WEBVTT - Why Music Back Catalogs Have Become a Red-Hot Asset Class 0:00:10.960 --> 0:00:15.200 Hello, and welcome to another episode of the Odd Lots podcast. 0:00:15.240 --> 0:00:20.079 I'm Joe Wisenthal and I'm Tracy Allaway. So, Tracy, we 0:00:20.120 --> 0:00:23.040 don't really talk about it that much on the show, 0:00:23.120 --> 0:00:25.799 but if there's one thing I know about you and 0:00:25.880 --> 0:00:31.400 your career, you're very into sort of like weird asset classes, 0:00:31.440 --> 0:00:36.440 weird income streams that get packaged and resolved, A lifelong 0:00:36.479 --> 0:00:41.400 fascination of yours. Yeah, I guess. I guess you could 0:00:41.400 --> 0:00:46.560 broadly say I'm interested in the financialization of various assets. 0:00:46.760 --> 0:00:50.760 But in recent years there have been some pretty amazing ones. 0:00:50.840 --> 0:00:52.800 I think one of the weird things about this is 0:00:52.840 --> 0:00:55.880 that nowadays, when you hear it, it doesn't actually sound 0:00:55.920 --> 0:00:58.480 that weird, But when these things were happening just a 0:00:58.520 --> 0:01:01.240 couple of years ago, it was really strange. So I remember, 0:01:01.280 --> 0:01:05.840 for instance, there was a solar panel securitization a few 0:01:05.920 --> 0:01:08.800 years ago, and everyone thought that was nuts because bankers 0:01:08.800 --> 0:01:15.160 were securitizing Sunshine into an investable bond. But nowadays that 0:01:15.200 --> 0:01:17.800 seems very very normal. And then some of the other 0:01:17.840 --> 0:01:21.240 ones that have come up are franchise rights and sort 0:01:21.280 --> 0:01:24.680 of brand values from restaurants. We've had a bunch of 0:01:24.680 --> 0:01:28.800 those and the latest one that everyone is kind of 0:01:28.800 --> 0:01:33.759 going nuts over is music rights. Yeah, exactly right. So basically, 0:01:33.800 --> 0:01:37.679 anything that throws off some sort of predictable or semi 0:01:37.720 --> 0:01:42.400 predictable ers, um, you know, future cash flows can theoretically 0:01:42.480 --> 0:01:46.039 be turned into a product, into a financial product that 0:01:46.040 --> 0:01:48.720 can be sold. And of course one thing that we 0:01:48.840 --> 0:01:52.160 know uh FROs off cash is music rights. And so 0:01:52.880 --> 0:01:56.160 this year, um, there's been a budge but a couple 0:01:56.160 --> 0:02:00.639 of artists that sold the rights to their catalog. Bob Dylan, 0:02:01.280 --> 0:02:06.720 someone bought Bob Dylan's future cash flows. So all the 0:02:06.920 --> 0:02:08.880 I guess, I don't know all the music that all 0:02:08.919 --> 0:02:12.600 the streaming revenue, and U said, commercials and movies and 0:02:12.639 --> 0:02:15.200 all that he got got got a big check in 0:02:15.240 --> 0:02:18.400 advance for that. Shakira is another one who just I 0:02:18.480 --> 0:02:20.960 think a few weeks ago, a few weeks ago, sold 0:02:20.960 --> 0:02:24.360 her song catalog. So this is a hot area. I mean, 0:02:24.400 --> 0:02:26.840 I think there's actually like, weren't Bowie Bonds a thing 0:02:26.880 --> 0:02:30.160 a long time ago? That's like basically the Joe there's 0:02:30.200 --> 0:02:32.680 an aw thoughts episode on this. There's actually a very 0:02:32.800 --> 0:02:36.760 very early Yeah, that was right after David Bowie died. 0:02:37.000 --> 0:02:39.880 But I have to say, probably the most interesting thing 0:02:39.919 --> 0:02:43.120 that happened in the music rights or royalty space last 0:02:43.160 --> 0:02:47.679 year was someone not selling um their music rights, and 0:02:47.960 --> 0:02:51.840 that was Taylor Swift, who famously has you know, lost 0:02:51.880 --> 0:02:56.600 the rights to her master, her old masters, her catalog 0:02:56.600 --> 0:03:00.040 of back music, and then it was bought by it 0:03:00.160 --> 0:03:02.760 or Braun, which is kind of her like arch nemesis 0:03:02.800 --> 0:03:04.880 in the music world, and then he sold those on 0:03:04.960 --> 0:03:08.640 to a private equity firm called Shamrock Capital, and Taylor 0:03:08.639 --> 0:03:12.240 Swift had a lot to say about that entire process, 0:03:12.280 --> 0:03:14.600 which I'm sure we're going to get into. I gotta say, 0:03:14.760 --> 0:03:18.160 someone actually emailed me saying that we should get Taylor 0:03:18.160 --> 0:03:21.919 Swift on the podcast to talk about all these Um, yeah, 0:03:21.919 --> 0:03:24.600 why haven't we yet? I can't believe that's so obvious. 