09/17/2020

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The Music Royalties Market Booms



Streaming Pushes the Value of Music Rights


The market for music royalties is growing rapidly. This trend has been building for the past five years and has been accelerated by the pandemic.

As streaming services like Apple Music (AAPL) and Spotify (SPOT) gain popularity, the value of music-rights ownership has gone up. This was evidenced by Warner Music Group’s (WMG) IPO last month, which raised over $15 billion. The company is the third-largest label and publisher and owns many valuable song rights.

Investors Turn to Music Rights for Security


Companies that facilitate borrowing against, buying, and selling music rights are seeing demand for their services surge. Gary Young, a co-founder of music-finance company Royalty Exchange, said over the past two months new investor sign-ups at his company have increased fourfold.

Music royalties can be attractive to investors because they are relatively stable and largely unaffected by volatile economic conditions. Older, classic hits are particularly popular because investors trust their popularity will stay strong, and because classic music has seen increased streaming numbers during the pandemic.

Musicians Seek Alternative Sources of Cash


Musicians are equally eager to engage with music finance firms at the moment. With tours canceled and many recording studios closed, artists are looking for alternative ways to make money.

Sound Royalties, a music-finance firm, gives artists who own the copyrights to their own songs loans based on predictions about future royalty income. These loans can range from $5,000 to $10 million and tend to span anywhere from six months to five years.

The value of music royalties is immense. For example, publishing royalties to Rihanna’s song, “Don’t Stop the Music,” recently closed at $203,000. As the value of music rights continues to increase thanks to streaming, some analysts anticipate the music finance industry is poised for continued growth, even after the pandemic.


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