Odd Lots - Why Music Back Catalogs Have Become a Red-Hot Asset Class

Episode Date: March 8, 2021

Bob Dylan did it last year. Shakira did it in January. More and more famous musicians are selling off the rights to their back catalogs to investors. But why now? Why is there so much demand for this asset? On the latest Odd Lots, we speak with Alaister Moughan, an independent music valuation expert, about why this booming market is happening now.See omnystudio.com/listener for privacy information.

Thanks for listening to Odd Lots. Follow the show on Amazon Music for more future episodes or just ask Alexa, play the podcast, Odd Lots on Amazon Music. Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Wisenthaw. And I'm Tracy Allaway. So Tracy, we don't really talk about it that much on the show, but if there's one thing I know about you and your career, you're very into sort of like weird asset class. as weird income streams that get packaged and resold. A lifelong fascination of yours. Yeah, I guess you could broadly say I'm interested in the financialization of various assets. But in recent years, there have been some pretty amazing ones.

I think one of the weird things about this is that nowadays when you hear it, it doesn't actually sound that weird. But when these things were happening just a couple of years ago, it was really strange. So I remember, for instance, there was a solar panel securitization a few years ago. And everyone thought that was nuts because bankers were securitizing sunshine into an investable bond. But nowadays, that seems very, very normal. And then some of the other ones that have come up are franchise rights and sort of brand values from restaurants. We've had a bunch of those.

And the latest one that everyone is kind of going nuts over is music. rights. Yeah, exactly, right. So basically anything that throws off some sort of predictable or semi-predictable or, you know, future cash flows can theoretically be turned into a product, into a financial product that can be sold. And of course, one thing that we know throws off cash is music rights. And so this year, there's been a bunch, but a couple artists that sold the rights to their catalog, Bob Dylan. Someone bought Bob Dylan's future cash flows. So all the, I guess, I don't know, all the music, all the streaming revenue and

you said commercials and movies and all that. He got a big check in advance for that. Shakira is another one who just, I think, a few weeks ago, a few weeks ago sold her song catalog. So this is a hot area. I mean, I think this actually, like, weren't Bowie Bonds, a thing. a long time ago that's like basically the Joe there's an odd lots episode on this

there's actually a very very early years ago yeah that was right after David Bowie died but I have to say probably the most interesting thing that happened in the music rights or royalty space last year was someone not selling their music rights and that was Taylor Swift who

famously has you know lost the rights to her master her old masters her catalog of music and then it was bought by Scooter Braun, which is kind of her arch nemesis in the music world. And then he sold those on to a private equity firm called Shamrock Capital. And Taylor Swift had a lot to say about that entire process, which I'm sure we're going to get into. I got to say, someone actually emailed me saying that we should get Taylor Swift on the podcast

to talk about all these music issues. Oh, yeah. Why haven't we done that yet? I can't believe. That's so obvious. Why haven't we just had Taylor Swift on our podcast? You know, one day. We'll get her next week.

We'll get her next week. Yeah. So obviously we don't have Taylor Swift today. We'll be up front about that. But we do have someone who knows all about this space. Yeah. And there are so many questions that we need to get answered. Like, why now?

How do you value these income streams or these catalogs, given the ongoing, changing nature of the music business? I mean, these days, obviously, streaming is a really big thing. but that wasn't obviously anticipatable a few years ago. We don't know what the music industry is going to be like 10 years. So so many questions, why now, how you value these catalogs. So I'm very excited. We're going to be speaking with someone who is a music consultant in the business of valuing exactly what we're talking about.

We're going to be speaking with Alistair Mowen of Mowen Music, an expert in the music valuation business to answer all these questions. So Alistair, thank you so much for joining us. Of course. Thanks, Joe. So, you know, why now? I mean, let's start with that. I mean, we have seen a number of really big artists selling the rights to their work. They're turning their work into an asset that can be sold. Obviously, this isn't totally new.

