Why Music Back Catalogs Have Become a Red-Hot Asset Class

Joe Weisenthal (0:10)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:17)

And I'm Tracy Alloway.

Joe Weisenthal (0:19)

So Tracy, we don't really talk about it that much on the show, but if there's one thing I know about you and your career, you're very into sort of like weird asset classes, weird income streams that get packaged and resold, a lifelong fascination of yours.

Tracy Alloway (0:40)

Yeah, I guess you could broadly say I'm interested in the financialization of various assets, but in recent years, there have been some pretty amazing ones. I think one of the weird things about this is that nowadays, when you hear it, it doesn't actually sound that weird, but when these things were happening just a couple of years ago, it was really strange. So I remember, for instance, there was a solar panel securitization a few years ago, and everyone thought that was nuts, because bankers were securitizing sunshine into an investible bond. But nowadays, that seems very, very normal. And then some of the other ones that have come up are franchise rights and sort of brand values from restaurants. We've had a bunch of those.

And the latest one that everyone is kind of going nuts over is music rights.

Joe Weisenthal (1:31)

Yeah, exactly right. So basically anything that throws off some sort of predictable or semi-predictable or future cash flows can theoretically be turned into a product, into a financial product that can be sold. And of course, one thing that we know throws off cash is music rights. And so this year, there's been a bunch, but a couple artists that sold the rights to their catalog, Bob Dylan, someone bought Bob Dylan's future cash flows. So all the, I guess, I don't know, all the music, all the streaming revenue and you said commercials and movies and all that.

He got a big check in advance for that.

Shakira is another one who just, I think a few weeks ago, a few weeks ago sold her song catalog. So this is a hot area. I mean, I think this actually like weren't Bowie Bonds, a thing a long time ago that's like basically that.

Tracy Alloway (2:29)

Joe, there's an Odd Lots episode on this. There's actually a very, very early-

Joe Weisenthal (2:33)

It was like years ago.

Tracy Alloway (2:34)

Yeah, that was right after David Bowie died. But I have to say, probably the most interesting thing that happened in the music rights or royalty space last year was someone not selling their music rights. And that was Taylor Swift, who famously has lost the rights to her old masters, her catalog of back music. And then it was bought by Scooter Braun, which is kind of her like arch nemesis in the music world. And then he sold those on to a private equity firm called Shamrock Capital. And Taylor Swift had a lot to say about that entire process, which I'm sure we're going to get into. I got to say, someone actually emailed me saying that we should get Taylor Swift on the podcast to talk about all these music issues.

Joe Weisenthal (3:21)

Oh yeah, why haven't we done that yet? Why haven't we just had Taylor Swift on our podcast?

Tracy Alloway (3:27)

I, you know, one day.

Joe Weisenthal (3:29)

We'll get her next week. We'll get her next week.

Tracy Alloway (3:32)

So obviously we don't have Taylor Swift today. We'll be upfront about that, but we do have someone who knows all about this space.

Joe Weisenthal (3:39)

Yeah. And there are so many questions that we need to get answered. Like why now?

How do you value these income streams or these catalogs, given the ongoing changing nature of the music business? I mean, these days, obviously streaming is a really big thing, but that wasn't obviously anticipatable a few years ago. We don't know what the music industry is going to be like 10 years. So, so many questions. Why now? How you value these catalogs? So I'm very excited. We're going to be speaking with someone who is a music consultant in the business of valuing exactly what we're talking about. We're going to be speaking with Alaister Moughan of Moughan Music, an expert in the music valuation business to answer all these questions. So Alaister, thank you so much for joining us.

Alaister Moughan (4:25)

Of course, thanks Joe.

Joe Weisenthal (4:27)

So, you know, why now? I mean, let's start with that. I mean, we have seen a number of really big artists selling the rights to their work. They're turning their work into an asset that can be sold. Obviously, this isn't totally new. It's been going on for a while, but it seems to be really gathering steam.