The income is defensive and proven. What decides whether you make money is the multiple you pay for it and the discount rate you underwrite it at, not whether people keep listening.
Key takeaways
- A music royalty is a contractual right to a share of the money a song generates, a claim on a future stream of payments much like a bondholder’s claim on coupons.
- The cashflows are defensively low-correlation: people do not stop listening to music in a recession, and reported betas run far below the market.
- Access runs through online royalty marketplaces, private catalogue funds, and formerly listed royalty funds, with global recorded music revenue at $31.7bn in 2025, an eleventh straight year of growth.
- The multiple you pay is what decides the return, not whether people keep listening: as rates rose, catalogue multiples compressed and the Hipgnosis portfolio was written down 26.3% in 2024.
- Suited to income-focused investors who underwrite the discount rate carefully and model the after-tax yield, since royalty income is generally taxed as ordinary income.
[Internal link: For the broader category this sits within, see the Alternative Fortune guide to private credit and income-producing alternatives.]
The 60-Second Version
Every time a song is streamed, played on the radio, synced into an advert or covered by another artist, money moves. A slice of that money flows to whoever owns the rights. For most of the last century, those owners were labels, publishers and the artists themselves. In the last decade, that slice became something you can buy: a financial asset with a price, a yield and, increasingly, a marketplace. The pitch is seductive. Own a piece of a catalogue you already love, collect income that keeps coming whether the economy booms or breaks, and hold something that behaves nothing like the stock market. The global recorded music business hit $31.7 billion in 2025, its eleventh straight year of growth, and a lot of that money now sits behind tradeable rights.
The cashflows are genuinely defensive. People do not stop listening to music in a recession. Streaming grew through COVID and through the 2022 downturn, and publishing collections rose through the last financial crisis. That is the attractive core of the asset. The half the marketing tends to skip is what happened to price. In 2021, at the top of the cycle, investors bid catalogue prices to record highs. Then interest rates rose, discount rates followed, and the two best-known listed royalty funds, Hipgnosis Songs Fund and Round Hill Music Royalty Fund, were both taken private below their hype-era valuations. Retail holders who bought at the peak took real losses.
The income held up. Prices did not. That gap between a durable cashflow and a volatile valuation is what decides whether you make money here, and it is why the discount rate you underwrite at matters more than the streaming numbers.
I. What It Actually Is
A music royalty is a contractual right to a share of the money a song generates. That is the whole thing. You are not buying the song’s melody or its cultural meaning. You are buying a claim on a future stream of payments, the same way a bondholder buys a claim on coupons.
To invest in this asset you need to know where the money comes from, because “music royalties” is really several different income streams wearing one label. There are two big rights categories, and they pay differently.
The composition, the underlying song itself, the notes and lyrics, generates publishing royalties. Whoever owns the publishing collects when the song is streamed, performed live, played on the radio, or licensed into film and adverts. The recording, a specific recorded performance of that song, generates master or recording royalties, historically the domain of record labels. A single hit can therefore pay two separate owners from the same stream: one for the song, one for the recording.
Within those, the money arrives through several pipes. Mechanical royalties are paid when a song is reproduced, including per-stream. Performance royalties are paid when a song is publicly performed or broadcast. This collective-licensing income reached $2.9bn globally in 2025, its fifth straight year of growth, and it is a pool pure-royalty investors tap directly. Synchronisation is the “sync” fee for using music in visual media. Neighbouring rights are payments to performers and labels for broadcast and public play.
Any of this becomes investable because of predictability. A brand-new song is a lottery ticket. A song that has already proven itself over years, a “proven” or “catalogue” song in the trade, earns in a pattern that is remarkably stable. Merck Mercuriadis, who did more than anyone to sell this asset to institutions, put the thesis plainly:
“What people don’t really recognise is that when a song becomes a proven song, the earnings pattern to it becomes very predictable and reliable, and is therefore investable… And these songs are as valuable as gold, or oil.”
Merck Mercuriadis, Founder, Hipgnosis Songs Fund and Hipgnosis Song Management (Sway Capital)
The man who coined the “songs are as valuable as gold or oil” line is also the manager whose fund later suffered a 26% writedown. He was right about the earnings and wrong about the price, which is precisely the confusion this asset invites.