It's been going on for a while, but it seems to be really gathering steam. So what is a what's happening right at this moment that suddenly is making this a hot asset class? You sort of mentioned it in your introduction there. And obviously, streaming has increased the recorded music industry and especially the narrative around the industry. So the year 2000 and 2014, there was continuing decline in the sale of recorded music as physical sales dropped. Since 2014, you've seen a streaming grow at a rate of 40% per year, which is really encouraging. And the other thing which is really encouraging by that story is the nature of the consumption. We're obviously in a physical environment.

You sold a lot of CDs. It's sort of a one-off transaction. But with streaming, you've got sort of repeatable consumption. And it's very much, yeah, put a lot of interest for investors in the data is a lot better than traditional sales data. And also the underlying consumption, there's more of a, there seems to be a lot more repeatable consumption which people are confident they can model. So I think definitely that strong narrative around the recorded music industry, a lot of education in the market with the

likes of hypnosis and primary wave doing a lot of funding rounds and definitely sort of a low interest rate environment is have a lot of people looking for for assets of field, long-term yield and music catalogs. This has sort of been a really, really invoked opportunity for that recently. So when we see a headline like Universal Music Publishing, buying Bob Dylan's catalog for a reported $300 million, what does that actually mean? Where does the price come from? And what does the catalog actually entail in terms of rights and cash flow? Sure. So that's a very good question. First of all, when you're talking about a catalog, that can mean different types of rights. So really broadly you've got the master rights. So that's the actual recording copyright.

And then you have the publishing copyright, which is the underwriting underlying song or the underlying composition. And it gets a little bit more complicated around with you by the right to have control over that income. But those are sort of the two general classes. And when, you know, Universal will be valuing that transaction, they'll be looking at the income streams, historic income streams from whatever, a rights they're buying, and they'll also be looking at how long they have those rights will last for, and then sort of trying to project those rights going forward. And as I sort of mentioned,

you know, for example, publishing copyrights last 70 years plus the life of the offer. So it's a very long-term cash flow. So most of these investments are looking for low yield and sort of projecting 10 to 15 years of cash flow of a terminal value. So it's a, it's very much a long-term horizon and looking at the past history, how long you have those rights for, and sort of how confident you are in predicting those future cash flows? You know, you mentioned the high quality of the data that with streaming, these assets can be analyzed in a way that they haven't been, yeah, it hasn't been so easy in the past, like maybe when people are buying CDs and such.

But on the other hand, streaming as a phenomenon hasn't really been. around that long and we know that it's right there's always potential for technological disruption so how do people or how do you go about essentially modeling the risk that the business just dramatically changes again like another sort of like napster or something could come along in theory and people stop paying for music or the amount people pay for music plunges like how do how do those risks get incorporated into what people are willing to pay so that's a really interesting question and historically before the recent boom publishing catalogs rather than master catalogs were sort of considered a lot more low risk and for that mean for the very

reason you mentioned that in terms of the royalties coming from B to C income so from sales or streams that's something which does change over time but what is often quite prominent in music catalogs which is on the publishing side is B to B licensing. so licensing revenue from radio play or from the background usage of music in stores or from the background usage of music in bars. And as well as sort of licensing for TV and film and going forward, I guess there's a lot of hope that, you know, new technology such as AI, etc., will be also licenses for that. So that's one of the reasons why particularly publishing is, which has more of those diverse

income streams typically, is sort of considered more low risk. So that's very much a consideration in looking at the types of income, but it's sort of quite surprising is how many diverse income streams can come from one copyright. So Joe just mentioned the idea of the business model changing and how might that impact master rights. So one of the really interesting things about the Taylor Swift saga that I mentioned in the intro was that after her old masters were sold to this private equity firm, she basically said that she was going to re-record her old songs in order to get control back over them.

