Taylor Swift is a long way from what most fans recognise as “indie” or independent music. Yet her highly publicised fight with Big Machine Records shows why artists should hang on to their recording rights. As more musicians do just that, independent labels are grabbing an increasing audience share. Paris-based Believe, tuning into this market, on Tuesday priced shares that value the group at up to €2bn.
Music, after decades of decline, is back as big business. Warner Music floated last year and Universal Music Group is set to follow suit; owner Vivendi has plans to spin out a bigger stake. Believe’s fast growth and promise of a fairer deal for artists should attract a solid fan base within the investment crowd.
Streaming disrupted music’s traditional business model. Believe goes a step further, flipping it on its head. Believe says it works for the artists rather than vice versa. It effectively earns a commission, taking a percentage of revenues generated each time an artist’s song is purchased or streamed online. In return, it offers digital distribution services plus marketing and promotion across streaming platforms. Believe’s organic revenues grew 23 per cent year on year in the quarter to March this year. That is in line with Warner Music’s digital revenues.
Believe supplemented this rate by another 3 percentage points with acquisitions. New investment of at least €300m will cover funding for further bolt-on labels over the next three years. Believe usually pays a single multiple of a target’s sales. Prioritising growth over profits, Believe targets ebitda margins of up to 7 per cent by 2025.
At the top of the range, shares would price at three times 2022 sales, a discount to Warner Music which trades at four times. Music revolutions, like breakout pop stars, do not happen overnight. Swift, who knows a thing or two about break-ups, remained with Nashville-based Big Machine for 13 years before deciding to strike out alone. The digital music revival will improve the prospects for new artists who eventually make it; patient investors who have faith in that idea may buy into Believe.
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