Music Rights Investing

In the past month alone we’ve seen three announcements that are as fascinating individually as they are illustrative collectively. Primary Wave in talks to acquire Kobalt. BMG reportedly exploring a deal for Concord. The now-concluded acquisition of Downtown by Universal Music Group Each headline by itself is significant, but taken together they suggest something more structural is currently at play. A re-majorisation of the music business.

There was a moment, not that long ago, when music rights acquisitions felt almost mechanical- streaming growth was steady, capital was abundant. The underwriting conversation revolved around a small set of variables: historical cashflow, growth assumptions, discount rate, and multiple. If you believed in the long-term durability and expansion of streaming, the rest followed.

Music rights are nuanced, and always have been. Creative collaboration, shared ownership, territorial differences, long tails of value, and cultural context are all part of what makes music operationally distinct from many other industries. There is, however, an important distinction to be made between nuance and friction.

Top songs are what attract capital. Music, and entertainment at large, is a hits driven business. This may be true, as most of the value magnetises to the ‘head’ of catalogs, but it doesn’t mean that everything else has no value. In fact- the truth is far from it. Large catalogs can offered history, predictability, and a level of institutional comfort that made underwriting easier- let alone the base level of recognizability and ‘icon’ status that marketing departments dream

The music industry has always existed as a vehicle between art and commerce. In the last decade, a third dimension has pervasively entered the mix, and has been delicately impacting the status quo- institutional finance. Catalogs that were once considered illiquid creative assets are now treated as financial instruments. Music rights are being packaged, leveraged, and traded with the same language and logic once reserved for bonds, real estate and pension funds.

Imagine trying to value a ring in a jewellery store, but wearing a blindfold. You can sense the outlines, feel the cut of the stone and setting, but the fine detail- the information that actually determines whether you’re about to buy a diamond or a dud- is obscured. That’s where many funds still find themselves today. Investment decisions are often made with incomplete or unreliable data. Acquisition packs are full of disparate (and static) spreadsheets

We’ve all had that feeling. You suddenly hear a new song on the radio. A friend mentions it. Then it pops up in a reel, a TV ad, a shop playlist... suddenly, it’s everywhere. But somewhere along the way, without even realising it- you start to like it. Maybe even love it. You Shazam it. Save it. Play it again later. It becomes your go-to. You don’t quite know how it happened… but it did.

That’s right. Another newsletter about data in the music industry. It’s a hill I’m willing to die on- that data is the critical lifeblood of the entire ecosystem, and that those who grasp this the quickest will be the ones who accelerate their businesses the fastest.

Institutional investment has aggressively been reclassifying music as an ‘asset class’. But what happens when art and capital collide?