II. Market History and Growth
The recorded music industry spent the 2000s in a well-documented collapse. Piracy and the death of the CD gutted revenues. Then streaming arrived and rebuilt the business from the floor up. The turnaround is now long enough to call a trend rather than a bounce. 2025 marked the eleventh consecutive year of growth, and the first year recorded revenues cleared $30bn, finishing at $31.7bn, up 6.4% (Music Business Worldwide).
Streaming is the engine. Paid subscription streaming alone was $16.6bn, or 52.4% of the global market, up 8.8%. Add ad-supported streaming and the total streaming share reaches 69.6% of the market, roughly $22bn. Underpinning that is a subscriber base that reached 837 million paying users worldwide by the end of 2025 (Variety).
For an investor, the headline growth number matters less than the evidence that the income survives a downturn. Two data points carry that weight.
The first is what happened to publishing income through the last recession. CISAC-reported publishing collections rose from €6.1bn in 2008 to €8.5bn in 2021, straight through the Great Recession (MEP Capital). That is the empirical backbone of the “grows through downturns” claim, and it is what the collections actually did rather than a forecast of what they might do.
The second is vinyl. In 2025 vinyl grew for its nineteenth consecutive year, up 13.7%, with physical formats overall up 8.0% (Billboard). That matters because it tells you catalogue demand is not purely a streaming phenomenon. People are still paying, in cash, for music they could stream for free, which points to a durable attachment rather than a passing format.
Publishing collections rose €6.1bn to €8.5bn (2008-2021), straight through the financial crisis. That is the “defensive” thesis, in one line.
III. Demand Drivers
The bull case rests on subscriber growth, and the biggest published forecast belongs to Goldman Sachs. Its “Music in the Air” work projects paid subscribers rising from around 752 million to 1.17 billion by 2030 (Music Business Worldwide), and paid streaming generating $27.5bn for labels and artists by 2030. More subscribers, more streams, more royalties. If you own the income, you own a slice of that curve.
The clean story has three problems underneath it, and each one lowers the price a rational buyer should pay.
First, the growth is decelerating. In the same report, Goldman cut its 2024-2030 streaming CAGR forecast from 10% to 7.9% (Music Week). CAGR, compound annual growth rate, is the smoothed annual growth over a period. A cut from 10% to 7.9% does not sound dramatic until you compound it over six years and price a catalogue off it. Lower growth means a lower fair multiple.
Second, where the new subscribers come from matters. Goldman expects emerging markets to drive around 68% of net new subscriber growth by 2030, up from 57% (Music Business Worldwide). The problem for a royalty owner is ARPU, average revenue per user. Emerging-market subscribers pay less than a subscriber in London or New York, so each new user adds less royalty income than the headline subscriber count implies. Growth in bodies is not growth in pounds.
Third, and this is the reality check that repriced the whole market, the forecasts have already missed. Recorded music grew only 4.8% in 2024 against Goldman’s own 8.9% estimate (Billboard). When the growth an asset was priced on fails to show up, the multiple compresses, which is what happened over the following year.
IV. The Players
This is a market defined by a handful of named people and firms, and knowing who they are tells you how the asset behaves.
Merck Mercuriadis is the figure who turned catalogues into an asset class. A former artist manager, he founded Hipgnosis Songs Fund and Hipgnosis Song Management, listed the fund on the London Stock Exchange, and marketed the “songs are as valuable as gold or oil” thesis to institutions. He built the market, and as the case studies show, his fund also became its most public cautionary tale.
Blackstone, the private-equity giant, is the deep-pocketed institutional buyer that ultimately absorbed Hipgnosis. Its arrival is the story of the asset class growing up. When the listed retail vehicles wobbled, private capital took them off the public market entirely.
Concord is the operating consolidator, the strategic buyer that acquired Round Hill’s UK-listed fund. Where Blackstone is financial capital, Concord is a music company buying catalogues to run them.
Sony Music Group sits at the top of the food chain as the buyer of the largest single-artist catalogue on record, its more-than-$550m purchase of Bruce Springsteen’s rights in December 2021. And Universal Music Group, led by chairman and CEO Sir Lucian Grainge, is the largest label group and the loudest voice on where streaming economics go next. On UMG’s Q3 2024 earnings call, Grainge framed the next phase:
“Streaming 2.0 will build on the enormous scale we’ve achieved in the first stage of streaming and create a sustainable and growing artist-centric ecosystem that improves monetization and delivers great experiences for fans.”
