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FEATURE | Music Finance: Where The Real Money Is Being Made

By Anya Wassenberg on January 26, 2023

Street musicians in Paris (Photo: Hands off my tags! Michael Gaida/CC0C)
Street musicians in Paris (Photo: Hands off my tags! Michael Gaida/CC0C)

At 28, Canadian pop idol Justin Bieber is making headlines with the sale of his entire publishing catalogue to Hipgnosis Songs Capital in a deal reported to be worth $200 million. The purchase covers all 290 titles in his catalogue (as of December 31, 2021).

It’s said to be the largest such deal for anyone under pensionable age — and it’s the biggest deal ever for Hipgnosis.

He follows in a long list of pop music luminaries such as Justin Timberlake, Bob Dylan and Leonard Cohen. Bieber’s deal is rare because his catalogue isn’t that old, as compared to many of the musicians and other rights holders who have taken the plunge.

What are they selling?

The artists in question are selling the rights to their work — in other words, to collect royalties largely from streaming of their back catalogue. That’s become more and more important as statistics show, people consume more older music than new.

When Kate Bush’s Running Up That Hill took the world by storm more than 35 years after its original release via Netflix’s Stranger Things TV series, it only accelerated an ongoing phenomenon. About 70% of the music consumed today is older music, leaving only 30% of the pie for new artists and material. It makes that existing music all the more valuable.

When a company buys the rights, the revenues from the music in question go into a kind of mutual fund. Investors purchase shares in the fund, and profit when the songs are streamed.

Next stop: the future

After investing in yesterday’s catalogues, the next stop is the future — or rather, a futures index. It would mean that investors could put their money on which songs would become the next streaming stars.

Chicago-based company Clouty — “at the intersection of data, music and finance, re-imagining the value of music by making it a tradable asset” — introduced the world’s first music trading index, MUSIQ™, launched in the summer of 2022.

Because of online streaming, metrics are now readily available to measure and analyze activity in the music sector. It’s led to the next step of the company’s vision, which is the release of the MUSIQ 500 composite index that will track various genres of music and their current market value. The company uses a proprietary method with multiple inputs to calculate the value of the top 500 songs at any given time.

Clouty is currently looking for an exchange-traded fund to make it easy for investors to jump into the game. Futures could be linked to specific genres, artists or even songs.

The push to introduce music futures funds follows a couple of years when so-called music funds have been spending billions of dollars on acquiring the ripe back catalogues of artists and producers.

More than pop

So far, the list of artists and rights holders who’ve cashed in has been dominated by pop stars, but the long list (>100) includes some interesting names. When it comes to classical music, it’s composers and record labels who might be positioned to take the plunge.

  • Jazz icon John Lee Hooker’s complete music rights were sold to BMG;
  • Through the catalogues of Regent Music and Jewel Music, the music of Lionel Hampton, Thelonious Monk, and other jazz classics was sold to Primary Wave;
  • Academy Award-and Golden Globe-winning songwriter/movie music composer Tom Whitlock (Danger Zone, Take My Breath Away), sold his entire catalogue to Primary Wave;
  • Composer/producer Jean-Michel Jarre sold his entire publishing catalogue to BMG.

The value of the above deals is undisclosed.

Music — the consumption of it, not the live aspect of it — is virtually recession proof. Consumers have proven that their music listening habits are not affected by economic downturns in the same way that other industries are. Industry business analysts are calling for double-digit growth into the 2030s.

“Music is an asset class that’s hiding in plain sight and hasn’t been unlocked,” said David Umeh, founder and chief executive of Clouty said in an interview with the Financial Times.

Is it just us, or did it get a little cold in here?


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