I have to say, like, this is an area that I'm not familiar with, but what does that actually mean? And how is she allowed to do that? Because I thought the whole point of old masters was to basically preserve the copyright right on the music. And then lastly, would that vastly change the value of the songs that this private equity firm, Shamrock Capital, just bought for millions of dollars, of course. Sure. So before I worked in the music industry, I was actually a trained lawyer. And that's become really in handy because as well as valuing these royalty cash flows and analyzing it,

you've got to be really familiar with the legal stipulations of these contracts. So when I spoke about the master recording and the publishing composition, the other difference there is that if you write a song and you do someone else does a cover version of it, someone else can always do another cover, but you can't record, you can't write the same song again. So that publishing contract always remains unique. But you could always, for example, Taylor Swift is effectively covering her own songs. So typically the record label, when it signed Taylor Swift,

there'll be provisions in those contracts saying that she can't cover her own songs for a specified period of time. So that's what's going on there is that she is effectively covering her own work and that's something which, yeah, there's to be stipulations in the contract. The second part of your question is really interesting because the short answer is it's untested. There's been sort of people in the past, prominent artists, such as Prince who have had followed with their record label

and always use this as sort of a part of the negotiation by saying, well, I'm going to re-rego with my entire catalogue. And usually that goes around negotiation of perhaps giving those masters back or increasing the share of the income the artist takes. So it's actually something relatively untested because there's a few examples of some smaller artists doing it, but it's always been used as a negotiation tactic, a sort of nuclear option.

And no one in Tor Taylor has actually sort of pulled that option. So it'll be interesting to see because it does raise many questions. So just on Taylor Swift real quickly, in theory, if she were to re-record all of her old albums and theoretically she would like, I don't know, release them as new albums or something, the fans might stream those,

in which case she would get some streaming revenue from that. But then the owner of those original masters would get some sort of licensing revenue as they would from any other cover? So yeah, the whoever owns the underlying publishing assets. So yeah. And typically in the industry, the artist retains ownership, or at least for the long term,

the artists will retain any ownership of those publishing interests. And this is what you might see in a lot of these headlines, is that a lot of the big catalogs being sold are people you haven't heard before because they're actually the songwriters behind these songs. And that's the sort of the really, unique IP and that's some sort of the more the area of the music industry which is not as prominent which is but where the very

valuable IP is. So actually Alistair this would be a good spot because you mentioned you are a lawyer but or you were previously a lawyer what do you just tell us sort of real quickly for listeners how you got into this space

and the sort of like broad trajectory of how you got here in this moment to be a music consultant and expert in music valuation. Sure. So I was actually originally a corporate lawyer in New Zealand where I grew up. And I moved to New York about eight years ago to study music business at NYU. And while I was at NYU, I actually had a lot of, I spent a lot of time in the music publishing industry, including one publisher that was sort of acquiring a lot of copyrights. And eventually, after moving back to London, working on the legal side at Universal Records, I worked at a company for the, about three years called 23 Capital, which was lending into the space, lending against back catalogs rather than purchasing. And I had the sort of experience of doing the analysis of the royalty statements.

And, yeah, to provide a little bit of detail, like these statements, you know, half annual statement is around could be a thousand lines, a thousand lines of Excel. So they're very detailed and sort of specialist and knowledge needed to go through these. So I sort of had the royalty analysis side as well as having an understanding of the contractual relationship. So at 23 Capital, I was doing a lot of analysis of the underwriting essentially of these catalogs and a lot of music education, a lot of music education seminars to our investors. And yeah, now I'm just sort of doing it on a freelance basis and in particular working with a lot of artist teams who are selling their catalog to get a sense of value and just sort of put the materials together in a nice.

way to seek interest because a lot of the diligence and financial around these catalogs are very, not only very specialized, but very large. And that's sort of something which has been understood in the industry and we found a good niche in the last year or so. So you mentioned working with artist teams. And I'm curious if in your mind there seems to be a sort of shift in sentiment towards selling. catalog. So my understanding is that, you know, selling your catalog used to be something that artists were told never to do unless absolutely necessary. But nowadays, because there's this sort of growing financial infrastructure around music assets, artists are starting to feel a bit different

and they're starting to feel if they sell the rights to their music, they could still get some income, but maybe a specialized player. could do a better job of promoting the catalogue or, you know, selling it for commercials and things like that and make money that way. Do you sense that shift underway? I definitely see that shift. So I think when I first started the industry, an artist selling their catalogue was your typical deaf-divorced taxes scenario where there was a very immediate need for liquidity, and that was usually the reasons where these artist catalogs were sold. I think now there's a lot more interest in the space.