Sir Lucian Grainge, Chairman and CEO, Universal Music Group, Q3 2024 earnings call, 31 October 2024 (Music Business Worldwide)
Below the majors sit the marketplaces that opened this asset to smaller investors: Royalty Exchange in the US, JKBX, and ANote Music in Europe. They are the players a retail investor is most likely to actually transact with, and how each one works is set out under How to Actually Invest below.
V. Geography
Music royalties are a global income stream by nature. A song streamed in Jakarta pays the same rights owner as one streamed in Berlin. But the investable market and the growth market are not in the same place.
North America remains the largest revenue pool and the most developed marketplace for buying and selling rights. The US is where Royalty Exchange has run more than 2,000 transactions worth over $170m in completed volume (Royalty Exchange), and where JKBX secured SEC qualification to list royalty shares to retail. It is also where the ordinary-income tax treatment is most clearly documented.
Europe is the other developed venue, and for a UK or EU investor it is the more relevant one. The main EU exchange, ANote Music, is based in Luxembourg, runs a secondary market in catalogue shares, and is open to retail across Europe including the UK. The UK, meanwhile, was where the listed-fund experiment happened. Both Hipgnosis and Round Hill traded on the London Stock Exchange before being taken private, so Britain is simultaneously a pioneer of the retail vehicle and the site of its most visible repricing. That LSE saga, and the Blackstone takeover that ended it, is the closest thing this asset class has to a public case study, and it happened in London rather than New York.
Emerging markets are where the subscribers are coming from, the projected 68% of net new subscriber growth to 2030, but at lower ARPU. For an investor this creates a split. The developed markets are where you buy and sell the asset and where the income is richest per user. The emerging markets are where the volume growth lives but each unit of growth is worth less. The two do not map onto each other neatly, and any forecast that treats a new Lagos subscriber as equal to a new Los Angeles one is overstating the income.
VI. How to Actually Invest
There are three broad routes into this asset, and they differ enormously in minimum cheque, liquidity and fees. The listed-fund route, once the obvious answer, has narrowed sharply.
Marketplaces (fractional or whole catalogues). Royalty Exchange runs a live-auction US marketplace open to retail, with over 2,000 transactions and $170m+ in completed volume (Royalty Exchange). You bid on income streams directly. JKBX is a US platform operating under Regulation A Tier 2 with SEC qualification, listing shares at $1 to $55, though note some offerings gate to accredited investors (Music Business Worldwide). ANote Music is the European equivalent, a Luxembourg-based secondary-market exchange open to UK and EU retail. Worth knowing before you use it: ANote is not regulated by Luxembourg’s CSSF, because royalty interests are not treated as financial instruments under MiFID, so the usual investor protections that apply to a regulated fund do not apply here.
Listed funds (public tickers). This route has largely closed. Both Hipgnosis Songs Fund (LSE: SONG) and Round Hill Music Royalty Fund (LSE: RHM) were taken private after acquisition (Music Ally), so the two flagship retail tickers no longer trade on the London Stock Exchange. The easy, liquid, buy-it-in-your-brokerage route is currently thin, and the vehicles that offered it were the ones that repriced.
Direct/private catalogue purchase. The institutional route, buying whole catalogues, as Blackstone, Concord and Sony do. Out of reach for most individuals in cheque size, but it is the “real” version of the asset and the benchmark the marketplaces price against.
| Vehicle | Access | Minimum / price | Fees | Liquidity | Source |
|---|---|---|---|---|---|
| Royalty Exchange (US marketplace) | Retail | Varies by auction | Marketplace/transaction | Auction-based, moderate | link |
| JKBX (US, Reg A Tier 2) | Retail (some accredited-gated) | Shares $1-$55 | 1.0% royalty fee on gross income | Platform secondary market | link |
| ANote Music (EU/UK exchange) | Retail | Varies by listing | Exchange/transaction | Secondary market | link |
| Listed funds (SONG, RHM) | Retail (formerly) | N/A, delisted | N/A | None (taken private) | link |
| Direct catalogue purchase | Institutional/HNW | Multi-million | Deal-by-deal | Illiquid | link |
One fee detail is worth flagging because it shows how the intermediary makes money beyond the headline charge. JKBX not only charges a 1.0% royalty fee on gross income interests but also earned an effective ~11% sourcing spread, buying assets for $45.3m and listing them at $50.3m (Asset Scholar). That spread is not hidden, but it is real. The platform bought lower than it sold to you. Always ask what the sponsor paid, not just what it charges.
