In his recent article for Forbes entitled, “The Taylor Swift Effect: Why Music Deals Are Getting Shorter And Smarter,” Jared Brenner explores an ongoing shift in music industry dealmaking from the “Standard Record Deal,” in which artists signed their masters away forever, to an era of the “Short-Term Master License.”
In the piece, Jared first examines the current landscape of the music industry, identifying one key aspect influencing the change: most hit songs generate the majority of their revenue within the first 15 years. Generally, labels attempt to capitalize during that time and then exit the deal smoothly. However, a shift has occurred where, now after a set period of time, artists with extensive fan bases are demanding a reversion of master rights. As Jared writes, “To prolong their control, labels are aggressively hardwiring matching rights, strategic deal extensions, and profit-based buyouts into these short-term agreements.”
As artists attempt to acquire their rights back, Jared shares that Wall Street has packaged music into asset-backed securities due to its improved data transparency and stable recurring streams. Jared highlights, “Institutional investors aren’t gambling on discovering the next breakout global superstar so much as actively targeting the 73.3% of global streams that come solely from 'catalog' content.” Yet, Jared reports, “while emerging markets will drive 75% of net subscriber growth by 2035, the average revenue per user in those territories is a meager $8, compared to $31 in developed markets.”
In the article, Jared states that dealmakers are making note of this forecast and, therefore, redirecting toward differentiated revenue streams, including “short-form video monetization, direct-to-consumer superfan apps, and VIP live experiences,” where they seek “active” rights. Jared expresses that creators should operate with caution, however, stressing, “You must ensure the legacy 360-deal doesn’t secretly morph into an all-encompassing brand takeover, where labels capture an unfair slice of your direct fan relationships.”