Artists are getting probably a lot more fairer prices for their catalogs. And it's sort of made artists and their managers think about things like estate planning. And a lot of these, especially all these older artists, it's almost like a legacy management scenario. So one really good example is a company called Primary Wave, which has worked with broad interest in the likes of Ray Charles. and estates like that where they actually sort of, it's sort of a way to, they buy a,

they sell a partial interest and that company takes over the marketing and the social media and sort of the legacy management of those catalogs. So it's definitely, the interest is sort of let those people, let artists and managers

make those decisions from, you know, I'm effectively selling my pension plan, but is it better for me to have this cash right now? And I think it's made that more of a, an optional decision, rather than a last, you know, a worst-case scenario decision where that was sort of typical reasons if an artist was selling their catalog.

Right. So previously it was a sort of desperate thing or some liquidity need, a divorce or something like that. And now it's just, oh, well, this, you know, it's more cash in hand versus, you know, one in the hand, two in the bush, I guess, kind of thing. Is there any artistic loss with this? Like someone like Shakira or Bob Dylan selling their catalogs, do they take any artistic risks?

Do they still retain any control over how their music is used? Like what a, or is it just a financial transaction? So that goes back to the legal question I was talking about by what rights you buying. And you can buy the rights, you can buy a passive interest and the cash flows coming from a catalog, or you can buy the underlying copyright. So in theory, if you bought an out of the underlying copyright without, any specific provisions, you could license that out to whatever TV show you wanted. You could put out a deluxe reissue with all of the sessions. So that's always quite an issue of are they

buying control? And that's obviously a positive for an investor because they might see ways to increase the income from that catalog. But it's also a manner of negotiation for the client trying to, the artist trying to retain certain sort of control about how that catalog is exploited. So that's sort of, yeah, the legal rights being purchased is really important when the artist is considering that. Today's show is brought to you by Vanguard. To all the financial advisors listening, let's talk bonds for a minute. Capturing value and fixed income is not easy. Bond markets are massive, murky, and let's be real.

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go see the record for yourself at vanguard.com slash audio. That's vanguard.com slash audio. All investing is subject to risk vanguard marketing corporation distributor. So one thing I'm really fascinated by, and we've touched on this already, but going back to the valuation question, you know, it's one thing to try to estimate the cash flows from, I mean, all of these are called esoteric securitizations when we're talking about intangibles like a franchise and brand rights, things like that. it's one thing to estimate the cash flow from a restaurant or, you know, maybe fast food franchises, things like that, other exotic assets. But it's kind of different to try to estimate cash flow from a song when the popularity of music and, you know, what's trendy and what isn't tends to change quite quickly.

how do people go about doing that? Because I mean, I think few people were, Joe is going to hate me for saying this, but I think few people, for instance, were expecting Fleetwood Mac

to make this big comeback on streaming because people are sort of rediscovering the music there. There are other examples. Why was I going to hate you for saying that? Because you like Fleetwood Mac, right? Oh, yeah, yeah, I like them, but that's okay.

I thought you'd be offended at the idea of people rediscovering them. No, no. Okay, fine. No, no, no. I'm happy people are. And then I guess it can go the other way as well, right? So Michael Jackson kind of fell from favor due to, well, we all know why.

And so you can see artists who are sort of unexpectedly unpopular at times. So how do people go about doing that kind of analysis? So it's sort of similar to looking at a company where effectively you do a quality of earnings report. So these royalty statements can go back, you know, and get five to ten years of royalty history. Usually you get three to five. And what you're trying to look for in those earnings is what is the repeatable recurring income. And as you mentioned, are people still listening to this artist in a very repeatable way?

Given the nature of streaming, we've seen a lot, the catalogs of the likes of the Fleetwood Maker, likes of those legacy acts have actually experienced growth, which is really encouraging because of the sort of streaming environment. It's very much a case-by-case basis, but I think generally it's around the quality of the artists, a lot of those quality artists are experiencing growth. But one thing which is, I guess, the most difficult part of doing such analysis

is more recent content. So, for example, if you've got a new release from a Drake album and then you've got three years of earnings, what's that going to earn in the next 10 years? And what's that sort of decay there? Yeah, that's the really difficult part because if you've got a long period of three to five earnings, we see, which you do see a lot in these legacy catalogs, a very repeatable recurring income, which is growing of the industry.

