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Illustration: Aïda Amer/Axios

Phones and streaming platforms have turned music rights into something like a digital annuity that more investors have become interested in buying.

Why it matters: Investors want income independent from politics or the rest of the market and they see music as that potential source of cash flow. 

What’s happening: Streaming music now accounts for more than 60% of global recorded music sales, and investors don’t see the trend slowing down.

  • “Music is now viewed as a highly resilient uncorrelated asset class,” Larry Miller, director of music business at NYU Steinhardt, tells Axios.
  • “From the investor standpoint, the life of a copyright is long [and the] volatility is low — especially when investing in a large music catalog — and the tide is rising, driven by streaming.”
  • "The multiples of revenue that are being paid for music publishing catalogs today and last year are literally twice as high as they were well under 10 years ago," Miller says. (See below.)
Reproduced from Shot Tower Capital; Chart: Axios Visuals
  • "It's an asset class where you can generate yield," says Anthony Tittanegro, Executive Director at Domain Capital Group. "It's not exactly an annuity per se, but it should provide periodic cash flow."

For artists, selling their music catalogs may offset declining income from live performances and tours, which can make up a huge portion of their business. 

  • “From the seller side, [many] whose greatest period of hit-making production was in the 70’s or 80’s or 90’s are now approaching older years and are doing estate planning,” Steinhardt said.

Driving the news: Two of the largest rights acquirers, Primary Wave and Hipgnosis Songs Fund, have backings from leading financial institutions.

  • Morgan Stanley and JPMorgan Chase Bank have been part of deals to fuel Hipgnosis Songs Fund, which has rights to some of Shakira and Neil Young's music catalogs.
  • BlackRock led a $300 million investment into Primary Wave, which owns copyrights of songs from artists including John Lennon and Kurt Cobain and, as of last December, Stevie Nicks.
  • Private equity firm KKR led an investment round in royalty-free music platform Artlist, bought a majority stake in a publishing catalog from Ryan Tedder and One Republic worth, reportedly, $200 million, and is joining with record label and management company BMG to become more competitive in acquiring rights.

The big picture: The value in owning the publishing rights to the songs is expected to grow. 

  • “A bank today looks at a mortgage and says ‘I can get 3.5%.’ With music it [can be] 5%,” says Ross Gerber, an investment manager and investor in two music companies.

Yes, but: Streaming may be the future of music, but many artists are frustrated by the lack of payouts that go to the artists directly.

  • Musicians last month protested outside of Spotify offices around the world, accusing the streaming platform of mistreating artists, especially as they have come to rely more on streaming income as the pandemic shut down live performances.
  • Apple and Spotify have cheapened music and turned it into a commodity because Apple’s incentive is to sell phones and Spotify’s incentives are aligned with the music labels because they are part owners, says Gerber.
  • Axios has reached out to Apple and Spotify for comment. The Wall Street Journal recently reported that Apple pays double what Spotify pays per stream. Streaming services pay artists indirectly through rights holders who strike agreements with artists.

What to watch: Some songs are iconic and may not matter if it’s Neil Young — they are still familiar tunes, Axios’ Dan Primack observes. “Maybe you only need one or two songs in a catalog and it pays for the rest.”

Go deeper

Perfect storm brewing for extreme politicians

Data: Axios research; Table: Jacque Schrag/Axios

Redistricting and a flood of departing incumbents are paving the way for more extreme candidates in this year's midterm elections.

Driving the news: At least 19 House districts in 12 states are primed to attract such candidates — hard partisans running in strongly partisan districts — according to an Axios analysis of districts as measured by the Cook Political Report's Partisan Voter Index (PVI).

Updated 3 hours ago - Technology

3D printing's next act: big metal objects

Chief Scientist Andy Bayramian makes modifications to the laser system on Seurat's 3D metal printer. Photo courtesy of Seurat Technologies.

A new metal 3D printing technology could revolutionize the way large industrial products like planes and cars are made, reducing the cost and carbon footprint of mass manufacturing.

Why it matters: 3D printing — also called additive manufacturing — has been used since the 1980s to make small plastic parts and prototypes. Metal printing is newer, and the challenge has been figuring out how to make things like large car parts faster and cheaper than traditional methods.

Updated 4 hours ago - Technology

Mayors see cryptocurrency as a way to address income inequality

Illustration: Sarah Grillo/Axios

At the U.S. Conference of Mayors' meeting in D.C. this week, there's buzz around the idea of giving cryptocurrency accounts to low-income people.

Why it matters: Cities have been experimenting with newfangled ways to address income inequality — like guaranteed income programs — and the latest wave of trials could involve paying benefits or dividends in bitcoin, stablecoin or other digital currencies.