Invest in music catalogues? It’s not just daisies and butterflies – our newest podcast

your money is in

Investors continue to invest in music publishing catalogs for a more reliable return. But publishing assets come with their own problems — according to these investors who are actively looking at them.

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We’ve written extensively about the music industry’s infamous “black box,” which relates to billions of dollars in uncollectible royalties. Now investors are realizing how difficult royalties refunds can be, even with partners like Kobalt, Paradise Distribution, and Exactuals.

Unfortunately, if you’re the owner of a large publisher’s catalog, you’re likely also struggling with data discovery, accounting clutter, fraud, and lost revenue.

But how bad is this problem?

In our latest Digital Music News Podcast, recorded in Hamburg, Germany, I addressed this topic when two European investors were actively investing in music releases. They had at least 99 problems.

“The problem is getting the money back from the various collection agencies, and that’s a nightmare,” said Thierry Baujard, founder of Europe-focused media investment firm Mediadeals.

“We lose a lot of money through mistakes and mistakes. People don’t understand the titles and it’s getting lost in Latin America and elsewhere.”

Baujard was honest with me. Getting paid for publications is a lot harder than he imagined.

“So that’s a big problem. So we’ve got a pretty big publisher that’s now specialized in film music and it’s taking a lot longer to get the money back than we thought. We see that there are many mistakes.”

But not only time – it costs a lot of money to get your money back.

“The problem, of course, is the cost that we have to spend, the amount that we have to spend (to get payments back) — the money that comes back is pretty small.” So if we’re paying someone to do that — we already have a company that’s taking a commission of 30% – we probably have to do that, but it’s very, very expensive.”

I asked Thierry what the solution to this mess was. He answered in one word: lawyers.

“Right now the best solution we have is lawyers,” Baujard told me. “It’s a bit sad … it’s obviously very sad and it also takes a lot of time and money.”

Baujard told me that he actually works with two teams of lawyers and has to personally dispatch lawyers to different PROs to make claims. He also hired a company to scan every TV station in the world and then compare all of that data to what the PROs are saying.

The results are pretty depressing.

“With two films, for example, there were a lot of differences,” Baujard said. “We know that this film was shown on 25 channels and the collection agency shows that it was shown on five channels. So the question is of course whether the other 20 stations will come in the next 6 months or not.”

“Probably not,” I said.

Oke Goettlich, head of Göttlich GmbH, pointed out the urgent need for technological solutions.

“I’m invested in a publishing company,” explained Goettlich.

“There are challenges that cannot be solved by the old industry and you need to set up this new technology – digital data interfaces and even gathering information about what songs were performed where.”

I thought that was the job of PROs like GEMA, SACEM and ASCAP. But it doesn’t quite work that way.

“A lot of PROs raise money and distribute it to the well-known artists, but not to those who actually play. It’s absolutely unbearable that the pros who are dishing out most of the money in this entire game are unable to track exactly where that money goes.”

Göttlich has long been concerned with rights issues. He began founding Germany-based distribution partner Finetunes more than a decade ago and recently sold the company to The Orchard.

Here’s our podcast, which focuses more generally on the issues investors face in music startups and investments.

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