Two customers stand in a music store looking at records for sale.

The Booming Business of Music Catalog Sales


High interest rates are affecting acquisitions, while music streaming continues to change the business model.

After an unprecedented boom in catalog sales, the music rights business is entering a new phase, with catalog acquisitions moderating as higher interest rates reduce the amount of available capital for would-be buyers. Higher rates have also pushed up the discount rate used to calculate the asset value of music rights, resulting in lower overall purchase multiples.

Like all intellectual property deals, valuing music catalog assets can be tricky, even in the best of times. Royalty data valuations depend heavily on future estimates that are derived from analyzing historical cash flows, specific genres, artists, and trends. As a result of streaming, royalty data and cash flows have become more consistent and easier to analyze, but valuation firms are still estimating 20 years of future cash flows.

Because of these developments, several independent music publishing players and music catalog trusts are undergoing mergers, restructuring, asset sales, and new financing in an effort to make the most of the current economic environment.

However, amid the current industry uncertainty lies plenty of opportunity for strategic players. The era of blockbuster music catalog sales—such as Katy Perry’s $225 million deal in September 2023—may be slowing, but lucrative second-tier deals and specialized catalogs are still available, often at more sustainable prices.

What’s more, cash flows from music catalogs will likely continue to be strong as the streaming business continues to dominate worldwide. The global recorded music market is expected to grow revenues by 51% to $42.4 billion by 2030, according to market research firm MIDia.

"Songwriting catalogs continue to present a stable asset that can generate consistent cash flows in the hands of skilled intellectual property and music industry firms," says Pete Foley, Group Head of Technology, Media & Telecommunications Corporate Banking at Fifth Third Bank.

The History of Music Catalog Sales

In the past three years, headlines have been dominated by eye-popping music catalog sales. In 2021 alone, investors spent $12 billion on music rights acquisitions and the deals just kept coming.

Some memorable examples include Bruce Springsteen’s $550 million sale to Sony for both published and recorded rights to his music and work as a songwriter in 2021. The previous year, Bob Dylan’s recorded rights went to Universal for an estimated $300 million. In early 2022, Warner bought the late David Bowie’s published rights for about $250 million. Later that year, Phil Collins and his bandmates in the group Genesis sold their catalog for $300 million to Concord Music Group.

Big-name artists looking for ways to diversify their income and make up for lost touring revenue during the pandemic likely fueled many of these sales. In addition, many legends (or their estates) discovered rights sales were a lucrative way to manage legacy and inheritance planning.

The majority of these mega deals were made when low interest rates made a flood of capital available during the pandemic-inspired boom in music streaming services. Intellectual property players realized they could increase value in existing catalogs by finding new and better revenue streams. Favorable copyright legislation also gave a boost to artists’ royalty payments.

The era of the big deal fundamentally changed the music catalog industry, fueling its growth and, importantly, shining a spotlight on the potential cash flows intellectual property and rights management businesses can generate. As a result, music rights have become an asset class in themselves, providing an alternative investment for institutional and more recently individual investors.

Major Players Have an Edge

Despite the recent surge in interest rates, the music rights buying frenzy continued in the first half of 2023 with catalog acquisitions hitting the $2 billion mark. Some notable deals included Hipgnosis Songs Fund’s acquisition of Justin Bieber’s catalog for a reported $200 million in January and Paul Simon’s Simon & Garfunkel rights that BMG snapped up for an undisclosed sum. In October, HarbourView Equity Partners bought rights from Pat Benatar and the estate of Christine McVie.

To understand how the industry is responding to the current economics, it makes sense to take a look at how the music catalog industry is structured. Basically, there are three tiers of players, and each tier plays a different role, explains Fifth Third’s Jeffrey Bazoian, Managing Director and Head of Media & Entertainment Corporate Banking.

Major players still lead the pack when it comes to music catalog acquisitions. The big three—Sony, Universal, and Warner—have the capital to continue to acquire big-name rights. They also have the resources and the patience to monetize those acquisitions over the long term. "When you’re buying Dylan or Springsteen, the majors will win," says Bazoian. "It’s a matter of what you’re going to do with those rights over a long-term horizon."

In general, however, "capital constraints are causing a disconnect between what artists and writers want to sell at and what buyers will pay," says Bazoian. The sky-high multiples that artists have come to expect are no longer there for every seller.

That’s where the larger independent players come in. Independent music companies such as BMG and Concord, along with strategic acquisition vehicles such as HarbourView Equity Partners, Litmus, and Primary Wave, are also continuing with acquisitions. But their focus is more strategic toward building strong genre portfolios including hip hop, jazz, classical, R&B, and country.

Independents are often backed by institutional investors and pension funds, and they use bank financing secured by copyrights to fuel many of their transactions. For example, Fifth Third recently led a $200 million senior secured syndicated transaction for HarbourView and a $400 million senior secured debt facility for Concord.

The third industry tier is where you’ll find the most turmoil. It consists of two publicly traded music trust companies based in the United Kingdom—Hipgnosis Songs Fund and Round Hill Music Royalty Fund. Both are undergoing major changes.

Round Hill shareholders recently announced they approved a $468 million deal to be acquired by Concord. Despite major catalog holdings, including some songs by the Beatles and Elvis Presley, Round Hill had seen a dramatic drop in its share price, so the deal was welcomed by shareholders.

Hipgnosis has also been in the press, announcing that it would be completing a strategic review as a result of the investment trust’s failure to get a continuation vote on October 26, 2023.

What the Future Looks Like

Despite the current high interest rate environment and an industry-wide restructuring and consolidation, buyers in the music catalog business will likely see plenty of opportunities. "Portfolios may be trading for a bit less," says Bazoian, "but they still have great cash flows and those cash flows continue to grow."

Much of that cash flow is generated by streaming, which dominates the way music is consumed today. Growth overseas, particularly in emerging markets, is expected to boost global streaming revenues. In addition, new pricing structures that increase prices among consumer segments, particularly superfans, may provide opportunities for large-scale growth. Although a smaller percentage of the business, revenues from synchronization of film and television and advertising are also expected to grow. In addition, there will likely be new expansions similar to what has taken place at athletic equipment firm Peloton and social media company TikTok.

Lucrative opportunities will continue to present themselves in the music catalog business, but players and investors need to keep close touch with industry developments, acquisition activity, and economic factors that will impact the future of this rapidly evolving investment opportunity.

Fifth Third’s Technology, Media & Telecommunications Group has developed specialized knowledge of the music industry and developed extensive connections across the market. The group has a national presence, as well as locations in Nashville and Atlanta, two of the country’s top music markets. To learn more about how Fifth Third’s TMT Group can assist your firm with financing questions, click here.