0:03:24.680 --> 0:03:27.040 Why haven't we just had Taylor Swift on our podcast 0:03:28.000 --> 0:03:30.600 you know one day. Um, we'll get her next week, 0:03:30.639 --> 0:03:33.320 we'll get her next year. So obviously we don't have 0:03:33.360 --> 0:03:36.480 Taylor Swift today. UM, We'll be upfront about that, but 0:03:36.520 --> 0:03:39.320 we do have someone who knows all about this space. Yeah, 0:03:39.400 --> 0:03:41.720 and there are so many questions that we need to 0:03:41.720 --> 0:03:45.840 get answered, like why now, how do you value these 0:03:46.240 --> 0:03:50.400 uh income streams of these catalogs. Given the ongoing changing 0:03:50.520 --> 0:03:53.800 nature of the music business. I mean, these days, obviously 0:03:53.920 --> 0:03:57.160 streaming is a really big thing, but that wasn't obviously 0:03:57.200 --> 0:03:59.560 anticipatable a few years ago. We don't know what the 0:03:59.640 --> 0:04:02.280 music industry is gonna be like ten years, So so 0:04:02.320 --> 0:04:05.920 many questions why now how you value these catalogs. So 0:04:05.960 --> 0:04:08.200 I'm very excited we're going to be speaking with someone 0:04:08.240 --> 0:04:11.880 who is a a music consultant in the business of 0:04:12.040 --> 0:04:14.800 valuing exactly what we're talking about. We're going to be 0:04:14.880 --> 0:04:18.719 speaking with Alistair Moen of Moan Music, an expert in 0:04:18.720 --> 0:04:23.160 the music valuation business, to answer all these questions. So, Alistair, 0:04:23.200 --> 0:04:26.400 thank you so much for joining us. Of course, thanks Jo. 0:04:27.920 --> 0:04:31.839 So um you know why now, I mean, let's start 0:04:31.880 --> 0:04:34.520 with that. I mean, we have seen a number of 0:04:34.560 --> 0:04:39.360 really big artists selling the rights to their work. They're 0:04:39.480 --> 0:04:44.480 turning their work into an asset that can be sold. Obviously, 0:04:45.240 --> 0:04:47.719 this isn't totally new, It's been going on for a while, 0:04:47.720 --> 0:04:50.800 but it seems to be really gathering steam. So what 0:04:51.000 --> 0:04:53.440 is uh, what's happening right at this moment that suddenly 0:04:53.839 --> 0:04:56.359 is making this a hot asset? Class you sort of 0:04:56.400 --> 0:05:02.080 mentioned in your introduction, dere and obviously streaming has increased 0:05:02.080 --> 0:05:05.800 the recording music industry and especially the narrative around the industry. 0:05:05.920 --> 0:05:08.839 So the year two thousand and two thousand and fourteen, 0:05:09.240 --> 0:05:12.760 there was continuing decline in the sale of recording music 0:05:12.839 --> 0:05:16.839 as physical sales dropped. Since two thousand and fourteen, you've 0:05:16.880 --> 0:05:20.440 seen a streaming growing a rate of forty per year, 0:05:20.720 --> 0:05:23.760 which is really encouraging. And the other thing which is 0:05:24.600 --> 0:05:29.320 really encouraging by that story is the nature of the consumption. 0:05:29.400 --> 0:05:33.040 Where obviously, in a physical environment, um, you sold a 0:05:33.040 --> 0:05:35.440 lot of CD s, it's sort of a one off transaction. 0:05:35.960 --> 0:05:39.720 But we're streaming, you've got sort of repeatable consumption and 0:05:39.760 --> 0:05:42.760 it's very much um yeah, but a lot of interest 0:05:42.800 --> 0:05:45.520 from investors in the data is a lot better than 0:05:45.560 --> 0:05:48.760 traditional sales data, and also the underlying consumption there's more 0:05:48.800 --> 0:05:51.040 of a There seems to be a lot more repeatable 0:05:51.040 --> 0:05:55.159 consumption which people are confident they can model. So I 0:05:55.200 --> 0:05:59.000 think definitely that strong narrative around the recording music industry, 0:05:59.480 --> 0:06:01.960 a lot of education in the market with the lacks 0:06:01.960 --> 0:06:05.400 of hypnosis and primary wave doing a lot of funding rounds, 0:06:05.400 --> 