Over the last years, music catalogue acquisitions have been at the spotlight of the music scene. While these exchanges of property have always been happening within the music industry, recently they have been gathering a lot of attention from big capital players. With multi-million deals taking place, significant momentum has been created, with valuations of music catalogues constantly rising, to a large extent also thanks to the ever-growing streaming economy. But what exactly is a “music catalogue”?
A collection of musical compositions and their copyrights
A music catalogue is a collection of songs coming from the same owner. In other words, it is a list of musical compositions and songs that are created and registered under the name of an individual or entity and are combined in the form of a “music catalogue”. The owner has in hand and controls the copyrights (publishing, sync or master rights) to songs included in this music catalogue and receives income by the generated music royalties each time the music is being consumed and used.
It is possible for some people to own all the rights to the music they’ve created and released, however this is a rather rare situation in our modern day music industry. In most cases, the copyrights to songs are divided amongst all the parties who cooperated for the making of the music pieces. Besides the performing artist or band, often songwriters, musicians and beatmakers, publishers, record labels, managers and other stakeholders all get a split share (not necessarily equal) of the rights and can add them to their music catalogue. This means that the same song can be part of multiple different music catalogues and, hence, also share the earned royalties accordingly.
The amount of songs included in a music catalogue can have various ranges. If you released an album, those 10 songs and their rights would make your catalogue. Some artists, songwriters or musicians can have hundreds or thousands of songs included in their catalogues, depending on all the compositions or songs they wrote (for others or themselves) or performed over their career. In the case of publishers and record labels the catalogue can include thousands of songs or more. It all depends on the number of rights to songs owned by individuals or entities, and, consequently, on how these individuals classify the rights under their very own music catalogue(s).
Why are investors interested in music catalogues?
Besides the emotional connection one might have with certain songs, music catalogues bring along some other “perks” for investors. Whatever investment course you might take, one of the first rules you’ll learn is that diversification is key. Investors looking to diversify their portfolios with an alternative asset class have recently started looking closer at music catalogues, particularly those with a demonstrated track record and history of generating consistent royalty cash flows. Not only is music an asset which is not correlated to financial markets, and hence also not impacted by the fluctuations more traditional financial assets might experience, but it is also an asset with a periodic cash flow thanks to the generated royalties.
Standalone songs are rarely investable as they would be particularly volatile and prone to the popularity of that song and the artist behind it. However, a music catalogue spreads that risk over a multitude of songs, which all have their own royalty income streams. With music catalogues that include multiple different artists or bands, you can diversify even more. In addition to being assets not correlated to traditional financial markets, music catalogues with a proven track record tend to perform consistently, with music industry valuation standards indicating possible net yearly yields of between 5% and 16%.
The growth of social media and paid streaming subscriptions has demonstrated that music is continuously evolving and growing. This can only mean that music and the royalties it generates can become a smart and stable financial asset class that can generate income in a more consistent manner than most traditional financial assets over the shorter and longer future. One thing however that should not be forgotten, is that even with the most popular songs in it, a music catalogue requires proper management and clear tracking of all royalty income streams.
The above points would explain why over the past years we’ve seen more and more financial players actively search for music catalogues to invest in, and why catalogues of very popular artists (Bob Dylan, Shakira, Taylor Swift,…) exchanged ownership. Now it’s time to democratise the accessibility to these kinds of investment opportunities. Allowing retail investors and music fans to take part as real industry insiders, while keeping the balance and respect for those who created the music is vital, let alone leaving creative control 100% in their hands. That’s why we’ve created ANote Music and now that you know exactly what a music catalogue is, we’re looking forward to getting you started on your music investment journey.