Will financialization of the music industry kill the Public Domain?

December 22, 2021

by: Paul Keller DEAR WALT WE HⒶVE YOUR MOUSE, unknown artist, Amsterdam 2012

The New York Times is running an article on ever increasing sales prices fetched by music catalogues of major recording artists of the late 20th Century, with the latest record set by the sale of Bruce Springsteen’s catalogue to Sony Music Entertainment:

Last week Sony, which now owns Columbia, announced that it acquired Springsteen’s entire body of work — his recordings and his songwriting catalog — for what two people briefed on the deal said was about $550 million.

The price, which may be the richest ever paid for the work of a single musician, caused jaws to drop throughout the music industry. But it was only the latest mega-transaction in a year in which many prominent artists’ catalogs have been sold, fetching eye-popping prices. […]

Not long ago, music was seen as a collapsing business, with rampant piracy and declining sales. No longer.

Streaming and the global growth of subscription services like Spotify, Apple Music and YouTube have turned the industry’s fortunes around. One result is a spike in the pricing of catalogs of music rights to both recordings and to the songs themselves.

New investors, including private equity firms, have poured billions of dollars into the market, viewing music royalties as a kind of safe commodity — an investment, somewhat like real estate, with predictable rates of return and relatively low risk.

These recent sales are not an entirely new phenomenon, as catalogue sales have been around for a while, but the emergence of investors from outside of the music industry that treat catalogues of music rights as a new asset class raises a number of interesting questions. Among them is what the financialization of music rights will mean for the underlying framework of rights — copyright — which has never been designed with this type of actors in mind.

In its most basic form copyright is a right that is granted for a limited period of time to the authors of works. Copyright is structured in such a way that it lasts for a limited period after the death of a creator, supposedly to ensure that the descendants of successful artists can benefit from their creative success and can protect their legacy by maintaining influence over the uses of their works. Most aspects of copyright can also be transferred, which allows the above-mentioned catalogue sales and can lead to situations where the connection between a creator’s legacy and the power to exercise copyright becomes very brittle.

All of this raises the question of what will happen to the rights that are underlying these massive catalogue sales once the rights are fully owned by private companies — be that private equity funds, other financial investors or giant entertainment conglomerates. In this context, it seems reasonable to expect them to look at their assets without much consideration for the various balances that underpin the copyright system. This of course bodes ill for all the counter-balances to the exclusive economic rights that guarantee the “predictable economic returns” and that make this asset class so attractive to financial investors. In other words it bodes ill for the Public Domain.

There are plenty of examples in which financialization of a sector has turned upon the sector itself, by subjecting the inherent logic of that sector under the all-dominating logic of ever-increasing financial returns. This very likely means that sooner or later we can expect the owners of these assets to discover (if they have not yet — it would be interesting to see how these contracts deal with the term of copyright protection) that they can maximise their return on investment simply by getting legislators to expand the term of copyright protection. From a financial investor perspective this looks like a non-brainer as it would create additional returns without any discernible downsides.

The more detached the owners of these rights are from the creative production process, the less we can expect them to understand or even value any of the inherent balances that are part of the copyright system. If copyrights are just another asset class, then it does not make any sense that they are temporary in nature and that there are well-established exceptions and limitations to copyright. This logic applies to a much lesser degree to owners with strong links to the creative process, who do benefit from the usage rights and flexibilities granted to them by the temporary nature of copyright and the usage rights granted by exceptions and limitations to copyright.

From the perspective of financial investors, copyright is not much more than a bundle of rights created out of thin air that structure financial flows and it follows that there is absolutely no reason why they should not push for governments to make these rights last longer.  Once the slate of recording artists that entered into these deals have passed away and will not be able to speak up anymore — or complain that they have been shafted — it will only be a question of time until financial investors start pushing for longer term durations or — more likely — perpetual copyright. Compared to this new class of cultural predators, the good old Walt Disney company will quickly start looking like an innocent schoolboy.

For anyone interested in preserving the balance inherent to the copyright system and protecting the public domain the writing is on the wall. Any efforts to extend terms of protection or otherwise encroach on the public domain must be rejected, not only to defend the public domain but also to protect the copyright system as a whole from the destructive forces of financialization.


Paul Keller