VII. Unit Economics: A Worked Example
Music catalogues are valued the way income assets always are, as a multiple of the money they throw off, so the multiple is where most of the understanding lives.
The metric that matters is Net Publisher Share (NPS), the publisher’s net income after paying out the songwriter’s share, meaning the money the owner actually keeps. Catalogues are priced at a multiple of NPS. In 2024, catalogues above $20m in enterprise value traded at an average 16.1x NPS, down from 16.7x in 2023 (Billboard). The most iconic assets, above $200m, fell from 18.4x to 17.5x NPS. Recording rights, measured on Net Label Share (NLS), priced lower, around 13x NLS ex-iconic in 2024, down from 13.8x.
The maths follows from there. Take a catalogue producing $100,000 a year in NPS. Bought at the 2024 average of 16.1x, it costs $1.61m (roughly £1.27m or €1.49m at mid-2026 rates).
- Initial cash yield: $100,000 ÷ $1,610,000 = ~6.2%.
- If income compounds at Goldman’s 7.9% streaming CAGR, year-five income ≈ $146,000.
- Year-five yield on original cost: $146,000 ÷ $1,610,000 = ~9.1%, before any gain from selling at a higher multiple.
That is the attractive version, and it is worth sitting with how much rides on two numbers you do not control: the multiple you pay and the growth you assume. Pay 18x instead of 16.1x and the entry yield drops below 5.6%. Assume 4.8% growth (the actual 2024 figure) instead of 7.9% and the compounding ladder flattens. In practice, iconic assets yield around 6-7% at the start, with smaller, riskier catalogues on marketplaces reportedly delivering blended realised returns above 10% (Royalty Exchange). You are paid more for taking more song-specific risk.
VIII. Macro Sensitivity
The most important thing to understand about this asset is that it behaves like duration. Royalties are long-duration cashflows, income stretching decades into the future, and long-duration cashflows are worth more when discount rates are low and less when they are high. The market has already demonstrated this rather than merely implied it.
As rates normalised higher through 2022-2024, catalogue multiples compressed from 16.7x to 16.1x NPS, and the market shifted from speculative buying toward structured finance. The songs earned what they always had. The discount rate applied to those earnings is what moved.
The offsetting virtue is low correlation to equities. Listening is non-discretionary. People do not cancel Spotify because the market fell, so streaming revenue grew through COVID in 2020 and through the 2022 downturn. Reported betas make the point: Mills Music Trust at −0.65 and Hipgnosis Songs Fund at 0.21 (Royalty Exchange), both far below the market’s 1.0, with Mills historically moving inverse to it. Beta, how much an asset moves relative to the market, near zero or negative is the diversification prize investors buy this asset for.
| Regime | Rates | Equities | Likely royalty behaviour |
|---|---|---|---|
| Growth + low rates | Falling/low | Rising | Best case: multiples expand, income grows. This was 2021’s peak. |
| Growth + rising rates | Rising | Rising | Mixed: income grows but multiples compress (16.7x→16.1x). Duration drag. |
| Recession + low rates | Low | Falling | Defensive win: non-discretionary income holds, low beta shines. |
| Stagflation | High | Falling | Worst case: high discount rates hit valuations while equity ballast fails elsewhere. |
The asset does its job in three of those four regimes. The one that breaks it is stagflation, where high discount rates crush the valuation at the same moment the low-beta income fails to compensate for losses elsewhere. That is the regime to underwrite against.
IX. Tax
This is general information, not tax advice. Rules vary by jurisdiction and change; take professional advice for your own situation.
One tax fact reshapes the entire yield calculation and most marketing skips it. Royalty income is generally taxed as ordinary income rather than capital gains, because it is payment for licensing the use of an asset rather than the profit from selling one, and in the US that can exceed the 37% top bracket (Royalty Exchange). The UK reaches the same place by a different route: HMRC treats royalty receipts as income, not capital (The Music Royalty Co), so they are taxed at income-tax rates rather than the lower CGT rate. A 6.2% headline yield taxed at ordinary income rates is a very different asset from a 6.2% yield taxed at capital-gains rates. Model the after-tax number.