0:06:08.839 and definitely sort a low interest rate environment is have 0:06:08.920 --> 0:06:11.880 a lot of people looking for for assets of field 0:06:11.920 --> 0:06:14.760 long term yield, and music catalogs there's sort of been 0:06:14.760 --> 0:06:20.760 a really really in vogue opportunity for that recently. So 0:06:20.880 --> 0:06:25.400 when we see a headline like Universal Music Publishing buying 0:06:25.480 --> 0:06:30.159 Bob Dylan's catalog for a reported three million dollars, what 0:06:30.240 --> 0:06:32.799 does that actually mean, Where does the price come from, 0:06:33.080 --> 0:06:37.800 and what does the catalog actually entail in terms of 0:06:37.920 --> 0:06:43.200 rights and cash flow? Sure, so that's a very good question. Um. 0:06:43.320 --> 0:06:45.120 First of all, when you're talking about a catalog, that 0:06:45.200 --> 0:06:49.400 can mean different types of rights. So really broadly, you've 0:06:49.400 --> 0:06:53.880 got the master rights, so that's the actual recording copyright, 0:06:54.240 --> 0:06:56.560 and then you have the publishing copyright, which is the 0:06:56.640 --> 0:07:01.279 underwriting underlying song or the underlying composition, And it gets 0:07:01.360 --> 0:07:04.200 a little bit more complicated around with you by the 0:07:04.320 --> 0:07:06.240 right to have control over that income. But those are 0:07:06.240 --> 0:07:11.840 sort of two general classes. And when Universal we're valuing 0:07:11.880 --> 0:07:15.960 that transaction, they'll be looking at the income streams historical 0:07:16.000 --> 0:07:19.880 income streams from whatever rights that buying, and they'll also 0:07:19.920 --> 0:07:21.920 be looking at how long they have those rights will 0:07:22.000 --> 0:07:24.320 last for and then sort of trying to project those 0:07:24.720 --> 0:07:27.680 rights going forward and as I sort of mentioned, you know, 0:07:28.240 --> 0:07:32.880 for example, publishing copyrights last seventy years plus the life 0:07:32.880 --> 0:07:35.480 of the offer, so it's a very long term cash flow. 0:07:35.840 --> 0:07:38.200 So most of these investments are looking for low yield 0:07:38.280 --> 0:07:41.840 and sort of projecting ten to fifteen years of cash 0:07:41.880 --> 0:07:44.760 flow with a terminal value. So it's is very much 0:07:44.800 --> 0:07:48.560 a long term horizon of looking at the past history, 0:07:48.760 --> 0:07:51.320 how long you're those rights for, and sort of how 0:07:51.360 --> 0:07:54.880 confident you are and predicting those future cash flows. You know, 0:07:55.160 --> 0:07:59.640 you mentioned, um, the high quality of the data that 0:07:59.720 --> 0:08:04.440 we're streaming, these assets can be analyzed in a way 0:08:04.480 --> 0:08:07.760 that they haven't been. It hasn't been so easy in 0:08:07.800 --> 0:08:10.320 the past, like maybe when people are buying CDs and such. 0:08:10.680 --> 0:08:14.600 But on the other hand, streaming as a phenomenon hasn't 0:08:14.640 --> 0:08:18.120 really been around that long, and we know that you know, 0:08:18.160 --> 0:08:22.240 it's right, there's always potential for technological disruption, So how 0:08:22.280 --> 0:08:27.080 do people or how do you go about essentially modeling 0:08:27.160 --> 0:08:30.000 the risk that the business just dramatically changes again like 0:08:30.040 --> 0:08:33.040 another sort of like napster or something could come along 0:08:33.240 --> 0:08:36.120 in theory and people stop paying for music, or the 0:08:36.120 --> 0:08:38.400 amount of people pay for music plunges, Like how do 0:08:38.679 --> 0:08:42.520 how do those risks get incorporated into what people are 0:08:42.520 --> 0:08:46.920 willing to pay. So that's a really interesting question. And 0:08:47.840 --> 0:08:52.040 historically before the recent boom, publishing catalogs or have the 0:08:52.160 --> 0:08:55.400 master catalogs but sort of considered a lot more lower risk. 0:08:55.520 --> 0:08:57.960 And for that for the very reason you mentioned that 0:08:58.559 --> 0:09:01.280 UM in terms of of the royalty is coming from 0:09:01.320 --> 0:09:05.920 B to C income, so from sales or streams. That's 0:09:05.920 --> 0:09:10.199 