Fifteen years ago, Berlin-based music conglomerate BMG was negotiating the terms of the sale of its record label to Sony, and executives at the New York-based entertainment giant couldn’t understand why their German counterparts would want to keep people like Rick · Astley.
Like a string of “legacy artists” that BMG is eager to keep on its books, this British 1980s icon seems to have become a relic of the past. “They got nervous and said: Why do you want this?” recalls Hartwig Masuch, the legendary BMG chief executive, who is stepping down next month after 15 years in the role. “What the hell is going on? What don’t we understand?”
What Sony doesn’t seem to have grasped yet is how the value of obsolete catalogs will be transformed digitally, making classics from decades past available on demand. Last year, 35 years after its original release, Astley’s “Never Gonna Give You Up” surpassed 850 million plays, making it BMG’s top-performing single.
Thanks in no small part to the early recognition of the value of artists’ old recordings — and snapping them up in a massive acquisition spree partly funded by US private equity firm KKR — BMG is now the world’s fourth-largest music company.
While it still pales in comparison to industry giants Universal Music Group and Sony’s music divisions, which each had revenues of $10 billion last year, and Warner Music Group, which had revenues of $6 billion, it is on track to earn record annual revenues of €2024. will reach 1 billion euros per year. This compares with less than 300 million euros in 2014.
“We’ve outperformed every (competitor) company in terms of revenue growth over the years, but not once have we made the Hot 100 Billboard chart,” Masuch said in an interview from his office, where he can see Berlin’s Gendarmenmarkt and the corner A deep red Fender electric guitar in the house.
“That’s not because we’re geniuses,” says the 68-year-old, himself a former frontman for a German new wave/punk band. “More people over 25 listen to Spotify than under 25. And we know that people who start, say, 20 onwards, to a large extent, stick to what they experienced when they were young.” Today, about 60 percent of BMG’s revenue Releases from existing music.
Despite his distaste for some elements of the music industry, he is optimistic about the future of musicians — and about the benefits of online streaming services, which he says create a more reliable and transparent revenue model . “It’s a huge game changer for artist freedom.”
Masuch, who pairs jeans and a long-sleeve T-shirt with a Swatch watch, eschews a rock-and-roll lifestyle and awards shows that involve “too much posturing.”
Instead, the self-proclaimed “crazy music fan” — who counts the Rolling Stones, The Beatles and Pink Floyd among all-time favorites — prefers one-on-one sessions with artists.
He pokes fun at some of his encounters with his musical icons over the decades, like when Mick Jagger came to one of his London dinners. “I didn’t know what to talk about. It took me half an hour to be able to talk.”
When Masucci became CEO in 2008, there were only three people working at the company: himself, a financial expert and an assistant. That was two years after Spotify was founded. CD sales plummeted, and the music industry was in crisis.
BMG’s parent company, German media giant Bertelsmann, made the unconventional decision to sell the business to Universal and Sony and start from scratch, focusing on marketing music rights rather than the traditional emphasis on recording and releasing new records.
Masucci has built a new company, positioning himself as another home for artists tired of the Big Three in America, whose executives he has thinly veiled contempt for.
The CEO, who has said in the past that he earns about a tenth of what his industry peers make, which sometimes exceed $100 million, has promised artists a new structure to “represent “their old catalogs instead of owning them. Among those attracted to the model were two members of the Rolling Stones, two members of the Beatles and Pink Floyd’s Roger Waters. Kylie Minogue, Nick Cave and Rita Ora have all recorded and released on the label.
Alice Enders, a music industry analyst at London-based Enders Analysis, said BMG had “continued to grow” under Masucci’s watch as the former economics student brought solid financial management to the table. In the first place and capitalized by cash-rich Bertelsmann.
“A lot of it is not organic growth — it’s through investment,” she said. But she added that with BMG’s EBITDA margin of more than 22% last year, Bertelsmann had “invested heavily” in backing Masucci.
Masucci, who grew up in a small town near Dortmund, said there were advantages and disadvantages to being a German company in an industry dominated by American companies. He admits that explaining to artists why they should work with a company based in Berlin rather than Los Angeles or New York has sometimes proved challenging. But he argues that being an outsider can also help foster a “culture of being different, more frugal and less egotistical”. “Artists don’t like to be dominated by egos,” he said. “They prefer to be the biggest self in the room“
There are pros and cons to being owned by Bertelsmann, a family business that also owns Penguin Random House and broadcasting group RTL.
“There are very few people making decisions and they can be very opinionated,” he said. “But on the other hand, once they have confidence in the strategy, they can make decisions very quickly.”
His successor, a scion of the family, Thomas Coesfeld, 33, has been BMG’s chief financial officer since 2021 and is one of two brothers Bertelsmann is grooming for senior leadership.
He will have to contend with industry headwinds — and music’s first major test as an asset class — amid rising interest rates. Investors have poured billions of dollars into acquiring song rights in recent years, but tighter economic conditions have challenged those cash flows.
Masucci, who will no longer pick up his phone beyond a three-month “detox,” has been coy about his plans for the future. He said he would not be retiring and wanted to “be more involved in the financial industry”.
Asked if he sees BMG artists as friends or clients, he laughs: “We’ll know in 4 weeks.”
But he is deeply proud of his accomplishment. “Creating a business relationship with a band — a very personal one in a way — was very important to me as I was developing my love of music, and it’s obviously the biggest achievement for me. “