Are song catalogues the new asset class?
KKR, Blackstone, Brookfield and others are all investing heavily — in song catalogues.
There was Pink Floyd. As reported in the Financial Times, interest from a wide group of investors and music companies including Blackstone, Sony Music, and Warner Music, Pink Floyd was expected to fetch more than $500 million, making it one of the biggest music rights deals ever (current update is that deal is stalled — for now). A few weeks ago, Phil Collins and Genesis bandmates announced the sale of their music rights for over $300 million in the Wall Street Journal. Kayne denies his are up for sale. Then there was Brookfield and Primary Wave just announced $1.7 billion to buying copyrights, including Joey Ramone’s song catalogues among others.
Warner Music acquired David Bowie’s songbook for about $250 million. The agreement comprised songs from the 26 David Bowie studio albums released during his lifetime, as well as the posthumous studio album release, “Toy.” It also includes the two studio albums from Tin Machine, along with tracks released as singles from soundtracks and other projects.
The family of dance musician Avicii has sold 75% of the rights to his master recordings and publishing to the Swedish entertainment company Pophouse. The deal will allow Avicii’s parents to concentrate on the foundation they established after his death in 2018. They retain the remaining 25% of his rights, “to ensure a dignified tone” in how his music is used and promoted. Pophouse was established by Abba star Björn Ulvaeus in 2014 and runs the Abba Voyage show in London. In a press release announcing the Avicii deal, the company revealed sales figures for the groundbreaking virtual concert for the first time — with 650,000 tickets sold, and more than 160 sold out performances.
These deals are the latest in an era that has seen song catalogs soar to previously unimagined values, with Bruce Springsteen’s publishing and recorded-music rights going to Sony for a staggering number sources say is in the mid-$500 million range, Bob Dylan’s publishing going to Universal for nearly $400 million, Paul Simon’s to Sony for $250 million, and many more. While selling song catalogs may seem unthinkable for many songwriters, for older artists it’s been deemed a sensible estate-planning move: The market for such properties is far hotter than it’s ever been, and it saves the songwriter’s heirs from having to manage a very complicated asset — and gets them a big pile of money instead.
All of this is detailed in the Financial Times podcast How Wall Street became infatuated with the music industry
As reported in the Financial Times, Pink Floyd is selling both the copyrights to its songs and its recordings, or master copies, making its catalogue one of the most valuable to come to the market. It is seeking £400 million or more for these copyrights.
In September, The Hipgnosis fund this month issued $222 million of asset-backed securities — bonds that use the music copyrights as collateral. This was used to refinance the debt it took on to initially fund the $341 million of music purchases.
The debt will cost the Hipgnosis fund more than 6% a year, compared with just under 4% that KKR-backed Chord Music Partners will have to pay on a similar debt deal arranged in January.
The KKR-backed deal is tied to about 62,000 songs by artists including The Weeknd and Lorde.
Primary Wave’s acquisition business differs from the buy-and-hold strategy of many of the market’s newer players. The company, whose three funds hold some $2.1 billion in value, typically takes controlling interests in catalogs — often joining with artists or their estates — and then works to actively increase the value by commissioning biographical films, Broadway shows, interpolations and brand deals. Since taking a 50% stake in the Whitney Houston estate three years ago, Primary Wave has helped quadruple its income, through endeavors such as Kygo’s “Higher Love” hit featuring Ms. Houston’s vocals recorded in 1990, a MAC cosmetic line and a coming biopic, “I Wanna Dance With Somebody.”
WCM Co-Chair and COO Carianne Marshall noted: “This fantastic pact with the David Bowie estate opens up a universe of opportunities to take his extraordinary music into dynamic new places. This isn’t merely a catalog, but a living, breathing collection of timeless songs that are as powerful and resonant today as they were when they were first written. We were pleased that the estate felt that Warner Chappell has the knowledge, experience, and resources to take the reins and continue to promote a collection of this stature. All of our global leaders and departments are incredibly excited and primed to get to work with these brilliant songs across multiple avenues and platforms. And with both sides of WMG now representing Bowie’s career, we couldn’t be better set up to represent this illustrious body of work.”
“Increasing demand for content from streaming services and social media make iconic music IP a scarce and irreplaceable asset,” said Angelo Rufino, a managing partner at Brookfield, pointing to how music is being licensed to Peloton, TikTok and the metaverse. “One of the cheapest forms of entertainment is going to keep finding ways to weave itself into our everyday consciousness and that just means more revenue.”
All of this leads to the question that is inevitably being asked — is there a different ownership model at play?
Sources: Financial Times, Billboard, Wall Street Journal, BBC
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