something which does change over time. But what's often quite 0:09:10.360 --> 0:09:13.400 prominent in music catalogs, which is on the publishing side, 0:09:13.480 --> 0:09:18.200 is B two B licensing, so licenseseing revenue from radio 0:09:18.240 --> 0:09:21.640 play or from the background usage of music and stores, 0:09:21.720 --> 0:09:25.680 or from the background usage of music and bars, and 0:09:25.880 --> 0:09:28.760 as well as sort of licensing for TV and film, 0:09:28.800 --> 0:09:31.200 and going forward, I guess there's a lot of hope 0:09:31.280 --> 0:09:34.560 that you know, new technologies such as AI et cetera, 0:09:34.760 --> 0:09:37.280 to be also licenses for that. So that's one of 0:09:37.320 --> 0:09:41.000 the reasons why particularly publishing is which has more of 0:09:41.000 --> 0:09:44.520 those diverse income streams typically is sort of considered more 0:09:44.559 --> 0:09:47.960 lower risks, So that's very much a consideration, and looking 0:09:48.040 --> 0:09:50.680 at the types of incumbent it's sort of quite surprising 0:09:51.280 --> 0:09:54.319 is how many diverse income streams can come from one copyright. 0:09:55.240 --> 0:09:59.120 So Joe just mentioned the idea of the business model 0:09:59.240 --> 0:10:02.719 changing and how might that impact master right. So, one 0:10:02.720 --> 0:10:06.560 of the really interesting things about the Taylor Swift saga 0:10:06.880 --> 0:10:11.440 that I mentioned in the intro was that after her 0:10:11.760 --> 0:10:15.560 Old Masters were sold to this private equity firm, she 0:10:15.679 --> 0:10:18.640 basically said that she was going to re record her 0:10:18.720 --> 0:10:23.120 old songs um in order to like get control back 0:10:23.240 --> 0:10:27.160 over them. I have to say, like, this is an 0:10:27.160 --> 0:10:29.760 area that I'm not familiar with, but what does that 0:10:29.800 --> 0:10:33.360 actually mean? And how is she allowed to do that? 0:10:33.440 --> 0:10:35.920 Because I thought the whole point of Old Masters was 0:10:36.000 --> 0:10:39.960 to basically preserve the copyright on the music. And then lastly, 0:10:40.600 --> 0:10:44.920 would that vastly change the value of the songs that 0:10:45.040 --> 0:10:49.200 this private equity firm, Shamrock Capital just bought for millions 0:10:49.200 --> 0:10:53.599 of dollars? Of course sure. So before I went to 0:10:53.640 --> 0:10:57.400 the music industry, I was actually a trained lawyer, and 0:10:57.440 --> 0:11:01.320 it's become really in handy because as well as valuing 0:11:01.360 --> 0:11:03.800 these royalty cash flows and analyzing it, you've could be 0:11:03.840 --> 0:11:07.320 got to be really familiar with the legal um stipilations 0:11:07.360 --> 0:11:11.080 of these contracts. So when I spoke about the master 0:11:11.200 --> 0:11:15.440 recording and the and the publishing composition. The other difference 0:11:15.480 --> 0:11:19.280 there is that, um, if you write a song and 0:11:19.360 --> 0:11:21.400 you do it, someone else does a cover version of it, 0:11:21.760 --> 0:11:24.640 someone else can always see another cover, but you can't record. 0:11:24.760 --> 0:11:27.360 You can't write the same song again, So that publishing 0:11:27.400 --> 0:11:31.600 contract always remains unique, but you could always For example, 0:11:31.640 --> 0:11:36.040 Taylor Swift is effectively covering her own songs. So typically 0:11:36.280 --> 0:11:39.400 the record label when it scien Taylor Swift, there be 0:11:39.679 --> 0:11:43.280 provisions and those contracts saying that she can't cover her 0:11:43.320 --> 0:11:47.000 own songs for a specified period of time. So that's 0:11:47.040 --> 0:11:49.760 what's going on there, is that she is effectively covering 0:11:49.760 --> 0:11:53.480 her own work, and that's something which, yeah, there's stipulations 0:11:53.480 --> 0:11:56.480 in the contract. The second part of your question is 0:11:56.640 --> 0:12:01.480 really interesting because the short answer is it's un tested. Um, 0:12:01.600 --> 0:12:04.280 there's being sort of people in the past, prominent artists 0:12:04.280 --> 0:12:06.319 such as Prince who have had fell out with the 