According to an extensive new report from MIDiA Research, 2021 saw unprecedented growth in the catalog acquisition market with investors spending $5.3 billion on publicly-announced deals, a 180% increase over 2020.
This excludes an additional $6.7 billion invested into music companies or music catalog acquisition funds in 2021 (up 92%), signaling a similar abundance of 2022 deals to come. Industry stakeholders hope this boom represents a pivot point for a music industry reaching new annual revenue heights, bolstered by the growth of new categories such as non-DSP streaming.
Other key insights from the report include:
- Western markets, and in particular the US, are projected to have the highest streaming average revenue per user (ARPU), thus exerting the strongest influence on catalog acquisition
- Most deals (76%) include publishing rights, but masters (49%) and name, image and likeness (4%) are increasingly common
- Investors lean towards rock music, which makes up 35% of catalog deals, as well as music from the 2000s (23% of deals) and 1970s (20% of deals)
- Of 100 classic acts who charted No. 1 albums on the Billboard 200 between 1970 and 1999, nearly one third have already sold a portion of their rights, highlighting that the pool of ‘iconic’ acts is finite
- Despite a quarter of US consumers being hip-hop fans, and 43% of 16-34s, hip-hop comprised just 3% of catalog deals in 2021
- While a small number of investors dominate the market, 2021 saw a 63% increase in the number of deals carried out by the long tail
So far, investors seeking safe bets have targeted the two most popular genres — pop and rock — as well as music which is not so old that it is outdated, but also not so new that success is not yet proven. However, new dynamics are emerging. Because the more rights an acquirer holds, the greater their ability to market and monetise the music, masters and name and likeness rights are increasingly common, appearing in 2021 deals with artists like Tina Turner and the estate of Luther Vandross.
Consumption patterns are also changing. The song economy encourages a focus on songs and playlists, not artists and albums — the traditional catalog drivers. Due to this and the fragmentation of fandom, in the future, we can expect fewer ‘icons’ for the masses. With US consumption underpinning valuations, the increasing footprint of hip hop, pop and R&B on US streaming also threatens the profitability of the current focus on classic rock catalogs.
“The competition within the catalog acquisition landscape is heating up like never before.”
– Kriss Thakrar, MIDiA Research
This is where specialisation and the evolution of new, bespoke deal structures come in. A key theme of the report is the diversification of the market as new companies enter the space, driving competition and expanding the long tail. These companies are largely competing for the same, diminishing pool of evergreen catalog. There is an opportunity for new entrants to specialise in areas such as regional repertoire (ex. Reggaeton or Afrobeat), the classics of tomorrow, or contextual catalog (ex. sleep, study, or holiday music). In particular, we explore the opportunity to invest in hip-hop catalog and its culture of sampling. Although rock music is almost twice as popular as hip-hop for US consumers, the two genres are neck-and-neck amongst high music streamers in the US, and younger generations prefer hip-hop. In the US, 16-34-year-olds are 71% more likely to be hip-hop fans than the average consumer, and 23% less likely to be fans of rock music.
Tatiana Cirisano, music industry analyst and consultant at MIDiA Research said: “The music industry has traditionally hyper-focused on what is new and hot, but the growing role of catalog in music consumption shows that it also finds value in the past. Rather than a temporary boom, 2020 and 2021 helped consolidate music copyrights as an asset class, opening a new chapter for music and finance.”
Kriss Thakrar, MIDiA Research consultant said: “The competition within the catalog acquisition landscape is heating up like never before. Both new entrants and existing companies can narrow down on their focus in order to stand out and truly serve the intellectual property they are looking to acquire. If not, they risk either buying at unsustainable prices or not being able to get deals through the door.”
The full report is available for MIDiA clients here.