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© 2022 Outlander LLC. All rights reserved
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WE INVEST IN
Music Catalogues
Music copyrights have experienced tremendous growth following the public’s embrace of internet-based music delivery. The music industry has now experienced substantial year-over-year growth for the past five years, due largely to the universal embrace of digital streaming as the preferred delivery mechanism.
Even with recent substantial growth, market penetration for streaming has not yet peaked, either in the United States or abroad.
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Industry Growth
In 2021, the global music industry reported its seventh consecutive year of growth, with annual revenues expanding from $14.2 billion to $25.9 billion during that time. This outcome is driven primarily by the growth and overall advantageous effects of streaming. Reduction of piracy, favorable regulatory developments, and maturation of emerging markets also enhance growth.
Outlander produces attractive yields based on this value proposition by investing in music copyright royalties.
Streaming
Streaming grew from 1% to over 50% of recorded music revenue over the past ten years; it climbed 22.9% in 2019 and 20% in the COVID year of 2020. Goldman predicts streaming will grow at a 12% CAGR over the next ten years, stimulated by an increase of paid subscribers from 340 million to 1.2 billion during the same period. To serve this growing demand, Spotify uploads 60,000 songs on its platform every day.
The global streaming market has experienced only 11% penetration, which is expected to nearly double by 2030. Even the two most mature streaming markets of the UK and the US today are only experiencing near 40% penetration today. Goldman expects streaming penetration in 2030 will grow 56% in developed markets and 233% in emerging markets.
A recent ruling by the US Copyright Royalty Board increased the streaming royalties owed to publishing rights holders by 44%.
An Enduring and Non-Correlative Investment
Historic analysis shows that music royalties provide relatively stable income that is not correlated to other asset classes. A 2021 report by Shot Tower Capital explains that “…music assets have generally experienced non-correlated growth throughout various market cycles.” Moreover, consumers continue to spend on music during recessions. In times of economic instability, music provides stable cash flow.
Investment Strategy
Outlander has developed an investment strategy targeting specific types of catalogs that demonstrate heightened profitability. Our investment strategy favors catalogs with exposure to geographies in which streaming penetration has substantial room to grow.
We also favor smaller catalogs that are often available for lower multiples. Finally, due to our strategic admin and co-investment partnership with CTM, we prefer deals in which admin is available, as active administration of catalogs can further enhance our returns.
