Wall Street wants the rights to the songs you like to listen to.

The big investment managers, such as Blackstone, Carlyle, KKR or Pimco, are looking to music for a profitable asset given the growth of streaming after years of low rates.

“I have heard that there was a secret chord / that David played, and that it pleased the Lord.” Thus begins the song Hallelujah -in its literal translation into Spanish-, which was composed by the Canadian musician Leonard Cohen and in which he masterfully mixed biblical references with the story of a forbidden or impossible love. “Leonard Cohen’s career had reached a low point when he wrote Hallelujah. It was 1984, and he had been out of the spotlight for quite some time,” Rolling Stone magazine published in 2019.

“It took a few years for Hallelujah to become a classic. Bob Dylan was one of the first to acknowledge its brilliance, playing it in a couple of concerts in 1988. John Cale of The Velvet Underground tackled it on piano in a tribute album to Cohen in 1991, and three years later, Jeff Buckley was inspired by that interpretation and covered it on his 1994 album, Grace.It was that version that eventually created a huge cult following for the song, and ever since It has been covered by everyone, from Bono to Bon Jovi”, they recalled in the American magazine, dedicated to music and popular culture.

A recent report by Kroll (a firm specializing in market research and economic intelligence) revealed to bond investors “that a version of Cohen’s Hallelujah performed by Pentatonix, an American a cappella group, represents more than three times the number of listeners on Spotify than the original. It also beats Jeff Buckley’s version. If you add 10 different versions of the song Hallelujah, they represent almost 13% of the copyright in Blackstone’s catalogue,” journalists Anna Nicolaou and Kaye reported a few days ago. Wiggins in a Financial Times article entitled How Wall Street stormed the music business.

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And it is that more than a decade of low and negative interest rates led many investors to seek juicy returns in alternative assets, such as the copyright industry -royalties-. “Nowadays, music executives, lawyers and agents say the influx of money from Wall Street is unprecedented. After a series of investments in the industry, Blackstone now makes money every time Justin Timberlake’s SexyBack is played in a mall. Apollo charges every time Luis Fonsi’s Despacito plays in a nightclub,” wrote Nicolaou and Wiggins – other managers, such as Carlyle, KKR or Pimco – are also in the loop.

“The phenomenon was promoted by a London-listed investment fund called Hipgnosis, named after an art group that designed album covers for Pink Floyd and others. In 2018, Merck Mercuriadis, a music obsessive who in his One day he ran Elton John, he created the fund as a vehicle to buy songs, pitching them to institutional investors as a way to earn reliable, bond-like returns,” they explained in the Financial Times.

Immune to inflation

Goldman forecasts that music revenue will nearly double to $153 billion by 2030, as streaming revenue grows 12% on average a year. In 2021, investment asset manager Blackstone bought Mercuriadis’s company Hipgnosis Song Management and launched an independent $1 billion fund, Hipgnosis Songs Capital, to do more song trading, which HSM also advises. Mercuriadis used some of this money to buy the catalogs of Cohen, Timberlake and others for the Blackstone fund.

“There is inflation, there is risk in the supply chain, there is geopolitical risk,” argued the senior executive of a major venture capital group in the article in the British newspaper. “Music is relatively immune to these things,” said the expert.

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Acquisition of music catalogs soared to $1.9 billion in 2020 and $5.3 billion in 2021, according to Midia, a research company specializing in the music industry. “Hypgnosis goes to the market and says: this is what has increased the value of our asset,” Mark Mulligan, an analyst at Midia, told the Financial Times. “Not how much has revenue gone up, but how much has valuation gone up. A lot of what drives value is simply: how much are people willing to pay? What they’re willing to pay is determined by valuations… It’s this echo chamber.

The problem is that now, in an environment of rate hikes, there are those who question the validity of Hipgnosis’s valuations, just as the debt rating agencies were doubted. “Blackstone executives believe they can extract more money from music through more sophisticated management,” reports the City Financial Daily. As an example, they point out that profitability can be increased by convincing filmmakers to use songs from their catalog, including those songs on Peloton bikes or Tik Tok videos.

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