The disposal is treated differently from the income. Many jurisdictions apply capital-gains treatment to the sale of the catalogue itself (EPGD Law), while the ongoing royalties remain ordinary income. The US even has a specific carve-out, the Songwriters Capital Gains Tax Equity Act, for songwriters selling their own work, and passive royalty income there is reported on Schedule E and is not subject to self-employment tax (Royalty Exchange), a modest point in the asset’s favour.
The practical takeaway is jurisdiction-neutral. The income and the sale are usually taxed on two different bases, and the income base is often the less favourable one. Whatever country you are in, run the after-tax yield before the headline yield seduces you.
X. Case Studies
Case 1, Bruce Springsteen to Sony (December 2021): the peak. In the most valuable single-artist catalogue deal on record, Sony Music Group bought Bruce Springsteen’s combined recording and publishing rights for a reported more than $550m, reported on 17 December 2021. It is the high-water mark of the cycle, a strategic buyer paying a top-of-market price for the most durable kind of catalogue. It shows what the best assets command, and it dates almost exactly to the moment multiples peaked.
Case 2, Round Hill to Concord (October-November 2023): the discount closes. Concord acquired Round Hill Music Royalty Fund for ~$468.8m, at $1.15 per share in cash, a ~67% premium to the pre-bid price (Music Business Worldwide). Read that premium carefully. A 67% premium means the shares had been trading at a deep discount to the value of the underlying catalogues. The portfolio was real and valuable, 51 catalogues, 150,000+ songs, including Beatles, Alice in Chains and The Offspring rights, but the public market had priced the wrapper far below the assets. 99% of shareholders approved and the fund delisted from the LSE on 1 November 2023. The assets were good and the vehicle wrapped around them was structurally mispriced.
Case 3 (cautionary), Hipgnosis Songs Fund: the writedown. The fund that built the asset class became its most public failure. In March 2024, independent valuer Shot Tower Capital slashed the portfolio value by 26.3% to a $1.93bn midpoint, at 15.9x net royalty income, and operative NAV fell from $1.74 to around $1.17 per share (Billboard). A due-diligence report found the fund had “failed to perform”. Shareholders had already voted against continuation in October 2023 and blocked a $440m related-party catalogue sale to a Blackstone/manager vehicle, citing the lack of an up-to-date valuation, and the board suspended dividends to pay down debt (Digital Music News).
The resolution is the part that cost retail money. Blackstone, via Lyra Bidco, acquired the fund at $1.31 per share, valuing it at ~$1.58bn, effective 29 July 2024 (Digital Music News). The exit price sat below the earlier stated NAV. Shareholders approved the Blackstone deal, but holders who bought at IPO-era premiums took real losses. The underlying assets were fine. What failed was the price paid for them, the leverage on top, the governance and the discount rate.
Hipgnosis: portfolio written down 26.3%, NAV $1.74 → ~$1.17, bought out at $1.31/share. The music never stopped playing. The valuation did.
XI. The Core Constraint
The binding constraint on music royalties is not demand. Demand is proven: $31.7bn and eleven years of growth settle that argument. What decides whether you make money is the price you pay for the income and the discount rate you underwrite it at. Buy $100,000 of NPS at 16.1x and you own a ~6.2% starting yield. Buy the same income at 18x and you own less than 5.6%, with more downside when rates move against you. The whole Hipgnosis and Round Hill episode came down to entry price, leverage and discount rates, not to whether people kept listening. They kept listening the whole time.
This is why the marketing framing (“own the music you love, collect income forever”) is dangerous. It aims your attention at the cashflow, which is genuinely good, and away from the multiple, where the risk actually lives. The risk was never the song. It was the price paid for it.
XII. Inside the Asset
To underwrite a catalogue you have to look past the artist’s name to how the income is actually built, because two catalogues with the same headline NPS can be very different assets.
Age and decay. A song’s earnings usually spike on release and then settle into a long, slow decline before stabilising. A “proven” catalogue is one that has already passed through the volatile early years into the predictable back-catalogue phase, which is exactly Mercuriadis’s “proven song” point. Newer catalogues carry more decay risk. Older ones are more bond-like.
