Music rights to Pink Floyd’s past catalog, including hits such as: comfortably numb When another brick in the wallcould be sold for $500 million.
Bidders include music companies, as well as private equity giant Blackstone Group and other Wall Street players.
Music companies used to dominate the music rights market.
But as Wall Street sees music rights as an interesting asset class, competition is heating up.
Investment firms are looking for deals to buy music rights from artists who prefer one-time payments to years of royalties.
As a result, the price of music rights has skyrocketed in recent years.
With the exception of Pink Floyd, popular artists like Bruce Springsteen and Bob Dylan sold their music rights for $500 million and $400 million, respectively, amounts unheard of in the industry a few years ago. .
How Streaming Saved a Struggling Industry
After the rise of the internet, the music industry struggled to cope with the rise in piracy.
Pirated songs don’t give royalties to artists and don’t generate revenue for record labels or distributors.
But with the rise of Spotify and other streaming apps offering free packages, wide selection, and cheap subscription plans, royalty began to flow in again.
Music piracy exists, but it is greatly reduced as these apps offer free music and other useful features for a smooth listening experience.
For example, to pirate a song, you have to visit shady sites to download the music, with the added burden of sorting it out. Streaming platforms eliminate these hassles.
According to Goldman Sachs, global music revenue growth is set to reach record highs as streaming revenue continues to rise while physical and downloaded music die.
In addition to streaming platforms, other platforms such as TikTok, Instagram and other short form content platforms allow creators to use music in their short form content.
Each play brings royalties to the creator of the music. This is an important source of income that didn’t even exist a few years ago.
Some of these reels/videos have been duplicated by millions all over the world, so a viral 10 second video will popularize your song or artist and increase your chances of earning higher royalties.
Kate Bush run up that hill and metallica Master of the Puppet After these songs were featured, they became popular on streaming apps stanger things Fourth season.
In 2020, streaming revenue contributed 62% of the music industry’s global revenue.
Why is Wall Street usurping music rights?
Wall Street took note, but the pursuit of value goes beyond the stocks of music companies and streaming platforms.
Investors are now looking to buy music rights directly as a quasi-bond investment.
Yields for established artists are typically expected to be around 5-10%. This is a fairly high return in a low interest rate scenario.
Higher risk, lesser-known record rights sellers with high yields of 10-20%. Some funds, such as the Hipgnosis Songs Fund and Lyric Capital, focus exclusively on raising money to purchase rights to music.
The Hipgnosis Song Fund owns the rights to Shakira’s catalog of 145 songs. Investor Bill Ackman likens music to essential needs like “food and water.”
Most investors believe that listenership is unlikely to be affected by external economic scenarios, making it an attractive asset class. Music rights are a general term for various rights attached to lyrics (publication rights) and actual recordings.
Publishing rights royalties are split between the writer and the song’s publisher as the lyrics are used to create the song.
On the other hand, the recording rights are held by the record label company, which pays the artist a certain amount of royalties.
As new social platforms like the Metaverse continue to grow, so will the opportunities to stream music. For investors, too, the predictability of streaming earnings makes these investors relatively safe.
Streaming platforms have some tailwinds
Streaming platforms that once relied on external funding may be heading towards profitability.
Targeting is much easier than on traditional audio platforms such as terrestrial radio, so more advertising dollars are likely to shift to these platforms.
For example, someone playing a gym playlist might receive more health product recommendations in an ad, which is not possible with traditional channels.
Unlike streaming platforms, which come under close scrutiny, radio often pays less in revenue.
Additionally, major royalty labels are reducing the royalties that streaming platforms have to pay them.
In 2017, Spotify paid out 79% of its revenue in royalties, down to 73% in 2021.
Additionally, high-margin subscription revenue contributes approximately 87% of revenue. Survival and growth of streaming platforms is no longer a big deal. This bodes well for the music industry.
This article was originally published here.
