Last week, Blackstone
has set up a $ 1 billion mutual fund with music rights company Hipgnosis to invest in songs. This announcement is one of many recent announcements where traditional investment houses representing pension funds, sovereign wealth funds, and other investors are using music rights as an asset class. These include Round Hill Music, which spent $ 342 million on 83 music catalogs last year, or Primary Wave, which raised $ 800 million to invest in songs like Black Rock and Oaktree Holdings. A few weeks ago, Primary Wave spent $ 50 million on the Bing Crosby catalog. In addition, Kobalt Music Publishing sold its 62,000 copyright catalog to KKR Ventures earlier this week for $ 1.1 billion. As Bloomberg predicted earlier this year, music rights are emerging as one of Wall Street’s most lucrative alternative asset classes. In addition, other advances are on the rise, including independent administrative units for recording and monitoring license fees, rights revenue via the Metaverse (as on the Roblox platform) or the minting of non-fungible tokens (NFTs). Simply put, the number of ways to make money from music rights is increasing.

Music rights are lucrative, patient investments for those seeking constant, low-volatility returns over a long period of time. If a song or piece of music is protected by copyright, this will apply for 70 years from the end of the calendar year from the death of the author. Every time a song is played, no matter where or when, those who own it are paid; it can be fractions of a penny, but it adds up, especially as consumption and thus the total value of the phonograms sector continues to rise. In 2020, the value of recorded music increased 7.4%, with 443 million of us now paying for licenses to stream music. More of us are using Netflix
, Spotify and AppleMusic mean more revenue for music rights holders.

It’s a shame that not everyone who might benefit is listening. While Wall Street and the private sector are betting that we keep streaming Bob Dylan or Fleetwood Mac, there is little thought about how cities can invest in and make money from copyrighted works. While there is a lot of focus on existing rights and well-known artists, any song written anywhere could become a hit. Hence, investing in infrastructure to maximize the odds of doing so, while participating in the spoil of the investment, is a good practice. But this thinking – increased spending on music education, performance opportunities and artists – to create future prosperity has yet to prevail. Instead, there is a cognitive dissonance that assumes that these artists, whose catalogs are worth billions, were born famous. Everyone comes from somewhere. And we all use local services as we grow, be it education, health, physical infrastructure or culture.

There are precedents for that. The Michigan State Teachers Pension Fund invested $ 1.1 billion of its $ 72 billion pot in Concord Music, which owns the rights to works by Ariana Grande, Paul McCartney, and others. But that’s more of an exception than the rule. What if local pension funds or other local community investment frameworks set up pots of money to invest in local writers and their works that implement a circular economy approach so that part of the rights would be returned if a song was successful? to the community. What if the fortune of a song and that of the local community’s investment pots were linked?

This is common practice in other industries. Buildings, roads, sewers, hospitals, and other infrastructure projects are funded through tax increases, measuring the likely value of an infrastructure project – like a road – over 10 or 20 years, freeing up investment for construction. Songs can be the same. Songs are like streets; Once it has been built, its effect can be felt immediately by the user. And when they are cared for, their value remains constant. But we can only build so many roads. We can never have too many songs.

Another option is the bond issuance made popular by David Bowie in 1997. Its Bowie Bonds program has returned 7.9% annually over 10 years. An urban songwriter loan that bundles a pool of local rights (a percentage of each song) could generate the same return.