Copyright Investment: A Post-Pandemic Revelation?

A key part of the music industry and monetisation of music has been the establishment of ‘rights’. The concept of copyright goes back centuries, first being created in 1575 by Elizabeth I giving Thomas Tallis and his pupil William Byrd a patent to print and publish polyphonic music. This was then reinforced by the first modern copyright law, the ‘Statute of Anne’ (1709) which provided copyright protection for all published works for a period of fourteen years. 

Over the centuries, these laws have developed to the point we are at now in which there are many different types of music royalties and licensing that protect musicians and ensure they get paid for use of their work. These rights have always been held onto fiercely by musicians and there have been many cases of infringement and breaches with long, messy court hearings behind them to maintain the integrity of a musician’s monetisation of their product.

But things have begun to change.

Recently, the news has been filled with articles about major acts selling the rights to their music to investment companies like Hipgnosis. Hipgnosis, established in 2018 in London and founded by Merck Mercuriadis (an ex-artist manager for Elton John, Beyoncé and Iron Maiden amongst others) and Nile Rodgers from Chic, has an investment portfolio that includes the rights of Red Hot Chili Peppers, Mark Ronson and 50 Cent to name a few, and was one of the first of a number of companies (including Universal Music Publishing, Primary Wave and Notting Hill Music) that are buying up the rights to back catalogues of music.

So why are investment companies buying up the rights to back catalogues of well-known artists?

It’s simple really. The companies use money from investors to buy song rights and this allows them to control the use of the songs they own and license them to all the places that use music, such as streaming services, TV, films and radio, and ultimately earns a profit for the companies and their investors. Any revenue earned from the use of the music they own is paid directly to the company, in much the same way as it’s been paid to the musicians themselves in the past. The revenue earned is then distributed between the investors and the company. 

In essence, music is seen as a long-term, stable and predictable asset that can be invested in, with a guaranteed return on the money paid in as the consumption of music grows to $65 billion globally by 2023. These companies have unlimited buying power, as they raise money from public investors in the company that they can use to buy more and more back catalogues. If you own the rights to back catalogues that people want to listen to, and that will always be popular, you have a guaranteed return on investment. It also benefits artists as they receive a lump sum of money up front, faster than they would receive the same amount from royalty payments.

In the modern era and amidst an uncertain investment market that changes often because of situations outside of control such as COVID-19 and Brexit, investors are turning to media like music, art and films to provide a safe and stable return for their money. 

We wrote about NFTs (Non-Fungible Tokens) in a previous blog post, and rights buying companies are likely to be around for the foreseeable future, just the same as NFTs. Both music and the wider creative industry are changing and growing. In the last 12 months, income from live events and tours, one of the largest contributors to the overall revenue of the creative industries, has been wiped out and this has woken us all up to the need to find revenue sources that don’t rely on people being together in a room.

Song rights buying could support not just the artists who sell their music for a lump sum, but also the investors who earn money back for each use of these incredibly popular songs. It launches an entire new income chain, and just like NFTs, could protect the industry from any future pandemics or other events that make live performances difficult, as well as reduced incomes from the sale of recorded music. 

Touring is slowly returning and will always be a vital part of the industry’s future, the same as merchandising and recorded music, but the future looks even brighter for an industry that is finally learning to guard itself against the uncertainties of life.