0:12:06.400 --> 0:12:09.520 record label and always used this as sort of a 0:12:09.520 --> 0:12:11.319 part of the negotiation. We're saying, well, I'm going to 0:12:11.400 --> 0:12:15.240 rerecord my entire catalog, and usually that goes around the 0:12:15.320 --> 0:12:19.560 negotiation of perhaps giving those masters back or increasingly share 0:12:19.559 --> 0:12:22.600 of the income the arts takes. So there's actually something 0:12:22.600 --> 0:12:26.560 relatively untested because there's a few examples of some smaller 0:12:26.559 --> 0:12:28.280 ats doing it, but it's always been used as a 0:12:28.320 --> 0:12:31.400 negotiation tactic, a sort of nuclear option, and no one 0:12:31.440 --> 0:12:33.719 until Taylor has actually sort of pulled that option. So 0:12:34.200 --> 0:12:36.240 it will be interesting to see because it does raise 0:12:36.280 --> 0:12:40.280 a mini questions. So just I'm Taylor Swift real quickly. 0:12:41.040 --> 0:12:43.880 In theory, if she were to re record all of 0:12:43.920 --> 0:12:46.880 her own all of her old albums, and theoretically she 0:12:46.920 --> 0:12:49.319 would like I don't know, release them as new albums, 0:12:49.440 --> 0:12:53.440 albums or something, the fans might stream those, in which 0:12:53.480 --> 0:12:57.400 case she would get some streaming revenue from that. But 0:12:57.520 --> 0:13:01.880 then the owner of those original masters would get some 0:13:02.080 --> 0:13:05.080 sort of licensing revenue, as they would from any other cover. 0:13:06.080 --> 0:13:08.920 So yeah, they whoever owns the end lining publishing assets, 0:13:09.840 --> 0:13:15.079 and typically in the industry, um the artist retains ownership 0:13:15.160 --> 0:13:18.040 or at least for long and the long term, the 0:13:18.120 --> 0:13:21.160 artist will retain any ownership of those publishing interests. And 0:13:21.360 --> 0:13:24.959 this is what you might see a lot of these headlines, 0:13:25.040 --> 0:13:27.520 is that a lot of the big catalogs being sold 0:13:27.520 --> 0:13:30.080 a people even heard before because they're actually the songwriters 0:13:30.480 --> 0:13:33.240 behind these songs and that's the sort of the really 0:13:33.320 --> 0:13:35.160 unique I p and that's some sort of the more 0:13:35.679 --> 0:13:37.720 the air of the music industry which is not as prominent, 0:13:37.760 --> 0:13:40.240 which is but we're on the very valuable ap is. 0:13:41.640 --> 0:13:44.839 So actually, Alis, this would be a good spot because 0:13:44.880 --> 0:13:48.240 you mentioned you are a lawyer, but or you were 0:13:48.240 --> 0:13:51.040 previously a lawyer. What do you just tell us sort 0:13:51.040 --> 0:13:54.560 of real quickly for listeners, how you got into this 0:13:54.679 --> 0:13:57.679 space and the sort of like broad trajectory of how 0:13:57.720 --> 0:13:59.880 you got here in this moment to be a MU 0:14:00.160 --> 0:14:04.880 consultant and expert in music valuation. Sure, so, I was 0:14:04.920 --> 0:14:08.560 actually originally a corporate lawyer in New Zealand, where I 0:14:08.600 --> 0:14:11.560 grew up, and I moved to New York about eight 0:14:11.640 --> 0:14:14.079 years ago to study music business at n y U. 0:14:15.000 --> 0:14:17.439 And while I was at n y U, I actually 0:14:17.800 --> 0:14:19.120 had a lot of spent a lot of time in 0:14:19.120 --> 0:14:22.720 the music publishing industry, including one publisher that was sort 0:14:22.760 --> 0:14:27.560 of acquiring a lot of copyrights, and eventually after moving 0:14:27.600 --> 0:14:31.000 back to London working on the legal side at Universal Records, 0:14:31.040 --> 0:14:33.960 I worked at a company for the about three years 0:14:34.000 --> 0:14:36.680 called twenty three Capital, which was lending into the space 0:14:37.480 --> 0:14:40.960 um leaning against back catalogs rather than purchasing, and I 0:14:41.000 --> 0:14:43.640 had the sort of experience of doing the analysis of 0:14:43.680 --> 0:14:47.120 the royalty statements and yeah, to provide a little bit 0:14:47.120 --> 0:14:50.560 of detail that these statements that you know, half in 0:14:50.680 --> 0:14:53.640 your statements around could be a thousand line a thousand 0:14:53.640 --> 0:14:56.920 lines of excels. So the very detailed and sort of 0:14:56.920 --> 0:15:00.320 specialist and then like knowledge needed to go for these. 