Weekly international investment round up to 4 August 2009
• Michael Jackson’s death highlights an interesting investment sector
• Music publishing offers an alternative to mainstream investments
Together with Elvis, The Beatles and Frank Sinatra surely Michael Jackson deserves his place alongside the absolute cream of the music industry and as both a singer and a performer he was arguably unparalleled. His 1982 album ‘Thriller’ still remains the best selling album of all time producing no less than thirteen number one songs thus making him the most popular recording artist in history.
Ever since his sudden death on the 25 June newspapers have been filled with reports of the singer’s lavish lifestyle and how this multi-millionaire unfortunately had the spending habits of a billionaire which has allegedly left his estate deep in debt.
However, one particular investment Michael Jackson made was sheer brilliance. In 1985 he paid $47.5 million dollars for ATV Music, the company which owned the copyright to many of The Beatles songs. Ten years later in order to raise some capital Jackson completed a deal with Sony which led to a merger, the singer received $150 million dollars plus a 50 per cent ownership of the new music publishing company. In early 2007, an audit of Jackson’s assets valued his share of the music and publishing company, Sony/ATV, at $390 million dollars while top estimates today of its whole worth touch $1 billion dollars.
Due to the implications of illegal downloading and music piracy at first glance the music industry may not appear to be an investment sector worth considering but its music publishing side would appear to be booming. While record labels may have been negatively affected by the shift from CD’s to downloads, music publishers not only still get paid whenever an album or a song is bought but they also receive a payment each time it is performed, played or used in a commercial.
Sony/ATV has seen its revenues increase by over 60 per cent in the last two years to $500 million dollars annually, while industry sources state that its ‘net publisher’s share’, which accounts for sales minus payments to its artists, has now grown to $200 million dollars per year. As an alternative to mainstream investments interest in music is increasing.
Earlier this year Imagem Music Group, whose main shareholder is the giant Dutch pension fund ABP, bought the rights to the back catalog of iconic songwriters Rogers and Hammerstein in deal reportedly worth $200 million dollars. Imagem now classes itself as the world’s largest independent music publisher holding rights to some 200,000 pieces of music including those from popular musicals ‘Oklahoma’ and ‘South Pacific’. Maybe the hills alive with the sound of money?
Intellectual property rights offer diverse revenue streams and relatively stable cash flows which have now attracted the attention of private equity groups such as Pegasus Capital Advisors to get in on the act. They recently acquired New York based Spirit Music Group whose repertoire includes hits by Elvis, Alice Cooper and Madonna.
More direct investment sources such as that offered by bandstock.com now even allow investment into musicians before they are famous. Whilst maybe not quite offering ‘money for nothing’ as a sector, music is very likely to continue to perform.
