Royal Sum Paid for Rights to 17-Year-Old’s Songs

The Wall Street Journal - November 12, 2013

New Zealand Artist Lorde Signs With Songs Music Publishing After Heated Bidding

By

HANNAH KARP
Updated Nov. 12, 2013 8:03 p.m. ET

 

Lorde, a 17-year-old New Zealand singer-songwriter, rocketed to the top of the charts with her hit “Royals.” Now, little-known music publisher Songs Music Publishing Inc. is humming its own tune: royalties.

Last week Lorde quietly signed with Songs Music instead of with one of the usual cast of global publishing giants, after a monthslong bidding war for rights to her compositions.

Matt Pincus, founder and CEO of Songs, and Lorde’s manager, Tim Youngson, declined to comment on the exact terms of the deal, but other publishers said some bids had reached $4 million.

Mr. Pincus would say only that his final bid was “competitive,” in the millions of dollars. That would be a whopping sum for a new artist, publishers said, especially since Lorde—whose current hit “Royals” has spent six weeks at the top of Billboard’s Hot 100 charts—has co-written most of her songs and therefore owns only half the copyrights. It is rare for publishers to pay even close to $1 million to sign a new writer.

Lorde’s team said it didn’t accept the biggest offer. They said they chose an outfit that promised to work the hardest to nurture her creative career, as well as ferret out new digital revenue channels—a task that record companies are less equipped to handle than they were in richer days.

“Even before signing her they were bringing her options for collaborations and introducing her to other songwriters,” said Mr. Youngson. “The decision wasn’t made on money.”

Lorde’s songwriting partner, 30-year-old New Zealand producer Joel Little, is signed to Sony Corp.’s Sony/ATV Music Publishing. Sony dropped out of the race as the bids skyrocketed, according to a person familiar with the matter.

Advancing such a lofty sum to an unproven songwriter is especially risky if the writer performs her own work, since performers often start relying more heavily on others to write their material as their careers accelerate.

The decision by Lorde—whose real name is Ella Yelich-O’Connor —highlights how technology has transformed the music publishing business over the past decade. For years music publishers were essentially administrators who simply cashed royalty checks when the songs they owned were played on the air, used in commercials or sold on records. But as record sales have declined and new music sources, from Google Inc. ‘s YouTube to subscription streaming services like Spotify AB, have multiplied, publishers have been forced to take a more active role.

A hit single can generate up to $3 million in radio airplay royalties for a music publisher that owns 100% of the composition rights, and up to about $8 million including revenue from other licensing deals, said Mr. Pincus, the 41-year-old son of private-equity mogul Lionel Pincus.

Publishing rights to existing work have grown increasingly valuable amid upheaval in the music industry, since they promise slow but steady income that isn’t entirely tethered to record sales.

He said his pursuit of Lorde began in February, long before “Royals” started climbing the charts in the U.S. He sent his business partner Ron Perry to New Zealand to meet her in July, and Mr. Perry then attended 12 of her shows, introducing her to songwriters that she admired.

Mr. Pincus was an early adopter of the new music-publishing model, having witnessed firsthand the direction the big companies were going, leaning heavily on old catalogs of songs.

After a stint in his teens playing the bass guitar in the hard-core punk band Judge, Mr. Pincus landed a job at EMI, the British publishing and recording conglomerate whose assets have since been absorbed by Vivendi SA ‘s Universal Music Group and Sony ATV Music Publishing.

About 10 years ago, he said, he noticed EMI’s publishing division was “drastically” reducing its budget for acquiring contemporary songwriters, favoring established catalogs instead that would generate immediate free cash flow. Meantime private-equity funds were pouring hundreds of millions of dollars into music publishing, viewing catalogs as hard assets with reliable yields and downside protection that made them “look like real estate,” he said.

With a price bubble building for older work, Mr. Pincus started his own publishing house to snap up overlooked songwriters: newcomers who might not generate significant revenue for five to six years. That riskier strategy is far less capital intensive, “but it’s a lot more work,” he said.

On the administrative side, his tactics included data systems to find his songs on the Internet and calculate royalty payments more precisely than the system many publishers use, catching small amounts that might otherwise fall through the cracks.

On the creative side, he employs half of his 30 staff members to guide songwriters’ careers, helping them find collaborators and licensing opportunities.

While major publishers have also revamped their operations in more recent years and now boast similar digital expertise along with deeper talent rosters and more global reach, Mr. Youngson said that Songs was ultimately more attractive because it was independently owned and appeared to be focused more on new songwriters’ long-term goals rather than “what we can sync now.”

“They’re not working for a boss,” said Mr. Youngson.

Write to Hannah Karp at hannah.karp@wsj.com