0:15:00.360 --> 0:15:03.440 So I've sort of had the royalty analysis siety as 0:15:03.440 --> 0:15:07.080 well as having an understanding of the contractual relationships. So 0:15:07.560 --> 0:15:09.640 at twenty three Capital I was doing a lot of 0:15:09.640 --> 0:15:13.880 analysis of the underwriting essentially of these catalogs, and a 0:15:13.920 --> 0:15:17.520 lot of music education, a lot of music education seminars 0:15:17.520 --> 0:15:20.360 to our investors um and yeah, no, I'm just sort 0:15:20.360 --> 0:15:22.640 of doing it on a freelance basis and in particular 0:15:22.720 --> 0:15:25.520 working with a lot of artist teams who are suddenly 0:15:25.640 --> 0:15:28.400 catalog to get a sense of value and to sort 0:15:28.400 --> 0:15:30.680 of put the materials to give in a nice way 0:15:31.040 --> 0:15:34.040 to seek interest because a lot of the diligence and 0:15:34.080 --> 0:15:38.320 financial and these catalogs are very not only very specialized, 0:15:38.360 --> 0:15:41.600 but very large, and that's sort of something which has 0:15:42.200 --> 0:15:44.160 been understood in the industream. We have found a good 0:15:44.240 --> 0:15:48.000 niche in the last last year or so. So you 0:15:48.080 --> 0:15:53.080 mentioned working with artists teams, and I'm curious if in 0:15:53.160 --> 0:15:56.600 your mind there seems to be a sort of shift 0:15:56.920 --> 0:16:03.520 in sentiment towards selling catalogs. So my understanding is that, 0:16:04.680 --> 0:16:07.400 you know, selling your catalog used to be something that 0:16:07.840 --> 0:16:13.560 artists were told never to do unless absolutely necessary. But nowadays, 0:16:13.680 --> 0:16:18.800 because there's this sort of growing financial infrastructure around music assets, 0:16:19.640 --> 0:16:22.360 artists are starting to feel a bit different and they're 0:16:22.360 --> 0:16:24.320 starting to feel if they sell the rights to their 0:16:24.400 --> 0:16:28.440 music they could still get some income, but maybe a 0:16:28.680 --> 0:16:32.560 specialized player could do a better job of promoting the 0:16:32.600 --> 0:16:36.280 catalog or you know, selling it for commercials and things 0:16:36.320 --> 0:16:39.120 like that and make money that way. Do you sense 0:16:39.200 --> 0:16:45.240 that that shift underway? Definitely see that shifts. So I 0:16:45.280 --> 0:16:48.440 think when I first started the industry and artist selling 0:16:48.480 --> 0:16:51.760 the catalog was it was your typical dift divorce Texas 0:16:51.760 --> 0:16:55.920 scenario where there was a very immediate need for liquidity, 0:16:55.920 --> 0:16:59.120 and that was usually the reasons where is artist Kellogg's 0:16:59.200 --> 0:17:03.040 for salt. I think now there's a lot more interest 0:17:03.320 --> 0:17:06.879 in the in the in the space um. Artists are 0:17:06.880 --> 0:17:11.440 getting probably a lot more fairer prices for their catalogs 0:17:11.520 --> 0:17:14.480 and it's sort of made artists and their managers think 0:17:14.520 --> 0:17:17.919 about things like a state planning and a lot of these, 0:17:18.359 --> 0:17:21.040 especially all these older artists, it's almost like a legacy 0:17:21.080 --> 0:17:25.119 management scenarios. So one really good example is a company 0:17:25.119 --> 0:17:28.760 called Primary Wave, which has worked with board interests in 0:17:28.760 --> 0:17:31.880 the likes of Ray Charles and states like that, where 0:17:31.880 --> 0:17:34.000 they actually sort of it's sort of a way to 0:17:34.760 --> 0:17:37.960 the buy, They sell a partial interest, and that company 0:17:38.000 --> 0:17:40.520 takes over the marketing and the social media and sort 0:17:40.520 --> 0:17:45.000 of the legacy management of those catalogs. So it's definitely, um, 0:17:45.040 --> 0:17:48.399 the interest is sort of let those people, artists and 0:17:48.480 --> 0:17:52.320 managers make those decisions from you know, I'm effectively selling 0:17:52.400 --> 0:17:55.199 my my pension plan, but is it better