Though the stock market is officially in a “correction,” the music royalty investment market shows no signs of slowing down. Some experts say that a stock market correction was overdue and this is just business as usual, keep thinking long term, etc. Nevertheless, this week’s volatility is a reminder of why music rights are becoming a hot alternative asset for investors.
This week’s and last week’s news of Concord Music’s latest acquisitions are evidence of such. Last week, we linked one of our top stories from Music Business Worldwide: Concord Music Acquires Cole Porter And George Gershwin Copyrights With Tams-Witmark Music Library Buyout. This week, it is reported that Concord has purchased the Varese Sarabande record label. The flurry of Concord’s acquisition activity comes with the help of institutional investor, Barings Asset Management.
The Varese Sarabande catalog is a movie soundtrack lover’s dream. The label has around 2,000 soundtracks and albums from film composers (such as Hans Zimmer and Danny Elfman) with annual revenue around $8 million. Concord reportedly paid around $20 million to $25 million for the label.
This is why, when clients ask me what’s the best music rights investment out there, my response is always, “Evergreen hits or TV/Film score.” Why? Because that music has the longest track record for consistent and significant earnings.
For example, a composer I know wrote the cues and score for a popular television show. The show was on the air for a long time and eventually went to worldwide syndication. The public performance royalties for this composer still averages in the ballpark of $200,000 to $400,000 a year.
While the show stopped production some time ago, episodes are broadcast all over the globe… and music along with it. And so the performance dollars just keep rolling in every quarter. Stock market correction, crash or boom - that old TV show is still airing and generating income.
The same goes for popular film score, even more so in the new streaming economy. Popular film soundtracks are bought, streamed and performed all over the world. The sound recording revenue from popular film soundtracks is easily a millionaire’s game. As Billboard reports, the net label share of Varese is around $4 million annually.
On the buyer side of this acquisition, Concord Music is majority-owned and backed by Barings Asset Management. Barings is the consolidated product of several investment firms through the Mass Mutual insurance company. Included in those consolidated firms was Woodcreek Capital Management, who had made the initial investments into Concord Music.
On the seller side, the Varese catalog was sold by another investor group, Film Score Records. Film Score Records was led and managed by The Cutting Edge Group (CEG), who describes itself as “...a global music financier and services provider for Film and TV studios, independent production houses, gaming studios, global brands, online media platforms and advertising agencies. CEG has invested in and provided a range of music services to over 400 feature films.”
The daisy chain of investors in this story emphasizes how deep and wide the demand is for music royalty alternative assets. If this was not a legitimate non-correlated asset, big players like Mass Mutual would not have a horse in the race. Unlike Bitcoin, whose alternative asset legitimacy has been questioned by some; the legitimacy of investing in music rights appears to be no question at all for these institutional investors.
Why? Because whether a stock market correction, crash or boom - the public will keep listening to music and royalties will always be due.
And now for this week’s other headlines:
- Senate Introduces Bi-Partisan CLASSICS Act (Billboard)
- Apple Music on Track to Overtake Spotify in U.S. Subscribers (WSJ)
- Warner Music Group Revenues Grew by 14% in Q4 2017 (Music Ally)
- Sony Music Generated $3.8 Billion in 2017, Streaming Revenue Jumps 33% (Music Business Worldwide)
- Best Buy to Pull CD’s, Target Threatens to Pay Labels for CD’s Only When Customers Buy Them (Billboard)
Benom Plumb, Assistant Professor of Music Industry Studies at the University of Colorado Denver, reviews the biggest stories of the week affecting music royalties. He is a music industry professional, not an attorney. For more info about Benom, visit his website at www.professorplumbmusic.com.