: Music royalties sing sweet tune to deal makers despite economic headwinds

by | Dec 16, 2022 | Stock Market

The music-royalty business appears to be living up to its reputation as a provider of steady returns in good times and bad, as fortunes in song streaming continue to grow despite economic headwinds. While huge royalty deals in the vein of Bob Dylan’s $400 million songwriting-catalog sale to Universal Music Group N.V.
UNVGY,
-0.93%
in 2020 or Bruce Springsteen’s $550 million master-recording and publishing-rights sale to Sony
SONY,
-0.38%
in 2021 are uncommon, music-industry players continue to see strong interest.

Two music-industry lawyers told MarketWatch that despite inflation and uncertainty in the financial world, they’re seeing more music-royalty transactions on the horizon as the music-streaming business continues to grow. “This is a real industry that has the attention of the financial community and the investing public,” said John Frankenheimer, co-chair of the law firm Loeb & Loeb LLP and former host of the annual Billboard Music & Money Symposium. “It creates a foundation that allows people to continue to build, and it’s still driven by creativity and ingenuity.” Along with music-company acquirers such as Warner Music Group
WMG,
+0.66%,
Spotify
SPOT,
+3.29%,
TuneCore (a unit of Believe SA
BLV,
-1.62%
) and Sonos Inc.
SONO,
-1.35%,
private-equity firms have also gotten into the act by raising standalone funds to invest in music royalties, while also pulling off some major deals. Earlier this year, Hipgnosis Music Fund, backed by Blackstone Inc.
BX,
-2.60%,
paid more than $100 million for Justin Timberlake’s interest in 200 songs he wrote or co-wrote, and in 2021 KKR & Co Inc.
KKR,
-1.87%
paid $200 million for Ryan Tedder’s publishing rights for OneRepublic songs written after 2015. In a year when many institutional investors have cut back on their investments in private-equity funds, money raised by standalone private-equity music-royalty funds has increased. In 2022, six music-related funds drew in $1.52 billion in capital commitments, up from four funds that raised $545 million in 2021, according to data provider Preqin. Meanwhile, U.S. recorded-music revenue in the first half of 2022 rose 9% to $7.7 billion in estimated retail value, according to the Recording Industry Association of America. Paid subscriptions increased to a record high of 90 million, with revenue rising by 10%, to $5 billion. In the …

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