next time you go for a jog and stream music off of spotify or apple music it's increasingly likely a wall street private equity firm will be collecting some money music is one of the hottest new asset classes drawing interest from pe giants.
Like blackstone apollo and kkr who poured more than 3 billion into buying song catalogs recently kkr is particularly active purchasing catalogs like songwriter ryan tedder and onerepublic and separate portfolio with hits from lord and the weeknd for over 1 billion dollars big ticket catalogs sold in.
Recent years include those from taylor swift to paul simon neil young and bob dylan the deal making is driven by two factors firstly a music industry recovery from the dark days of illegal napster downloads and the collapse of cd sales secondly a decade of rock bottom interest rates that has forced music.
Investors to hunt for yield far from corporate bonds in esoteric assets like music fueled by streaming industry-wide music revenue increased 7.4 to 21.6 billion dollars in 2020 the sixth consecutive year of growth after over a decade of decline analysts at goldman sachs predict.
Revenues will nearly double by 2030 which is why pe has grown interested based on streaming growth and the ability to generate new revenues by embedding songs in video games or tick-tock videos firms expect to earn double-digit returns music catalogs in this sense are hardly different than new yield plays such as.
Owning portfolios of taco bell franchises to pharmaceutical royalties for automotive loans as the music money pours in multiples are skyrocketed from three to four times the historic value of a catalog to upwards of 20 times an assets historical annual income in some reason deals.
Risks are everywhere from overpaying to the threat of rising interest rates there's also the risk a songwriter simply does not gel with their private equity overlords in 2020 taylor swift's music catalog was sold for about 300 million dollars amid a bitter dispute with its owners scooter braun and carlyle group.
To strike revenge swift re-recorded the music in the portfolio putting it back under her control her album red taylor's version had 26 songs make billboard's hot 100 list in november you