You can get confidence of that, but it's quite difficult when you've got more recent content because I guess those historical earnings aren't necessarily reflective of the future consumption. So, yeah, it's very much a numbers game and sort of going into the analysis. And also, I guess, there is some sort of creative or A&R touch where the acquirer might like the artist. They might think they're relevant. They might think they've been under-promoted recently. And they might think that they've got some cultural relevance going forward. And they think they can sort of bring that back by using their own marketing and distribution.

I think, you know, Jamie Powell over at FT Alphaville has written about this. So you mentioned, like, Drake, we don't really know, like, in 10 or 20 years, the degree to which people will be. listening to him. Someone like Bob Dylan, people have been listening to him for decades, but, you know, like, when I was a kid and my parents would, like, listen to a Bob Dylan cassette in the car, and now I personally am a huge Bob Dylan fan, but on the other hand, when I'm in the car with my daughter, she probably has headphones on looking at something on her tablet. So do you worry about that, like that, like historical, like patterns of these sort of legacy acts, which are just these huge cultural forces that maybe like after a while they just you know do people worry like there's no

this my generation isn't going to hand down bob dillon the same way my parents generation did to me yeah and that's that to be honest that's the most interesting part of doing this valuation work is it's sort of stepping back in thinking about the artist and thinking about how confident you are they're going to remain culturally relevance going back to what i said before one interesting angle was to also consider the business licensing aspect of a catalog. So, for example, you know, a song like Be My Baby, how often is that used in a film or how often is sweet dreams used in an 80s film? And there's sort of where those songs which have a mark a period of time, they're often used

a lot in those sort of circumstances. And that sort of we might be getting your confidence in that recurring income or might even be more sources like commercial or rock radio, which, you know, still plays sweet child of mine all the time. It's sort of looking at those different sources and getting a story. But ultimately, after sort of doing all the analysis, that's what you're asking yourself is that would, do I feel confident that this is an artist that's going to remain significantly culturally relevant in, you know, 10 to 20 years' time?

Because you really are looking at the long term of these assets. So I just popped to Bob Dylan royalties and Wall Street into Google. and I magically came up with an article that I had forgotten I'd written, but it's from 2012. And the headline is Goldman Rethinks Dylan Royalties Bond. And the lead has a really bad music joke in it. But investors have thought twice and decided it's not all right to take up an unusual bond offering back by royalties from songs and by Bob Dylan. So this was back in 2012. Alistair, what do you think changed between now and then to make investments?

investors and Wall Street more comfortable with these types of structures and deals? I think in particular, as we mentioned, the state of the positive growth in the recorded music industry. One area which is sort of, again, in the details, is that, especially in the publishing side, these realities are very heavily regulated and they're actually prescribed by law how much you get paid per stream or how much you get paid per radio play. And those rates are actually being, they get decided for a five year period and they've been sort of moved upwards in recent times. So there is a lot of very confidence around that. And I guess, yeah, it's very much the state of the industry and I guess there's been some, some early players in the game

who have really proven the success of this model because I think before, as you mentioned, with the Bowie Bonds and the Bob Dylan example, it was very much sort of very esoteric and there was always just sort of one of them. But I think the number of people, the number of players and also the more the education around the assets combined of the positive industry has really got people a lot more comfortable. And to be honest, have got people wanting to invest their time to understand all of the interests of these assets. So what's your guess?

I mean, we don't actually know an official price tag, I think, on the Bob Dylan catalog. We don't know if an official price tag on the Shakira catalog. what do we know about how much these are valued? What do people say? And what is your sense of how big this business is right now in total? What do we know about dollars here? Sure. I think in terms of how they're valued,

it's a multiple approach is often used as a shorthand. And you've seen multiples go from five years ago, the range of 10 to 16 for publishing to 20 plus. So I think the range has gone up significantly in terms of the overall market size, you sort of have to make a distinction, so you've got the major labels, which are very much have big catalogs,

but also are in the game of new releases. And then you've got the catalog acquirers, which the major labels refer to as checkbook publishing. And I think that space is actually quite limited because there's only so many Bob Dylan's, there's only so many Neil Youngs. And I don't think there's catalogs, I don't think there's many catalogs of, you know, the report of $300 million price range.

