Hartwig Masuch thinks the music industry is putting too much of its money in the wrong places.

Hartwig Masuch, CEO, BMG

If you’re playing the lottery tonight, or fancy a punt on the horses, you could do worse than asking Hartwig Masuch for some tips.

Over the past decade, Masuch has delivered a series of predictions about the music business which sometimes sounded dubious – and risked vexing certain quarters of the industry – but which increasingly look like self-evident truths.

Some examples:

  • That streaming would switch negotiating power away from record labels and towards major artists: ✅
  • That records would grow faster than publishing in the modern era: ✅
  • That fairness and transparency would become the new music biz battleground: ✅

More recently, Masuch has made similarly bold forecasts.

For example, he believes that that the tide of new money flowing into the business today is fundamentally different to previous acquisition booms, and that investors may eventually start demanding that music companies are “unbundled” – with music rights held in a separate corporate entity than operating companies. (Time will tell how accurate his crystal ball is on that one.)

Softly-spoken and unassuming, he’s the antithesis of the model of the brash old-school music mogul. Yet Masuch’s withering analysis can be brutal in its logic.

So as he prepared to fly to London for the Ivor Novello Awards, MBW caught up with the BMG boss to discuss his company’s half-year results, frontline versus catalog, and why efficiency rather than ‘breaking hits’ will increasingly be the new battleground for labels…


How are you feeling about BMG’s H1 results – with revenues up 9% year-on-year?

I’m totally happy with the result. Music publishing suffered from lockdowns – the hit to performance revenue – and when publishing is two-thirds of your business obviously that hurts.

But in records we grew faster than the market in all three of our key territories – the US, UK and Germany – in every segment and we did so almost entirely organically without the huge spending seen elsewhere in the market.

I don’t want to spoil anyone’s breakfast, but a lot of the [music industry’s recent financial] announcements we’ve seen are simply the result of business mix: if 90% of your income is recorded and 50% of that is catalog, and catalog rose by 25%, that’s a nice position to be in.

What’s your latest view on the amount of investment, the amount of focus, the industry at large puts towards frontline releases versus catalog. Do you see it changing?

Logic would suggest it should change, but we see no sign of it.

For us it’s a question of balance and ensuring that where you invest, it makes sense on a long-term basis. Frontline investment is actually getting more aggressive than it ever did before, and yet if you look at some industry numbers, catalog is heading towards 70% market share on streams.

It raises the question: why the hell is so much money being applied to that remaining 30% [i.e. frontline A&R]?

And if we’re just talking about investment in new artists, you then have to deduct new releases from established artists from the 30%. So new repertoire from new artists could be as little as 15% of consumption out there.

“In the recorded business, songs that get some traction on TikTok are getting $5 or $6 million advances. That’s obviously still where some in the industry think their future lies. Good luck.”

Combine that with the fact that new repertoire is being brutally fragmented by over a million songs being uploaded every month, and it’s hard to see the sense in it.

New music will always be important to us. And we’re good at it. We have had incredible success with KSI in the UK and with Curtis Waters in the US, for instance. We are 100% committed to investing in new artists, but it has to be proportionate.

We see enormous amounts of money on the publishing side being targeted at that small 15% fraction of the market – it’s astonishing. And in the recorded business, songs that get some traction on TikTok are getting $5 or $6 million advances.

That’s obviously still where some in the industry think their future lies. Good luck.


Aerosmith, the biggest-selling heavy rock band in America, have regained a chunk of their catalog from Sony Music, and struck a new deal with Universal Music for their entire recordings range. Are you expecting more of these big catalog deals to play out?

It’s a very interesting situation. The clear winners in that discussion were Aerosmith and their management.

My suspicion is that increasingly when big proven artists sign new distribution or licensing deals with major record companies – on 60%, 70%, 80%, or even 90% [royalty splits in favor of the artists] – we’re then going to see them sell that income stream on to investors.

“It could be a no-brainer for the artist, but it’s going to be highly disruptive for the established players.”

That could mean they get paid twice: first with the advance on a distribution or licensing agreement, then again by selling ownership of the royalties.

It could be a no-brainer for the artists, but it’s going to be highly disruptive for the established players.


