New Strategies for Investing in Music Rights and Other Recent Developments in the World of RightsTech

Ahead of the RightsTech Summit next month, veteran business journalist and industry analyst Paul Sweeting takes a look at recent developments in the rights tech world.

Alternative financing strategies

Music copyrights, especially publishing rights, have become a hot investment property over past three years. Publicly traded investment firms like Hipgnosis Songs Fund, Round Hill Music, and the recently listed Reservoir Media have raised billions of U.S. dollars to fund the acquisition of song catalogs and master recordings, while established publishers have spent hundreds of millions more to bulk up their portfolios, such as Universal Music Groups $300 million-plus acquisition of Bob Dylan’s entire catalog in December.

The M&A boom has been driven by the growth of streaming. With the steady and recurring royalty revenue streams and usage data it produces, streaming has helped turn music rights into a high-yield, long-term asset class for investors looking for reliable long-term returns.

But like a new groove or a hot new sound, investors and financial firms are devising new ways to cash in on the streaming boom that don’t involve outright acquisition of rights and the administrative overhead that comes with them. And, in many cases, they also don’t require artists to give up ownership of their own creations in order to reap the rewards.

In April, the new London-based Music Credit Fund was launched, backed by Jack MacDonald of Alvarium Investments, to provide loans to artists and other rights owners secured solely by the future royalty earnings from their works.

“Existing acquisition models and restrictive debt offerings shouldn’t be the only way to access funding in the music industry,” MacDonald said in a statement announcing the launch. “The last few years has seen a growth in understanding and confidence in the space and in our view, this should lead to more evolved, fairer options for creatives.”

Loan terms can run as long as 10 years, at an average interest rate of 7.5%, and require no personal guarantees or relinquishing of control over the underlying copyrights.

“Traditional forms of lending, i.e. from a bank or a major record company, always come with considerable contractual commitments and obligations. Ours comes simply with the ability to pay back,” former AIM president and an advisor to the fund Alison Wenham told me on a recent RightsTech Roundtable webinar. “We have a strong belief that those rights should stay with the artist or the writer.”

In July, U.S.-based Shamrock Capital, which has been active in the content acquisition space, announced the launch of a new, $196 million fund to provide debt-based financing to creatives and rights owners across the music, film, television, games and other content sectors.

“We view this new fund as a natural extension of our content acquisition strategy which enables us to provide optionality and flexibility to content owners.,” Shamrock partner and manager of the new fund Patrick Russo said in a statement.

“As we continue to invest in premium content rights, we believe Shamrock is well-positioned to be a long-term partner to artists, content companies, and other owners of entertainment IP.”

Both Wenham and Russo will be speaking on a panel on alternative financing strategies at the online RightsTech Summit (Sept. 14-15), along with Matt Lutz of Music Benefactors and Martin Cernosek of the Best Music Company-backed Royalty Partners Fund.

Paying for news

Another recent rights-tech development has been the movement in many countries and territories to extend or expand so-called neighboring rights for news and journal publishers, by requiring online platforms to secure licenses to include or display news content on their sites.

In February, the Australian government adopted the News Media Bargaining Code law, which requires Facebook, Google and other platforms to negotiate licensing agreements with publishers or face a government-imposed settlement.

Since then, Facebook and Google have struck deals with major publishers, including Nine Entertainment and News Corp., but many others remain unlicensed.

The European Union’s Directive on Copyright in the Digital Single Market, formally adopted in 2019, also includes provisions extending neighboring rights to news publishers and requiring platforms to secure licenses to display news content.

While full transposition (i.e. implementation) of the directive into member countries’ national laws has been slow, some EU countries, most notably France, have already moved to require platforms to conduct “good faith” license negotiations with any publisher that asks for them.

In June, Google reached a deal with a leading publishers alliance in France to pay $76 million over three years to 121 publications for the right to display their content in search results. That deal was put on hold, however, while a separate antitrust lawsuit against Google played out.

In July, the French Competition Authority fined Google €500 million for failing to comply with the regulators’ temporary orders regarding how to conduct those negotiations.

Yet even with government backing, most publishers are simply too small or too local to exercise much leverage in individual negotiations with the likes of Facebook and Google.

To balance those scales at least a bit, the Australian law creates a mechanism for smaller publishers to bargain collectively with the major platforms.

In the U.S., the Journalism Competition and Protection Act would create an antitrust “safe harbor” for publishers that would also allow them to negotiate collectively. The bill has attracted rare bipartisan support on Capitol Hill, in both its House and Senate versions, but progress through the sausage-making machinery has been slow.

In any case, any such system of neighboring rights and collective bargaining for publishers will eventually require new systems, procedures and perhaps new collective management organizations to administer the licenses, and collect and payout the revenue.

Those are among the topics that will also be addressed on a panel at the upcoming RightsTech Summit, featuring Danielle Coffey, senior VP and General Counsel at the News Media Alliance, Wout van Wijk, CEO of News Media Europe and other senior publishing industry executives.

Blockchain is back

Remember blockchain? Just a few years ago it was going to completely transform the music and other media industries, eliminating middlemen and allowing artists and other creatives to reap the full value of their work directly from consumers via crypto payments.

Or so we were told.

Money was showered on crypto startups, industry initiatives were launched and industry conferences filled with talk of blockchain.

As with most exciting new technologies, however, the talk was way ahead of the reality. Most of the early blockchain projects over-promised, failed to deliver and ultimately disappeared. The few blockchain companies that survived stopped referring to it in their pitches; some even changed their name to avoid the growing stigma. Talk of blockchain at conferences grew muted.

Some hearty entrepreneurs kept plugging away, however, and the technology continued to mature. Today, blockchain is having a bit of a second act.

Verifi Media, formerly known as dotBlockchain Music, for instance, has quietly established itself as blockchain-based distributed platform for music metadata, working in partnership with leading industry organizations and companies including DDEX, A2IM, FUGA and Deezer.

Verifi co-founder and chief strategy officer Allen Bargfrede will be joined a panel at the RightsTech Summit by Jordi Puy, CEO of Spanish CMO Unison and others to discuss blockchain’s second act in the music business, and where the technology may go from here.

Join leaders in the media and entertainment world at RightsTech Summit Online (Sept. 14-15) for discussions around the latest innovations in media rights management and licensing.

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