USD $1.35 billion.

In all probability, on the other hand, any potential purchaser of Queen’s catalog (together with UMG… perhaps with the good thing about outdoor capital) would glance to force this a number of down beneath 20X the use of arguments comparable to:

1. The ‘decay curve’ for Queen’s song royalties post-the Bohemian Rhapsody film free up hasn’t but performed out, and can lead to smaller annual royalties within the years forward than we noticed in FY 2021;
2. The Disney state of affairs is an obstacle to any potential purchaser’s talent to regulate Queen’s recorded song rights and exploit them to the utmost attainable yield;
3. The stability of recorded song vs. song publishing annual royalty source of revenue; if this swings within the choose of the previous, it will doubtlessly pull down the herbal a number of presented;
4. The macro-economic state of affairs in 2023, particularly upper rates of interest, and the overall power this places on price of capital for debtors.

Let’s say all of that reduces the a number of an organization is keen to pay for Queen’s rights to 17X.

At our advised GBP £40 million annual reasonable royalty source of revenue determine, a 17X a number of would convey the hypothetical supply on our desk to GBP £680 million, or USD $845 million.

Alternatively, MBW understands that the Queen rights ‘package’ lately up on the market on the market additionally comprises the band’s identify & likeness rights.

Relating to Queen, those it appears that evidently raise really extensive worth – as confirmed through the worldwide good fortune of Bohemian Rhapsody film, which took over $900 million on the Field Place of business.

How a lot would a Queen copycat of ABBA Voyage be price within the years forward?

Sufficient for Freddie Mercury’s identify & likeness to take our hypothetical-17X-multiple-offer to over USD $1 billion?

The Michael Jackson case

All the above hypothetical arithmetic might in the end be useless within the quest to end up the price of Queen’s catalog, on the other hand – as a result of there’s arguably a a lot more helpful proxy in play.

As reported through Selection and Hits and subsidized up through MBW assets, Sony Song Workforce has both finalized, or is with reference to finalizing, a deal to procure round 50% of the Michael Jackson property – together with Jackson’s publishing rights to songs he wrote, plus his recorded song rights, plus his identify & likeness.

The reported value for this MJ acquisition (by way of Selection) is between USD $800 million to $900 million.

MBW has heard from one well-placed supply that the true value is smaller – nearer to USD $750 million. However some other of our assets argues it’s on the upper finish of Selection’s estimate.

Regardless, if we extensively estimate that the cost Sony is ready to pay for part of Jackson’s rights is more or less $800 million, we will be able to additionally clearly determine that the approximate overall valuation being slapped at the Jackson catalog (keep in mind: publishing, plus recorded song, plus identify & likeness) is round $1.6 billion.

Would Queen’s valuation for the same package of rights – even though it doesn’t come with Disney’s North American bite of the band’s recorded song royalties – actually be that some distance beneath this determine?

There are components weighing within the choose of the Jackson catalog (and MJ’s identify & likeness rights) sporting extra of a top class than Queen’s.

As an example, Jackson’s big-budget biopic continues to be within the works, whilst Queen’s is already out and had its theater run.

Additionally, the new-ish Jackson level display, MJ: The Musical, is already a Field Place of business good fortune, having taken greater than $100 million in tickets, in spite of no longer but launching outdoor the USA.

There’s a large issue weighing in choose of Queen’s catalog vs. Jackson’s, on the other hand: Queen, if taken as a unit, wrote 100% in their largest hits; Jackson wrote maximum of his, however sure requirements (Mystery, She’s Out Of My Lifestyles, Guy In The Reflect, Rock With You) had been penned through outdoor songwriters comparable to Rod Temperton.

Both method, each Queen and Michael Jackson stay giants of recent song, conveniently greater than 50 years since their careers within the industry started.

As you learn this, Queen have 47.8 million per thirty days listeners on Spotify, and are the carrier’s forty ninth most-popular artist globally; Jackson has 37.0 million, and is Spotify’s 77th hottest globally.Song Trade International