So I think it's sort of, there is a limitation to the size of the industry. I haven't sort of done the overall analysis myself, but I think if you compare it to other asset classes, it would be a sort of a smaller niche. So given the evolution that you just described music rights going up in value by quite a lot, do you think that the business case for streaming, this idea that, you know, music might be worth more because we can all listen to it on Spotify and platforms like that. Do you think that's fully priced into music rights now or do you think there's further to go? I think that's being priced in at the moment and people are anticipating growth where the historical numbers back that up.

So continued growth in the streaming market and that, you know, a physical, sorry, a catalog, which has, for example, is 40% streaming that in two or three years time, that's going to go to 60 to 80, that streaming is going to become the dominant form of revenue generation. So I think that's what is being priced into these large acquisitions and these larger multiples is that people are, you know, the large multiples represent large people's anticipated growth. And I think that the theory is, you know, and I think some people got early in the game, maybe three or four years ago, I've seen that when they're paid a 16 effectively, with the revenue growing, it's now effectively a 12 times multiple.

So I think at the moment it's definitely being priced into the numbers. Well, let me ask you, you know, as a consultant, A, do you do work for both the seller musicians as well as buyers? And B, what's the first thing? So someone says, some band says, all right, Alistair, we want to sell our catalog. What do you do? Tell me how, like, you begin your process and sort of how you get to work. Sure. So I work on both the buy and sell side. So I work with a lot of artist teams who are looking to sell their catalogs and also do third party work for acquirers. So it's useful obviously to see both sides of that. And what I've seen from my experience the last few years is a lot more interests and a lot more bigger prices being paid. The second part in terms of what you ask for is, yeah, the first question, what parts of your account? catalog do you own, which revenue streams do you have? Do you have your masters or you're

paying paid a royalty? Did you write your own songs? Have you got your publishing? And the next sort of point to go is to look into the royalty statements that each of those income streams pay the artist and sort of aggregating that and getting a sense of the overall annual income, what titles are generating income, what source of income, is it radio, is it streaming? And then I guess if you progress, you go into the fun time. We're looking into the contracts to double-check they actually own those rights and getting a sense of, as I mentioned before, what are they selling? Are they selling the control of their catalog?

Are they selling a passive rights? And what are they comfortable with losing control over? The news doesn't stop on the weekends. Context changes constantly. And now Bloomberg is the place to stay on top of it all. Hi, I'm David Gurra. Join us every Saturday and Sunday for the new Bloomberg this weekend. I'm Christina Rafini.

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Listen to Leading by Example, executives making an impact on the IHeart Radio app, Apple Podcast, or wherever you get your podcast. Is there any prospect in your view of a sort of, um, I, Someone has to be working on this, but essentially retail ownership, either in the form of a listed equity asset that perhaps held a bunch of these or, you know, there's all these platforms that I always see advertised on Instagram. It's like, buy a share of art or buy a share of a race car, buy a share of a classic sneakers. Is anyone doing buy your share of Dylan's song catalog or anything like that for, I imagine a lot of like this could be a popular retail asset class? sure so in the UK you've got both hypnosis and Rental

who are publicly listed now so that's sort of they're both publicly listed and that's the first time that I guess you've got pure exposure to music catalogs because you can buy shares in Vivendi which owns Universal Music

but again Universal Music is in the business of releasing new releases as well there's also smaller platforms one called Rorty Exchange where you can buy and sell very small, you know, at least a million dollar royalty rights. So there's, it's an emerging space, but it's one which is given the sort of the complications

around the legal understanding and the royalty details, which is, I think, quite a tough break because it's quite hard to make it very streamlined. But on the public markets, both hypnosis and round tour leaving the charge, and I wouldn't be surprised to see a few more joining that, So is there anything else?

