Follow the Money! Big Capital in the Music Rights Market – Part 5: The Securization of Music Rights
- Peter Tschmuck
- Jul 28
- 7 min read
Updated: Oct 21
Private equity projects, in which music catalogues are bought up for millions, could just be a transitional phase towards a new development in which music becomes a speculative commodity. The buzzword is securitisation. This means that financial giants are developing new financial products based on music rights and the income streams they generate. In business jargon, these are referred to as asset-backed securities (ABS), which gained their dubious fame during the financial and economic crisis that began in 2008. However, in this case, it is music rights rather than real estate loans that are being securitised. This fifth and final part of the blog series takes a closer look at how this works and the advantages and disadvantages of this development.
Follow the Money! Big Capital in the Music Rights Market – Part 5: The Securization of Music Rights*
The Revival of the “Bowie Bonds”
In December 2021, Northleaf Capital Partners issued US $303.8 million in asset-backed securities (ABS) for investors to subscribe to. These securities were backed by a mixture of music publishing and master rights to 52,729 music titles from the Spirit Music Group catalogue, including the publishing rights to songs by Pete Townshend of The Who and the masters catalogue of country star Tim McGraw, both of which were acquired by Spirit Music Group before Northleaf’s investment in 2020. This elevated the investment in music rights to a new level, as it turned music into a commodity that can be traded alongside other securities. This concept is reminiscent of the ‘Bowie Bonds’, which British superstar David Bowie launched on the U.S. market in 1997. These bonds bundled the rights to Bowie’s songs and guaranteed investors a fixed annual interest rate of 7.9 per cent for ten years. Although investors were repaid their capital plus interest at the end of the bond’s term, the record industry’s recession, beginning around 2000, led rating agencies to downgrade the Bowie Bonds from an initial triple-A rating to Baa3, just above junk level. The global financial crisis that followed eventually put an end to this and similar ventures.
A New Boom of Music Rights Securization
Decades later, Bowie’s avant-garde financial experiment can be seen in a new light as the time seems ripe for new financial products that package music rights for investors. After Northleaf, KKR in February 2022 announced the securitization of a vast music rights portfolio, acquired by its Chord Music joint venture with Dundee Partners. KKR Credit Advisors intended to sell more than US $732 million of ABS supported by publishing and sound recording royalties from a catalogue of 65,000 songs, including hits from The Weeknd, Childish Gambino, and Stevie Nicks.
However, a forerunner of this securitization boom was the US music collecting society SESAC, which was bought by Blackstone in 2017. In August 2019, SESAC sold US $560 million in bonds backed by licensing agreements and music royalty streams. Compared to the later ABS deals, SESAC sold classic corporate bonds offering a yield of 5.25 per cent for a weighted average life of 6.7 years. Kroll Bond Rating assigned these bonds a rating of BBB minus. Three years later, in July 2022, SESAC again issued corporate bonds worth US $335 million to finance the acquisition of Audio Network, acquired by SESAC in 2021. These bonds act like loans, but from a group of investors instead of raising money from a bank. The investors expect the payback of their investments plus interest after a defined period, when the underlying asset has earned the necessary income.
These music rights ABS transactions, however, created new financial products, tradeable in a specialized market. This was the aim of Blackstone’s Hipgnosis Songs Capital fund, when it announced the launch of a US $221.65 million securitization of 950 songs of its music catalogue, including hit songs by Leonard Cohen, Justin Timberlake, and Nelly Furtado.
Figure 1: The process of securitization of music rights catalogues, 2019-2025
In December 2022, Apollo Asset Management’s Capital Solution issued asset-backed securities worth US $1.8 billion in cooperation with JP Morgan. Apollo’s ABS are backed by more than 1 million copyrights from Concord’s music catalogues, including songs from Phil Collins, Creedence Clearwater Revival, Daft Punk, Miles Davis, Genesis, Imagine Dragons, James Taylor, Nine Inch Nails, Pink Floyd, Cyndi Lauper, Little Richard, Otis Redding, R.E.M. and many other superstars. In February 2024, it was announced that ATLAS SP Partners, together with Truist Securities, had offered to sell US $266.5 million worth of music ABS based on approximately 5,000 songs from 66 songwriters from the Kobalt Music Publishing catalogue. A month later HarbourView successfully convinced the private equity firm KKR to issue US $500 million in ABS backed by the royalty income from the exploitation of the acquired rights catalogue. In November 2024, Blackstone completed a US $1.47 billion music rights ABS transaction, backed by the Hipgnosis Songs Fund 45,000-song portfolio, which Blackstone had acquired in July 2024 for US $1.58 billion. The proceeds from the so-called Lyra 24-2 ABS deal were used mainly to repay debt and to finance future music catalogue acquisitions.
A total of US $6.2 billion of music-related bonds and asset-backed securities (ABS) has been issued since 2019 mainly by the large PE companies, Apollo, Blackstone, KKR, and Northleaf. The securitization of music catalogues is both a monetization of music rights but also an exit strategy for PE projects.
