News that New York-based Pershing Square Tontine Holdings is planning to acquire 10% of UMG is the latest in a wave of financial transactions in

The productisation of music rights

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2021-06-08 13:30:05

News that New York-based Pershing Square Tontine Holdings is planning to acquire 10% of UMG is the latest in a wave of financial transactions in the music rights space. Alongside this, Believe’s impending IPO has the potential to be one of the biggest things to happen to the independent music sector in some time, and comes as part of a wave of IPOs (e.g. WMG, UMG), SPACs (e.g. Anghami, Reservoir) and no end of catalogue funds and acquisition vehicles. This trend, with good cause, has been referred to as the ‘financialisation of music’ but that only captures part of what is at play here. This is more than simply an influx of capital and debt; financial institutions are now becoming part of the plumbing of the music business, and in turn they are changing the definition of what constitutes success. This shift in objectives and desired outcomes has the potential to rebalance how the music industry operates.

Though the strategies and aspirations of financial entities that are investing in music are diverse, they are usually very different to those held by music companies, particularly those of traditional music rights holders. What constitutes success for one may not matter much for the other. For example, a credible music industry objective (e.g., get playlisted) might have little immediate relevance to asset class value. Even the macro market trends illustrate the disconnect: the value of publicly announced music catalogue transactions grew by 14% in 2020, while global music publisher and label revenues each grew by just 8%, i.e., the financial value of music catalogues grew faster than their ability to generate revenue. 

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