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Music Royalty

Yesterday, a publicly-listed British company called Hipgnosis Songs Fund announced a $323 million deal to buy the rights to 33,000 songs including

The B-52’s Love Shack, Fleetwood Mac’s Go Your Own Way, and Mariah Carey’s All I Want For Christmas. 

Spinning Gold

Hipgnosis has been one of the most aggressive buyers of song rights in recent years, having raised over $1 billion to assemble a catalog of hits.  The company sees dollars pour in whenever one of its songs is streamed, purchased, or performed. 

For Hipgnosis and its backers, music royalties offer a relatively stable source of income that is uncorrelated with other asset classes.  And in a world of near-zero interest rates, big money is listening: 

Just last month, New York-based Round Hill Music announced a planned $375 million IPO on the London Stock Exchange to build a catalog of 120,000 songs.

The Strategy: Is simple. Identify underappreciated songs, and extract value by using them in advertisements or creating new cover versions to churn up interest.

Streaming Central: Performance income from live events has been decimated by coronavirus, but a structural boom in streaming revenue has provided a tailwind:

  • Streaming revenues climbed to $11.4 billion last year, up from $9.2 billion in 2018 according to the International Federation of the Phonographic Industry.
  • By 2030, Goldman Sachs thinks the market could be worth $45 billion.
The Takeaway:

That’s music to rightsholders’ ears.