Lorde likely won't be getting a massive windfall if the sale of her music catalogue goes through.
A music industry executive, who spoke to the Herald under the condition of anonymity, explains the $1.6 billion reported by the Financial Times yesterday doesn't involve Lorde directly.
This is essentially a corporate arrangement between music company Kobalt and a group of private equity investors led by KKR.
What is being sold here are rights that Lorde, and all the other artists on the roster, have handed over already.
Recording artists most often hand over their publishing rights early in their careers in exchange for a big advance and a cut of ongoing royalties.
The companies then take control of those publishing rights and are free to sell them on if they want to.
In fact, this isn't the first time that the rights to Lorde hits have changed hands.
In 2017, Kobalt paid US$150 million to Songs Music Publishing in exchange for a catalogue that included music from Lorde, The Weeknd and Mark Ronson.
Kobalt is now essentially just selling on the rights that it had previously acquired.
Lorde's initial contractual agreements will remain unchanged regardless of the overarching ownership structure involved with her back catalogue.
Artists continue to make most of their money through royalties earned via streaming revenue, sales and use in films or advertisements.
The insider says that an artist usually gets around a 15 per cent cut of the overall revenue, unless they're on a so-called "superstar deal".
The music insider estimates that artists usually earn around US$7000 on average for accumulating a million streams on a platform like Spotify.
The level of remuneration earned has become a major talking point in the industry, with many questioning why the various companies behind musicians continue to hold so much control over the revenue.
The music insider says that the artists were historically reliant on companies to record, produce and manufacture the physical product, but the shift to digital means this isn't as necessary any longer.
However, the legacy revenue structures have remained in place.
He points to a recent extreme example of this arrangement that can lead to conflict between the artist and the company that owns the back catalogue.
In 2020, Ithaca Holdings – operated by powerful music manager Scooter Braun – sold the music catalogue of Taylor Swift to Shamrock Capital for more than US$300 million.
Swift, who had spent years feuding with Braun, furiously announced on Twitter that she would re-record the songs on her new label – in effect diminishing the value of the old masters.
"Taylor Swift almost feels like she's a slave or an asset to help sell a company to someone she didn't want it to be sold to," Midia Research analyst Mark Mulligan told the Financial Times in 2020.
"More artists will see what Taylor is going through and do what they can to not have that happen to them."
Swift and Lorde aren't the only artists who have seen their back catalogues move into the hands of private equity giants in recent years.
According to the industry insider who spoke to the Herald, these major deals are becoming more popular among major investment companies at a time when interest rates sit at record lows.
The value of these rights has exploded and many private equity companies now see them as a lucrative investment, which can deliver a steady flow of income and could potentially also be sold on for a profit at a later stage.
KKR, Blackstone and UK-based fund Hipgnosis have spent hundreds of millions of dollars acquiring music rights – and the trend doesn't show any signs of slowing down.
To understand the market value of these rights, you need only look at the recent listing of Universal Music on the stock market in Amsterdam at a valuation of €45 billion (NZ$74 billion).