for me 0:17:55.240 --> 0:17:56.920 to have this cash right now? And I think it's 0:17:56.960 --> 0:18:00.239 made that more of an optional decision round of than 0:18:00.280 --> 0:18:04.240 a last you know, worst case scenario decision, where that 0:18:04.400 --> 0:18:07.520 was sort of typical reasons for natis was suddenly a catalog, right, 0:18:07.560 --> 0:18:10.919 So previously it was a sort of desperate thing or 0:18:10.960 --> 0:18:15.080 some some liquidity need a divorce or something like that, 0:18:15.520 --> 0:18:18.480 and now it's just oh this, you know, it's more 0:18:19.080 --> 0:18:23.399 cash in hand versus you know, you know, one in 0:18:23.440 --> 0:18:25.680 the hand too in the bush, I guess kind of thing. 0:18:26.440 --> 0:18:30.280 Is there any artistic loss with this? So like someone 0:18:30.359 --> 0:18:35.800 like Shakira or Bob Dylan selling their catalogs, do they 0:18:35.840 --> 0:18:38.960 take any artistic risks? Do they still retain any control 0:18:39.040 --> 0:18:41.840 over how their music is used? Like what? What? Or 0:18:41.880 --> 0:18:44.920 is it just a financial transaction. So that goes back 0:18:44.920 --> 0:18:47.120 to the legal question I was talking about, by what 0:18:47.240 --> 0:18:50.399 rights you buying? And you can buy the rights, you 0:18:50.400 --> 0:18:52.760 can buy a passive interest and the cash flows coming 0:18:52.760 --> 0:18:54.639 from a catalog, but you can buy the end of 0:18:54.680 --> 0:18:57.600 laying copyright. So in theory, if you bought anout of 0:18:57.640 --> 0:19:02.360 sunderline copyright without any specific provisions, you could license set 0:19:02.359 --> 0:19:04.719 out to whatever TV show you wanted, you could you know, 0:19:05.080 --> 0:19:07.440 put out a deluxury issue with all of the sessions. 0:19:07.440 --> 0:19:09.720 So it's that's why it's quite an issue of are 0:19:09.760 --> 0:19:13.479 they buying control? And that's obviously the positive for an 0:19:13.480 --> 0:19:16.960 investor because they might see ways to increase you income 0:19:17.080 --> 0:19:20.240 from from that catalog. But it's also a manner of 0:19:20.640 --> 0:19:23.760 negotiation for the clients trying to the artists, trying to 0:19:23.800 --> 0:19:26.480 retain sort of sort of control about how that catalog 0:19:26.560 --> 0:19:30.320 is exploited. Um, so that's sort of the the legal 0:19:30.400 --> 0:19:33.320 rights being purchased is a really important when the artist 0:19:33.440 --> 0:19:51.840 is considering that. So one thing I'm really fascinated by 0:19:52.000 --> 0:19:55.000 and we've touched on this already, but going back to 0:19:55.040 --> 0:20:00.120 the valuation question, Um, you know, it's it's one thing 0:20:00.200 --> 0:20:05.240 to try to estimate the cash flows from I mean, 0:20:05.280 --> 0:20:08.760 all of these are called esoteric securitizations. When we're talking 0:20:08.760 --> 0:20:12.840 about intangibles like franchise and brand rights things like that. 0:20:13.960 --> 0:20:16.679 It's one thing to estimate the cash flow from a 0:20:16.840 --> 0:20:23.240 restaurant or you know, maybe fast food franchises, things like that, 0:20:23.359 --> 0:20:28.720 other exotic um assets. But it's kind of different to 0:20:28.840 --> 0:20:34.040 try to estimate cash flow from a song. When the 0:20:34.119 --> 0:20:37.399 popularity of music and you know, what's trending and what 0:20:37.520 --> 0:20:42.320 isn't tends to change quite quickly. How how do people? 0:20:43.200 --> 0:20:45.480 How do people go about doing that? Because I mean 0:20:46.480 --> 0:20:48.480 I think few people were Joe is gonna hate me 0:20:48.520 --> 0:20:50.520 for saying this, but I think few people. For instance, 0:20:50.560 --> 0:20:54.480 we're expecting Fleetwood Mac to make this big comeback on 0:20:54.600 --> 0:20:59.040 streaming because people are sort of rediscovering the music. There, Um, 0:20:59.080 --> 0:21:01.120 there are other wh Why was I going to hate 0:21:01.119 --> 0:21:05.360 you for saying that because you like Fleetwood macr Oh, yeah, 0:21:05.359 --> 0:21:07.679 I like that, But I thought I thought you'd be 0:21:07.880 --> 0:21:12.359 offended at the idea of people rediscovering them. Okay, fine, 0:21:12.560 --> 0:21:14.879 and then no, I'm happy people are and then I 0:21:14.880 --> 0:21:16.840 guess they can go the other way as well. Right, 0:21:16.920 --> 0:21:21.440 So Michael Jackson kind of um fell from favor due 0:21:21.440 --> 0:21:24.320 to well we all know why. And so you can 0:21:24.320 --> 0:21:28.520 see artists who are sort of unexpectedly unpopular at times. 