Sony is paying $2.3bn to take control of EMI Music Publishing, cementing its place as the world’s largest music publishing company, with rights to songs by the likes of Queen and Pharrell Williams.
The deal adds a catalogue of 2.1m EMI songs to Sony’s 2.3m. EMI’s catalogue ranges from 20th-century classics including work by Motown artists and Carole King, to more contemporary compositions by Kanye West, Pink, Sam Smith and Drake.
The agreement is Sony’s first major deal under its new chief executive, Kenichiro Yoshida, who noted that the music business has enjoyed a “resurgence” in recent years due to growth in revenues from streaming services provided by companies such as Spotify and Apple.
With this purchase, Sony “is becoming one of the biggest music publishing companies, both in name and reality”, Yoshida said.
Music publishing has become an increasingly important revenue generator as the music industry moves into the digital age. Every time something is streamed or sold, the record label collects revenue for the recording, while the publisher or rights bodies collect for the songwriters.
Music analyst Mark Mulligan said that as a result of the industry moving back to a model of teams of songwriters working on a hit, rather than individual acts penning their own songs, music publishing is booming. “Most of the big pop hits have multiple professional songwriters. It is increasingly common for a pop artist not to have written a song they have released. Katy Perry’s Raw had five writers,” he said.
“Songwriters are back to almost being a separate community in the music industry and a very lucrative one for the industry. Publishers are now very sophisticated at squeezing every ounce of revenue out of a song. Sony’s move is about gaining market share quickly by buying up the market place.”
The global music publishing market is worth about $5.5bn, according to MIDiA Research. The recorded music publishing market hit $17bn last year.
Yoshira said that the acquisition of EMI Music Publishing would be a “particularly significant milestone for our long-term growth”.
Sony, which bought a 30% stake in EMI and took over managing its catalogue in 2012, said it had signed a deal with Abu Dhabi-based investment firm Mubadala to buy its 60% holding in the firm, increasing the Japanese firm’s interest to 90%.
The agreement gives EMI Music Publishing an enterprise value of $4.75bn, Sony said, including £1.36bn of debt and about $2.3bn in cash for Mubadala’s 60% stake. The deal is dependent on regulatory approval from the US and EU.
Yoshida also unveiled Sony’s latest strategic plan, which aims to pursue the direction his predecessor Kazuo Hirai had chosen to revitalise one of Japan’s best-known firms. “We are a technology firm, but the technology [today] means not only electronics but also entertainment and content creation,” Yoshida said. He added that Sony would continue to strengthen its content services and also invest heavily in cutting-edge technologies including image sensors, he said.
The company in April reported record annual profits of $4.5bn, a roaring recovery supported by better sales across the board and helped by box-office blockbusters like its reboot of Jumanji.
Kazuo Hirai recently stepped down as the firm’s chief executive after spending the past six years pulling it out of deep financial troubles. Hirai led an aggressive restructuring drive, cutting thousands of jobs while selling business units and assets.