18 October 2021
Old music as a ‘secure retirement pension’ is steadily becoming more valuable
If you play Golden Earring’s Radar Love on a streaming service, you are not just lining the artists’ pockets. Investors are also profiting. This year, large investment companies are entering the music rights market.
According to the Financial Times, a group, with investment company KKR, is on the verge of buying music rights of popular artists like The Weeknd and Lorde for almost 1 billion. The publicly traded company Hipgnosis bought the rights to songs by Shakira and Neil Young for 900 million euros. Blackstone has cleared a similar amount for the purchase of rights.
“The market is overheated,” says André de Raaff of CTM Entertainment. He already started investing in music rights in 2008, then for pension fund ABP. “High prices are being paid now. There is an expectation that the music market will continue to grow very rapidly. That may happen, but we ourselves count on less extreme growth when compared to what American banks are now predicting.”
At the end of the 1990s, there seemed to be little profit left in music. Illegal copying of CDs and downloading of music via services such as Napster and Kazaa took off. With the arrival of paid services such as Apple and Spotify, more money has been going to artists, composers and other parties involved in recent years. Investors want to profit from this development and therefore buy up the rights to songs.
In the Netherlands, a new fund was set up at the beginning of this year by music producer John Ewbank, among others. Via the Pythagoras Music Fund, investors want to invest dozens of millions in the acquisition of music rights. The first stroke was struck at the end of September. At that time, the fund acquired the music rights of Willem van Kooten, alias Joost den Draaijer. It concerned 30,000 copyrights and 6,500 master recordings, including Radar Love by Golden Earring and Venus by Shocking Blue.
“We have the master rights to Radar Love,” says Ewbank. “If the song is played on the radio or via a streaming service, a copyright part goes to band members Barry Hay and George Kooymans. The master part goes mainly to us.”
MUSIC AS RETIREMENT
Ewbank says it was not difficult to find investors. “It was easy to explain. During the crisis in 2008, you held back on buying a luxury item like a CD. Music was cyclical, but now no one cancels their Spotify subscription during the corona crisis. It has become less dependent on the economy.”
According to De Raaff of CTM Entertainment, music rights are a relatively secure investment. “It’s a kind of pension. My father wrote the number one hit I’m on Guard about sixty years ago. During Christmas, my sister – who manages the copyrights – still divides the money among the children every year. Don’t forget: music rights are protected for seventy years after the death of the artist and can therefore still yield money for a long time.”
MORE MONEY ON THE WAY
With more big investors in the market, it is becoming more difficult for smaller parties to enter. De Raaff refers to deals involving artists such as Bob Dylan, Neil Young and Fleetwood Mac. “If I hear that big parties are interested, I immediately pull out. At that point I realize I’m not going to win that race, because they want to pay way more.”
According to music producer – and now music investor – John Ewbank, there is no question of insanity. “It is more logic. In the Netherlands, streaming music is very normal, but Belgium, for example, is still behind. World parts like South America still have to ‘open’ at Spotify. There will soon be money flowing in from countries where money never used to come from.”