0:21:28.520 --> 0:21:32.360 So how do people go about doing that kind of analysis? 0:21:33.840 --> 0:21:36.560 So it's sort of similar to looking at a company 0:21:36.560 --> 0:21:39.920 where effectively you do a quality of earnings reports. So 0:21:40.560 --> 0:21:43.439 these reyalty statements can go back, um, you know, and 0:21:43.480 --> 0:21:45.960 get five to ten years of royalty history. Usually you 0:21:45.960 --> 0:21:48.640 get three to five. And what you're trying to look 0:21:48.920 --> 0:21:51.639 for in those earnings as what is what is the 0:21:51.680 --> 0:21:55.200 repeatable recurring income And as you mentioned, as are people 0:21:55.280 --> 0:21:58.120 still listening to this artist in the very repeatable way? 0:21:58.320 --> 0:22:01.000 Given the nature of streaming, we're seeing a lot the 0:22:01.080 --> 0:22:03.200 calogs of the likes of the Fleetwood Maker, likes of 0:22:03.280 --> 0:22:07.280 those those Legacy X have actually experienced growth, which is 0:22:07.359 --> 0:22:10.640 really encouraging. Because of the sort of streaming environment, it's 0:22:10.720 --> 0:22:12.760 very much a case by case basis, but I think 0:22:12.800 --> 0:22:15.639 genuinely it's around the quality of the artists that a 0:22:15.720 --> 0:22:20.240 lot of those quality artists are experiencing growth. But one 0:22:20.280 --> 0:22:23.159 thing which is I guess the most difficult part of 0:22:23.840 --> 0:22:28.080 doing such analysis is more recent content. So for example, 0:22:28.160 --> 0:22:31.040 if you've got a new release from a from a 0:22:31.119 --> 0:22:33.960 track album and that you've got three years of earnings, 0:22:34.160 --> 0:22:37.119 what's second to earn in the next ten years and 0:22:37.160 --> 0:22:39.520 what's the sort of decay there. That's been the really 0:22:39.560 --> 0:22:41.880 difficult part because if you've got a long period of 0:22:42.160 --> 0:22:44.680 three to five earnings, we see what you do see. 0:22:44.680 --> 0:22:47.359 A lot of these legacy care logs are very repeatable, 0:22:47.400 --> 0:22:50.520 recurring income, which is growing of the industry. That you 0:22:50.520 --> 0:22:52.959 can get confidence of that. But it's quite difficult, um 0:22:53.480 --> 0:22:56.040 when you've got more recent content because I guess so 0:22:56.200 --> 0:23:01.960 historical earnings aren't necessarily reflective of the few consumption. So yeah, 0:23:01.960 --> 0:23:05.000 it's very much um a numbers game and sort of 0:23:05.040 --> 0:23:08.159 going into the analysis. And also I guess there is 0:23:08.200 --> 0:23:10.480 some sort of creative or a and our touched with 0:23:10.560 --> 0:23:14.240 the acquira might like theatist and might think they're relevant. 0:23:14.920 --> 0:23:17.400 They might think that being underpromoted recently and they might 0:23:17.440 --> 0:23:20.720 think that they've got some cultural relevance going forward and 0:23:20.760 --> 0:23:23.080 they think they can sort of bring that back by 0:23:23.320 --> 0:23:26.560 using their own marketing and distribution. I think, you know, 0:23:27.200 --> 0:23:30.280 Jamie Powell over at ft Alphabelle has written about this. 0:23:30.400 --> 0:23:32.679 So you mentioned, like Drake, we don't really know like 0:23:32.720 --> 0:23:35.640 in ten or twenty years, the degree to which people 0:23:35.640 --> 0:23:38.680 will be listening to him. Someone like Bob Dylan. People 0:23:38.680 --> 0:23:40.919 have been listening to him for decades. But you know, 0:23:41.119 --> 0:23:43.680 like when I was a kid and my parents would 0:23:43.720 --> 0:23:46.520 like listen to a Bob Dylan cassette in the car, 0:23:46.840 --> 0:23:49.399 And now I personally am a huge Bob Dylan fan. 0:23:49.960 --> 0:23:51.640