Warner Bros. Discovery Catalog Sale Isn’t Going Too Hot, Report Says — Is a Wider IP Valuation Dip on the Way?

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Photo Credit: Michael Marais

Two months back, reports indicated that Warner Bros. Discovery (NASDAQ: WBD) was looking to offload its music library, including the soundtracks behind several superhero films. Now, a different report yet is suggesting that the company may abandon the sale plans after receiving lower-than-expected offers.

This twist in the rumored Warner Bros. Discovery catalog-sale push just recently came to light in a piece from the Financial Times, which relayed in January that higher-ups were seeking a cool $1 billion+ for the music IP. According to the outlet’s newest article on the subject, however, the HBO and DC Entertainment owner “initially hoped to receive as much as” a staggering $2 billion for the catalog.

Astonishingly, given the massive price tag, FT has specified that the selling company would insist that the buyer adhere to “stipulations over access to and use of certain soundtracks.” In any event, bids for the song rights at hand are said to have come in at approximately $1.2 billion to $1.3 billion, well beneath the $2 billion payday that Warner Bros. Discovery had been targeting.

Against this backdrop, the business is reportedly considering selling only a portion of the works or nixing the transaction altogether. At the time of this writing, Warner Bros. Discovery – which is poised to post its Q1 2023 financials towards April’s end – didn’t seem to have commented publicly on the matter.

It also bears mentioning that the purportedly well-informed anonymous sources cited in reports of music industry sales have proven less than accurate on multiple occasions as of late. Though high-profile transactions are continuing to wrap, a deal for Pink Floyd’s catalog (which was for a time said to be near closing) appears to be dead in the water, and neither Spotify nor Amazon has formally announced plans to buy Audioboom (LON: BOOM).

More broadly, Warner Bros. Discovery’s catalog-sale obstacles may potentially be an early indicator of a song-rights valuation falloff, which some say is brewing amid broader asset devaluations, rising rates, and widespread economic woes.

Of course, it’s hardly a secret that 2020, 2021, and 2022 delivered all manner of ultra-expensive catalog plays. Although a substantial number of deals have come to fruition to this point in 2023, logic suggests that the red-hot space will ultimately join the global economy in cooling.

Until then, with a multitude of companies having each disclosed plans to inject millions (not billions) more into IP, it stands to reason that gargantuan purchase agreements – like those involving the Warner Bros. Discovery catalog and Michael Jackson’s body of work, which his estate is reportedly valuing at around $2 billion – could be the first to dry up.

According to its 2022 earnings report, BMG spent north of $400 million on catalogs across the 12-month stretch, whereas Kobalt communicated that it had dropped over $300 million on music IP as well as advances during its fiscal year. Last month, Cutting Edge, AMR Songs, Larrosa, Shamrock, Mojo Music, and others unveiled song-rights investments and/or related funding.