The music rights boom, explained

What’s driving demand for music royalties: streaming services and investor demand for yield.


December 9, 2020

In 1983, during a recording session, Beatles legend Paul McCartney told Michael Jackson that music rights were a great investment.

The King of Pop turned around and purchased 251 songs by The Beatles for $47m — and McCartney has spent the last 30+ years trying to get them back.

Today, musicians are increasingly heeding McCartney’s words of wisdom.

Music catalogs = big $$$

In the last few days, we’ve seen some blockbuster song catalog deals:

  • Bob Dylan sold his catalog of 600+ songs to Universal Music Publishing Group for $300m+
  • Stevie Nicks (Fleetwood Mac) sold an 80% stake in her catalog to the music publisher Primary Wave for ~$100m

According to the Wall Street Journal, music catalogs have exploded in value, largely thanks to the rise of streaming services.

A catalog now fetches 10-20x annual royalties compared to 8-13x just a few years ago.

How music royalties work

According to The Economist, 2 copyrights are created when a song is recorded:

  1. One on the composition of the song
  2. Another on the actual recording

Each of those rights are then split into 3 parts:

  1. Mechanical rights (sold in a physical format or streamed)
  2. Performance rights (played on the radio or live at a concert)
  3. Synchronization rights (appears in film, TV, or games)

Ventures like Royalty Exchange (a marketplace for royalties) and Hipgnosis (a publicly listed song fund that has spent $800m+ to own 13k+ songs) have built businesses making sense of these income streams.

Royalties are attractive to investors…

…because they offer a few solid benefits per The Economist:

  • Steady income in a world of low interest rates
  • Low correlation to other asset classes (will pay out largely independent of the macro environment)
  • Passivity (songs kind of play on their own)

As for McCartney, things are looking up.

After a multiyear legal battle with Sony/ATV, which took over Jackon’s rights, he finally reached a private settlement. By 2026, he should have control of his Beatles songs, which are already worth in excess of $1B.

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