Income mix. A catalogue leaning on performance royalties (the $2.9bn collective-licensing pool) behaves differently from one leaning on streaming or sync. Performance and mechanical income is steady. Sync income is lumpy, since a single advert placement can spike a year, then vanish. Diversified income is more valuable than concentrated income at the same NPS.
Publishing versus recording. The same stream pays both a publishing owner and a recording owner, but they price differently: ~16.1x NPS for publishing versus ~13x NLS for recordings in 2024. Publishing is generally regarded as the more durable of the two, which is why it commands the higher multiple.
Format resilience. The nineteen-year vinyl run is a reminder that catalogue value is not hostage to a single distribution channel. Distribution formats come and go while listeners keep paying for the same songs across each of them.
XIII. The Central Dilemma
The defensive quality that makes this asset attractive is real, and the person who articulated it best is also the person whose fund proved you can still lose money owning it.
Mercuriadis was right that proven songs are “as valuable as gold, or oil”: predictable, durable, investable. His own comparison is the giveaway. Gold and oil are commodities whose price swings hard even when the underlying stays stable, and his fund’s income held up while its valuation was cut 26.3%.
The dilemma for an investor runs like this. The asset delivers durable, low-correlation income, which is a genuinely useful thing to own. But you access it through a multiple that expands and contracts with rates and sentiment, and often through a leveraged, fee-laden wrapper whose discount to NAV you cannot control. You are buying a defensive cashflow inside a cyclical price, and if you buy the cashflow but pay too much for it you can still lose. No amount of “people never stop listening” gets you around that.
XIV. The Next Frontier
Two forces will shape what this asset becomes.
The first is AI, which cuts both ways. It is a threat, since AI-generated music could dilute the pool and complicate rights, and the industry is responding, with the IFPI framing 2025 as the year the industry “embraces the future on AI”. For a catalogue owner, the question is whether AI expands the licensing pie (new uses, new royalties) or floods the market with cheap substitutes. Nobody has the answer yet. Underwrite it as a risk, not a bonus.
The second is “Streaming 2.0” and superfans, the label industry’s bet that it can extract more revenue per listener rather than just more listeners. This matters precisely because subscriber growth is decelerating to 7.9% and the new users are lower-ARPU emerging-market subscribers. If the industry cannot raise ARPU through price rises and superfan tiers, the growth an owner is paying for shrinks. Grainge’s Streaming 2.0 pitch (Music Business Worldwide) is the bull case for per-user monetisation, and the thing to watch, because it is what keeps the compounding maths in a worked catalogue alive.
The frontier for the investor is the vehicle. With the listed funds gone private, the open question is whether marketplaces like Royalty Exchange, JKBX and ANote can build deep, liquid, well-priced retail access, or whether this asset drifts back to being an institutional game.
XV. Lessons from History
The most useful historical parallel is the asset’s own short, sharp cycle from 2021 to 2024. It is a textbook lesson in how a good asset can be mispriced.
The 2021 peak, the $550m+ Springsteen deal (Music Business Worldwide) and multiples running to 18.4x on iconic assets, happened in a zero-rate world where long-duration cashflows were bid to the sky. When rates rose, the same mechanics that inflated the asset deflated it: multiples compressed to 16.1x, Hipgnosis was written down 26.3% (Billboard), and both listed funds were taken private below hype-era valuations.
The lesson is not that music royalties are bad. It is the oldest one in finance: a durable cashflow bought at the wrong price and wrapped in leverage is still a losing investment. The defensive income did exactly what it promised. Publishing collections grew through the last recession (MEP Capital) and streaming grew through COVID. What hurt people was the entry multiple and the discount rate, not the songs. Buy the cashflow, pay a sensible multiple for it, and watch the leverage and NAV discount inside whatever wrapper you use.
XVI. The Case For It
Strip away the hype and a genuine case remains.
The income is durable and proven. Eleven straight years of growth to $31.7bn, 837m paying subscribers, and publishing collections that rose through the last recession (MEP Capital). This is a cashflow that already exists rather than a speculative story about a future that might arrive.
