By Emmanuel Legrand
Don't tell Hartwig Masuch that he is running an independent company. The founding CEO of BMG will counter that his company is the fourth major, challenging the other three major music companies. In his keynote discussion at Midem 2018 in Cannes, the German executive who just celebrated ten years at the helm of Bertelsmann's music group, was adamant that BMG is now in a different league than independent companies.
"We can do whatever you think a major can do, and I consider BMG the fourth major," he said. "In our DNA, by acquiring some very important companies, we share some of the values of independent companies. We have an appreciation for creativity and relationship with artists. But we are a major because a major, for me, is [a company that] has global access to the market and can give artists a perspective on several parameters such as recording and publishing. It would be foolish of us to say we are the leading independent. It would shy away from the real ambition that we have."
He continued, "Saying we are the leading independent is cheating. It sounds great to be the No. 1, but we'd rather be the No.4, challenging the number three."
Since its launch in October 2008, BMG has grown mostly through acquisition, and was built primarily on music publishing before expanding into recording. The current ratio is about two thirds publishing and one third recording. "We wanted to have a solid position in publishing," he said. "It has more stability [than recording] for investors so we were able to create a good publishing position. That's a good starting point."
The difference with the majors, he added, was that the company is fully integrated with staff working on both publishing and recording. "Artists want to be represented through whichever metric you want to put your repertoire into. And that's why we are also in books and audiovisual. We want to be an integrated company that deals with the output of our creative partners. We do not run two separate costs sets. Our team works together on a global level, and that is very key is to our global ambitions: cooperation on all segments."
Saying we are the leading independent is cheating. It sounds great to be the No.1, but we'd rather be the No.4, challenging the number three
Although BMG has been quite generous with its cheque book, Masuch did not want to get into the debate over whether publishing catalogues have been overvalued or not. "Saying they are over valued is very dangerous because a lot of factors play into that - interest rates, currency flows. But you can say that some are very, very aggressively valued." That said, he admitted factors such as interest rates that go up or trade barriers could affect investment in music publishing catalogues and have "very, very negative impacts on valuations [of catalogues]."
One of the keys to BMG's success has been its commitment to heritage artists, which Masuch prefers to call established or proven artists. "Obviously, I admire artists that were around when I started being interested in music. I like to be involved with those artists but there is also a pretty interesting commercial discussion [to be had] about what drives value in music companies. Is it what happens in the Billboard Hot 100 or is it the established artists?"
He continued, "We believe that [established artists] are a completely under-managed aspect of the business. Artists who have a 25-year career and who make a lot of money from touring, they might not be the guys who will get you into the world of, 'He broke such and such' but are people that you have to help navigate through today's music business. And I think this is a very interesting proposal. They were neglected and it is a very attractive business to be in."
That vision was applied to artists like Blink-182 or Janet Jackson who both scored a No.1 album in the US charts, and Masuch said he was looking forward to dealing with many more as reversion clauses will start to kick in in the USA. "There are lots of artists who will look at the relationship with the company that has represented them for the past 25 years. We are very respectful of the artists that have shaped our business."
There is a pretty interesting commercial discussion about what drives value in music companies. Is it what happens in the Billboard Hot 100 or is it the established artists?
Masuch does not shy away from new talent, but he does not believe in the old model of throwing all the money into an album. Actually, he believes it is doing a disservice to the artists. "You do not get to Dark Side of the Moon overnight. You go through Piper At The Gates Of Dawn and five albums before getting there."
He added, "We want to stay with new artists for many years. In this industry if you don't spend a million you are not serious. Actually, that goes the other way around [too]: if you are willing to commit to a five year relationship, you are really serious about it."
Masuch still believes in physical sales, especially high value products. He revealed that BMG recently released Iron Maiden's catalogue on vinyl and sold 200,000 units in a couple of days. "We believe that there are great opportunities with physical," he said. "I understand why some competitors want to get out of physical. It does not mean the fan is not interested in physical products. Look at country music. It does not mean they are digital idiots, it is just that they have an appetite for physical products."
Going forward, Masuch wants BMG to continue to grow with established artists and newcomers. The key to the relationship with artists, he said, was "respect." he explained:" I care that artists perceive us as people who care for them. It is important for me. We have massive respect for artists and it becomes a competitive criteria."