How the Securization Business Works: Advantages & Disadvantages
In 2022, the pre-sale report for Hipgnosis Music Assets (MUSIC 2022-1) by Kroll Bond Rating Agency (KBRA) highlighted how the ABS business works. The MUSIC 2022-1 ABS were issued by Hipgnosis Music Assets 2022-1 L.P. with a value of US $221.65 million, collateralized by the royalty streams from the music publishing and master rights catalogue comprising 950 songs from charting songwriters and artists, including Justin Timberlake, Nelly Furdato, and Leonard Cohen. This music catalogue was administered by the three music majors Universal, Sony and Warner as well as seven other music rights administrators. The 950 songs catalogue was valued at US $341 million with a discount rate of 7 per cent. The bonds bear interest semi-annually and no repayments are scheduled before the expected repayment date in May 2027. The rating agency suggested a rating of A- for the MUSIC 2022-1 bonds, suggesting a low risk profile.
The pre-sales report also included an analysis of the royalty structure of the music catalogue. Almost two thirds of the total annual revenue of US $13.4 million (previous 12 months to Q1 2022) were derived from licensing of publishing rights with one third from sound recording rights. However, the revenue figures show that only a few songs are valuable. For example, ‘Hallelujah’, written by Leonard Cohen and performed by himself and nine other acts, generated by far the highest annual revenues accounting for 12.8 per cent or US $1.71 million. Overall, the top 10 songs accounted for almost 40 per cent of all royalties. This extremely uneven distribution of royalties can also be seen among the artists. The top 10 artists in the catalogue account for 78 per cent of the total income. An analysis by age of songs revealed that old repertoire, defined as songs released 30 years ago or more, generated revenue of US $4.6 million per year, or 35 per cent of total revenue. A further 34 per cent of sales were generated by songs 10 to 20 years old, and a further 8 per cent came from songs that were between 20 and 30 years old. Overall, songs that were more than 10 years old generated sales of US $10.2 million, which corresponds to a 77 per cent share of sales. Conversely, this meant that only 23 per cent of annual catalogue revenue came from repertoire less than 10 years old.
However, compared to other ABS transactions, the concentration of revenue from the top 10 songs in the Hipgnosis MUSIC 2022-1 ABS is the highest at almost 40 per cent. By comparison, the top 10 songs from the 65,000-song Chord Music catalogue, on which the KKR ABS is based, generated 10.7 per cent of annual revenues, while the top 10 songs from the 52,729-song Spirit Music catalogue, on which the Northleaf ABS is based, generated 15.9 per cent of total annual revenues. This strong concentration of income in the Hipgnosis ABS probably led to the A- rating by the KBRA, while the KKR and Northleaf ABS were each rated A.
The KBRA report highlights both, the advantages of the securitization of music rights catalogues as well as the disadvantages. ABS transactions enable the monetisation of music catalogues, which thereby increase in value. Securitisation also creates new financial products that can be traded on a market which gives music rights an economic value that is determined by supply and demand.
The KBRA report also shows another problem that the value of the new financial products depends on a few popular songs. Should these songs, for whatever reason, lose their popularity, the value of the associated music bonds will suffer. If, in addition, other entertainment rights or other claims to future income (e.g. legal proceedings won) are bundled with the music rights in the ABS, non-transparent financial products could arise that only serve speculation. In this case, losses in other areas could also have a negative impact on the value of the music rights.
All parts of the series “Follow the Money! Big Capital in the Music Rights Market”
Endnotes
Music Business Worldwide, “‘Bowie bonds’ are back: Northleaf uses Spirit Music Group assets to raise $303.8m offering”, December 20, 2021, accessed: 2025-02-14.
Music Business Worldwide, “Spirit Music Group acquires master recordings of Tim McGraw originally released by Big Machine”, September 9, 2020, accessed: 2025-02-14.
Music Business Worldwide, “The name’s bonds. Music bonds.”, October 19, 2021, accessed: 2025-02-14.
Music Business Worldwide, “KKR bought a music catalog from Kobalt for $1.1bn. Now it’s turning it into bonds”, February 7, 2022, accessed: 2025-02-24.
Reuters, “SESAC sells $560 million in bonds backed by music royalties”, August 2, 2019, accessed: 2025-02-24.
Bloomberg, “Adele License Fees to Help Fund $335 Million of Bonds”, July 1, 2022, accessed: 2025-02-24.
Music Business Worldwide, “Music’s bond adventure continues, as SESAC and Hipgnosis both launch nine-figure offerings”, August 10, 2022, accessed: 2025-02-24.
Music Business Worldwide, “Concord prices $1.8bn bond offering backed by over 1m music copyrights”, December 8, 2022, accessed: 2025-02-24.
Billboard, “Kobalt Raising $267M From Security Backed by Song Catalog Including YoungBoy & More”, March 19, 2024, accessed: 2025-02-24.
Music Business Worldwide, “HarbourView raises $500m in debt financing led by KKR”, March 13, 2024, accessed: 2025-02-24.
Music Business Worldwide, “Blackstone’s Hipgnosis closes $1.47bn asset-backed securities transaction”, November 11, 2024, accessed: 2025-02-24.
Kroll Bond Rating Agency, 2022, Hipgnosis Music Assets 2022-1 L.P., ABS Pre-Sales Report, August 2, 2022.
Ibid., p. 8.
Ibid., p. 7.
Ibid., p. 9.
* This blog post is based on the report IP Finance in the Music Industry, which was commissioned by the World Intellectual Property Rights Organization (WIPO).
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