Without missing a beat, the tempo of music royalty investing has continued to accelerate into 2023. Big-name stars and iconic artists, including Justin Bieber, Taylor Swift, Imagine Dragons, to Neil Diamond, are taking advantage of favourable market conditions and are cashing back on their catalogues to the tune of millions.
Brian Southall, Author of "Northern Songs: The True Story of the Beatles Song Publishing Empire," published in 2006, captured a music industry mantra: "For songwriters and publishers alike, the most important five words are always the same" - 'never give up a copyright.'
Music as an asset class has existed for as long as there has been copyright law. Traditionally, ownership and control have been the influence of only a handful of companies. However, in recent years, record companies and investment firms have discovered the value in offering a piece of the action to retail investors. In doing so, a level of wealth has been created for stakeholders that don't cannibalise or replace existing industry structures but build on these.
Music royalties have become hot investments, attracting major players like Blackstone, KKR, Kobalt Capital Limited, Dundee Partners, and more. Dedicated firms such as Lyric Capital Group and Round Hill Music Royalty Fund have even formed to focus on this asset class. There is no sign of this trend slowing down as a growing number of artists sell the rights to their royalties and investors snap them up.
More than $5 billion changed hands through music rights acquisitions in 2021, including publishing assets and recordings, with 2023 projected to be even bigger.
During the last 25 years, songwriting catalogues generally sold for about eight to 12 times the "net publisher's share," or the amount of revenue the songs generated minus the royalties paid out to the performers and songwriters. Today, valuations are hitting 25 to 30 times the publisher's share.
So what's driving catalogue sales? The impact of streaming on the value of recent acquisitions has been exponential. In concert with harmonious market factors, such as low interest rates and favourable tax and estate planning environments, the availability of streaming data and social insights has made future earnings projections far more transparent and easier to analyse. These factors have skyrocketed the popularity of music as an asset class.
Music royalties are relatively stable investments as they are unaffected by broader economic activity, and offer recurring revenue and attractive yields as long-term assets, as royalties are paid for the lifetime of the artist, plus 70 years after their death. There is little counterparty risk, and with streaming culture firmly in place, they have the potential for capital appreciation.
Forbes 30 Under 30 entrepreneur, Marzio F. Schena pioneered one of Europe's leading music investment platforms, ANote Music that has been awarded as the only European company to a top 10 finalist spot in the Startup World Cup 2022, competing with 10,000 startups worldwide.
Platforms like ANote allow investors to purchase the intellectual property of music, and be paid out in royalties over time. The platform sells the rights to iconic tracks like 'In My Mind' by Dynoro & Gigi D'Agostino, 'In the Name of Love' by Martin Garrix & Bebe Rexha, and 'At Last' by Beyoncé as well as music from global charts.
Advocates highlight soaring streaming traffic via platforms such as Spotify and Apple Music and say music will always be consumed somewhere, somehow, and usually be paid for, regardless of economic or political conditions.
That suggests dependable earnings for investors buying into time-tested hits and iconic catalogues from all over the world.
Music royalties as an alternative investment class offers intriguing diversification for investors' portfolios. Still, as with any investment, it should align with the overall investment objectives.