It is genuinely low-correlation. Betas of −0.65 (Mills) and 0.21 (Hipgnosis) are the diversification most portfolios lack (Royalty Exchange). Listening is non-discretionary, so the income holds when discretionary spending falls.
The yield is real and can compound. A ~6.2% starting cash yield on iconic assets, with marketplace returns reported above 10% on smaller deals (Royalty Exchange), and income that can grow with the streaming market.
Access has opened up. Royalty Exchange’s $170m+ of transactions, JKBX’s SEC-qualified $1-$55 shares in the US (Music Business Worldwide) and ANote in Europe for UK and EU investors mean you no longer need a nine-figure cheque to participate.
And the repricing already happened. The 2021 excess has been wrung out. Multiples fell from 16.7x to 16.1x (Billboard) and the leveraged funds went private. Buying today is buying after the correction, not before it.
XVII. The Risks
The case against is just as concrete.
Duration risk is real. Royalties are long cashflows. When discount rates rise, valuations fall. Multiples compressed as rates normalised, and there is no reason that stops if rates rise further.
The growth may not show up. Goldman already cut its CAGR from 10% to 7.9%, and 2024 growth came in at 4.8% against an 8.9% estimate. Your compounding ladder depends on a forecast that has already missed once.
ARPU dilution. 68% of new subscribers coming from lower-paying emerging markets means subscriber growth overstates income growth.
Vehicle and governance risk. The Hipgnosis saga, a 26.3% writedown, a blocked related-party sale, a suspended dividend, a “failed to perform” report and a buyout below NAV (Digital Music News), shows the wrapper can lose money even when the underlying income is fine. Leverage, fees and NAV discounts are the investor’s problem, not the artist’s.
Liquidity. With the listed funds delisted, the easy exit route has narrowed. Marketplaces are auction-based, not deep public markets, and an unregulated venue like ANote adds its own liquidity and protection questions.
Tax drag. Ordinary-income treatment can quietly eat a third or more of the yield, and UK income-tax treatment does the same job on the other side of the Atlantic.
AI uncertainty. A live, unpriced risk to the value of the underlying rights.
XVIII. The Alternative Fortune Verdict
Music royalties are a real asset with a real, defensive cashflow, priced in a way that has already burned people who ignored the multiple. The income is proven: $31.7bn, eleven years of growth, 837m subscribers, publishing that grew through the last recession, and betas that genuinely diversify. Those are measured facts rather than marketing claims. If you want income that holds up when the economy does not, this asset can deliver it.
But the same period that proved the income also proved the danger. The 2021 buyers paid up to 18.4x, rates rose, and Hipgnosis was written down 26.3% and taken private below NAV. The music kept playing throughout, and the valuation is what failed.
Where the edge sits. It is not in the demand thesis, which is fully understood and fully priced. It is in entry price and structure: buying NPS at a sensible multiple rather than a peak one, favouring diversified, proven, performance-weighted income over lottery-ticket catalogues, and avoiding leveraged wrappers trading at unclear discounts to NAV. The person who wins here treats a catalogue like a bond, underwriting the yield, the credit quality of the income and the discount rate, rather than like a piece of memorabilia.
Questions to ask, by vehicle:
- Marketplace (Royalty Exchange / JKBX / ANote): What multiple of NPS/NLS am I paying, and how does it compare to the ~16.1x / ~13x 2024 averages? What did the platform pay for this income versus what it is listing it at, and is there a sourcing spread like JKBX’s ~11%? What are the total fees, including the 1% royalty fee? Is the venue regulated, or unregulated like ANote? How old is the catalogue and how is its income mixed?
- Listed fund (if any return): What is the discount or premium to NAV, and who set the NAV? How much leverage sits in the structure? Are dividends covered, or funded by debt as Hipgnosis’s were not? Are there related-party conflicts between the manager and the assets?
- Direct purchase: What growth rate is baked into the multiple, the optimistic 7.9% or the realised 4.8%? What is the after-tax yield given ordinary-income treatment? How exposed is the income to a single song, a single format, or a single lumpy sync deal?
The asset is sound and the income is defensive. What is left to decide is what you pay for it and which wrapper you buy it in. Underwrite the multiple like a bond, avoid the leveraged wrappers, and music royalties earn a place as a legitimate diversifier. Overpay for the story and no hit song will save the position.