How are you positioning BMG to compete in this future where “proven” writers and artists increasingly own their own rights?

The effect of all of these transactions is to turn catalogs into financial instruments. What matters to artists and investors in this situation is effectiveness and efficiency.

If you are an investor, you are not going to want to put up with the typical behavior of the music industry: you want to get your money. You don’t want to get trapped in audits that take five years because if you do, that is a pretty big problem for your return.

“What matters to artists and investors in this situation is effectiveness and efficiency.”

When we talk about service and fairness and transparency, that’s obviously an appeal to artists, but in an industry not known for service or fairness or transparency that also has an appeal to investors.

So we’ve tried to position ourselves to say: the music industry can be a pretty ugly business, but here’s a modern alternative. We are frugal enough to be able to run BMG profitably on a very low commission and, no, we won’t forget that you actually own the asset. More and more we will show ourselves to be the honest guy in this mix.


Let’s go back to your argument about the blockbuster industry over-investing in frontline. If I were a major record company or publisher boss, I might suggest that of course Hartwig would say that – because the hits business is an expensive game, and the majors have something of a monopoly on it. It’s a game that BMG can’t play as much as doesn’t want to play.

It’s not that we can’t play it; it’s that we refuse to play it to excess. It’s about looking at the market realities and being logical about how you deal with them.

If you monitor the value of the hits business, you’ll see that the Top 50 tracks – the sole focus of much of the industry – accounts for about 3% of streaming revenue. It’s a tiny slice of the business, yet it accounts for the bulk of the costs of most labels.

“[Frontline Hits] are a tiny slice of the business, yet account for the bulk of the costs of most labels.”

In 2015 there was a good argument that by maintaining or growing your chart market share, you could use it to better monetize guarantees and advances from big digital players. But that argument no longer holds up when you look at the size and power of some of those digital players and the declining share of overall revenue of the hits business.

When you look at the amount of money that frontline chart hits actually earn versus the costs paying for that part of the business, you can definitely argue it’s a business you don’t want to be in too heavily.

I hear some companies boasting about their chart share and I think that if you as a record company have 50% of the US Billboard Hot 100 today, your problem is actually bigger than the company who only has 20%.


BMG is the largest privately-owned music company without any public exposure. How does that ownership structure make the way you run the company different to your competitors?

Bertelsmann is a family-owned business so can be much more radical in addressing change and altering strategy.

We all know that publicly-owned companies manoeuvre very carefully because it takes quite some time to convince investors that a certain direction is the right way to go.

“The interesting question going forward is not whether you’re publicly quoted or not, but how fast decisions can be implemented – and that’s an attractive quality about this company.”

The other thing about Bertelsmann is that it has a number of interesting complementary businesses to BMG, enabling us to engage very directly with Freemantle, Random House, Avato and others in the group.

The interesting question going forward is not whether you’re publicly quoted or not, but how fast decisions can be implemented – and that’s an attractive quality about this company.


You’ve won praise from artist and songwriter-first lobbyists for BMG’s approach to the market, including in the wake of the UK’s DCMS inquiry into streaming economics. How do you balance that idea of being artist or songwriter-first with posting a healthy profit margin, which is currently around 17% for BMG on a EBITDA basis.

By not taking unfair advantage of creators and by maintaining a rational cost structure. If you create a business model whose core objectives are breaking hits regardless of the public’s appetite for them, and maximising market share and executive salaries, you’re not going to have much left for your artists or shareholders… unless of course they exit.

If on the other hand your core assumptions are you want to deliver the best possible service fairly and transparently to rights owners while also making a profit for your shareholder, you’re going to end up with a different kind of company.

“Our internal ‘currency’ at BMG is how many streams something costs. If you have an executive on a $10 million annual salary, on a topline basis he or she needs to generate 2 billion streams just to pay for themselves.”

Our internal ‘currency’ at BMG is how many streams something costs. If you have an executive on a $10 million annual salary, on a topline basis he or she needs to generate 2 billion streams just to pay for themselves. On a contribution basis that could easily be 5 billion or 6 billion.

I don’t blame executives for seeking to enrich themselves, but they shouldn’t be surprised if at some point artists and, increasingly, shareholders say, “No thanks”.Music Business Worldwide