CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 87.41% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Scan to Download iOS&Android APP

Exclusive: Music rights, capital investment and the future

By Andrew Knoll

23:50, 17 December 2021

Share this article

Subscribe to Weekly Highlights

The major market events for the week ahead right in your inbox. Subscribe
Springsteen album in a bin
Springsteen deal with Sony signals a trend - Photo: Unsplash

Musician Bruce Springsteen sold his catalogue of 20 studio albums to Sony Music this week for approximately $500m (£377.17), a story and figure first reported by Billboard.

The sum represents the largest on record for a music catalogue, surpassing the $300m deal struck by Universal for the copyrights to more than 600 of Bob Dylan’s songs last year. There's been a period of frenetic activity surrounding the purchase of publishing rights to artists ranging widely in age and musical style in recent years, from Paul Simon to Lil Wayne.

In an exclusive interview with Capital.com, industry innovator David Pullman, who first securitised publishing rights in the 1990s in a landmark arrangement with artist David Bowie, discussed why investors have been so keen on catalogues and why artists have become increasingly amenable to sales arrangements.

“It validates everything we did with the original Pullman Bonds,” Pullman said. “This was a great asset class: music, entertainment and other intellectual property. We’re seeing these deals happen one after another.”

Why has demand increased?

The deals can allow artists, who typically have a five-year creative peak, to liberate themselves of any uncertainties related to the industry, such as what occurred during the Napster era of free downloading or, more recently, when the pandemic limited the earning potential of artists' live performances. 

“You cannot look away from the magnitude of these deals. What is prompting the magnitude is that the multiples are much higher, and they will continue to rise,” Pullman said.

Pullman said that where other types of entertainment content, such as television and film, can become dated, music has greater potential to appreciate. He cited examples from the 1950s and 1960s, such as the Isley Brothers’ “Shout” and James Brown’s “I Feel Good” as songs that generate more revenue today than when they were released.

Large sales of rights have skewed toward singer-songwriters, who often wrote and recorded most of their music solo and retained ownership rather than sharing it with band members. The most bankable ouvres, Pullman said, have drawn the highest valuations and the greatest competition among investors.

“These catalogues are redwood trees, they’re not building another one of these overnight. You have the largest and most sophisticated private equity funds coming into the market and getting involved in music,” Pullman said.

Who is buying?

Private equity has entered the market, with plenty of music industry experience in the investment side. Legacy record labels like Universal and Sony have invested billions into rights purchases, and the marriage of executives and musicians begat companies like Hipgnosis, a venture capital outfit focused squarely on the music rights sector. Low interest rates, a robust equities market and a push for diversification have funnelled different types of investors into the music rights sphere, which is not tethered to the stock or commodities markets. 

Music labels in particular have extensive evaluative data and a proximity to the product that allows them to gauge a firm pulse of the industry, and other players in the sector have attempted to bring that type of expertise into the fold as well.

“It’s not just hedge funds or private equity or traditional investors, you’re seeing the music majors get involved in it,” Pullman said. “They certainly know the music business and they’ve done acquisitions for years, so they’re making decisions.” 

Natural Gas

2.86 Price
+0.740% 1D Chg, %
Long position overnight fee -0.0485%
Short position overnight fee 0.0282%
Overnight fee time 22:00 (UTC)
Spread 0.005

BTC/USD

23,103.50 Price
-0.090% 1D Chg, %
Long position overnight fee -0.0500%
Short position overnight fee 0.0140%
Overnight fee time 22:00 (UTC)
Spread 60.00

XRP/USD

0.42 Price
+0.570% 1D Chg, %
Long position overnight fee -0.0500%
Short position overnight fee 0.0140%
Overnight fee time 22:00 (UTC)
Spread 0.00337

ETH/USD

1,602.50 Price
+0.020% 1D Chg, %
Long position overnight fee -0.0500%
Short position overnight fee 0.0140%
Overnight fee time 22:00 (UTC)
Spread 5.00

What makes the rights profitable?

The methods, platforms, modes of delivery and other characteristics of utilisation for music have also proliferated greatly in the digital age. Where once a collector would invest thousands of dollars into home stereo equipment and recordings, today YouTube and similar platforms dominate the mode of delivery by offering relatively comprehensive archives at little or no cost to users over their televisions, phones, computers and other multipurpose devices.

That shift has functioned as a sort of crowdsourcing with complex, multi-stream revenue sharing across technologies, platforms, services and modes of delivery.  Sampling, interplots and other forms of cover recordings or mosaic compositions have also grown in prevalence and profitability since the 90s.

Meanwhile, the applications for music have grown across film, television, streaming services, advertising, corporate uses and a wide variety of ever-expanding applications, all of which generate revenue for rightsholders.

Music expanding as asset class

In short, Pullman said, intellectual property and music specifically is expanding as an asset class and its value has been rising. Even during a relatively dark period, the early- to mid-2000s when illegal file-sharing threatened the viability of the music industry, underlying demand for music was increasing, and the industry soon found new ways to monetise it.

Pullman will forever be linked to David Bowie, his first securisation client in 1996, who was a visionary in terms of valuing his music and seeing the potential of strong content going forward. Bowie, he said, bet on his future success rather than hedging against potential failure, as many artists did in the past

“David Bowie said ‘music could sell like water or electricity, like a utility,’ and it does,” Pullman said, pointing out that every radio, streaming service, satellite radio station, television commercial and film production pays for its music. “That’s true, but most of the time when people listen to music, they think it’s free.”

What’s next?

Although low interest rates have helped spur interest in acquisitions and uncertainties surrounding tax laws in the US and other developed nations may have gently nudged artists, the industry trend hardly seems transitory.

In the Springsteen deal, for example, the artist’s work generated an estimated $15m last year, but Sony, the parent company of Springsteen’s label Columbia, is banking on multiples continuing to rise. New applications such as the use of old songs in new recordings and, even more so, the ongoing increase in utilisation across a plethora of new contexts, may well validate those projections.

“All technology, over time, caused disintermediation. Talking films versus silent films, the record then the 8 track then the cassette then to CDs to digital downloads and streaming, they all disrupted music,” Pullman said. “We don’t know what media will be next but certainly history has shown that there tends to be new media.”

Rate this article

Share this article

The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
Capital Com is an execution-only service provider. The material provided on this website is for information purposes only and should not be understood as an investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents. We do not make any representations or warranty on the accuracy or completeness of the information that is provided on this page. If you rely on the information on this page then you do so entirely on your own risk.

Latest Economics headlines

Still looking for a broker you can trust?

Join the 480.000+ traders worldwide that chose to trade with Capital.com

1. Create & verify your account 2. Make your first deposit 3. You’re all set. Start trading