I mean, in terms of like what's next or what you're watching for the industry, anything else we should know about or pay attention to? That's a good question. I think, yeah, this is one thing which I think the IPO has been, especially in the UK,

I'm not sure the specific reason, maybe it's regulatory, but there's, I think definitely investors looking for an exit. Most of these, one interesting element is of the industry is who are the investors behind these companies.

And there's a lot of people of long-term money. There's a lot of pension funds. So, for example, the state pension fund of Michigan has a founder of a company called Concord, which bought the Imagine Dragons catalog. So there's often quite surprising owners of these assets who have those sort of long-term that need for long-term yield. And pension funds and sort of very long-term money

is often what is behind these assets. and I guess being predominantly a family office, pension fund P.E. sort of market and I guess looking for the retail market is the next step. One thing I was going to say, I saw that you were a fan of the Bakersfield sound.

Oh yeah. It's very surprising who ends up owning these assets. So Mill Hagerd's, some of his masters, is actually owned by Hasbro effectively. Really? How did that happen? So they acquired a company called Entertainment One recently

which acquired one of the label which had rights to that. So effectively Hasbro, you know, Twister, Transformers owns Mill Hagenmasters and actually the biggest sort of headline is they actually own

Def Row Records, which is sort of Tupac and Snoopto. Right, that's why I knew that it was familiar with Hasbro and music and I couldn't remember. I knew it was like some really discordant thing. That's hilarious. So they own all the death row records stuff?

They do. So it's often quite interesting where those assets end up in the sort of those investors actually behind the company which is investing in it and I guess one thing with my more sort of learning the financial market side of it more

recently is I think that yeah the retail market might be next because it's always sort of been either really long term money, PE money or sort of a very weird entertainment media slash company which happens to have which happened to sort of buy a catalog by buying

by effectively a you know Haspero trying to buy it's a pepper pig and the time you ended up Defro Records is part of that deal so Merle Haggard, Peppa Pig and Death Row Records Exactly, it's a great combo

Perfect Well Alistair Thank you so much for joining us I've been following this for a while So great to get these questions answered Yeah perfect thanks so much your time And as I mentioned So before I worked at 23 Capital

I hadn't worked in the finance space So I found your podcast Seri helpful to sort of learn the earnings and outs of the market and it's sort of been very helpful. Thank you so much. Thanks, Joe. Thanks, Tracy.

Thanks, Alastair. That was really interesting. Tracy, I really feel like there's the retail, the end, like, you know, the song exchange. Like, it seems like an obvious thing for people to just buy stakes

in their artists. You could even imagine, like, artists doing like a partial spin-off, like selling 25% or something like that. Because I just feel like, that's totally the thing these days that someone would just want to buy on their phone. I think we should start a U.S. equivalent of hypnosis,

and then we should start the O'DLOT SPAC and merge with it. Buy it. You know, I know we joke. Would that be fun? I mean, it would be very fun. You know what we joke about like, oh, odd lot spec?

It's totally irrelevant to the question we just had, but just watching the number of like people starting specs now is crazy. Like everyone we know is starting a SPAC. We're like the only people that have it. The amount of money people are making anyway. Well, also, this wouldn't be the most unusual spack of the current cycle by any means, even if we were focusing on what was once considered an esoteric asset. But this is also what's quite interesting about the conversation is, again, like,

I'm looking at work from eight years ago. And when people talk about music rights and music royalties, it all comes up under the umbrella of esoteric ABS. It's supposed to be an unusual asset class that's getting bundled and securitized. And now I think it sort of makes a lot of sense and it's becoming increasingly normal among a certain subset of investors. And the other thing I've been thinking quite a lot about is so much of esoteric ABS is about valuing cash flows from sort of intangibles. So things like the value of a fast food franchise, a catalog. of movies and music, as we've just been discussing.

And you can kind of see in a modern economy, I guess, where so much of the economy is predicated on those sorts of intangibles, that kind of makes a lot of sense. Like, you can see why that would be a growth category as opposed to securitizing the cash flow from, you know, like a factory that's actually making things or a more traditional or a laundromat. Yeah, exactly. No, I mean, it totally makes sense. And it's like, it's highly intuitive that intellectual property that can be licensed and especially licensed on platforms that can collect very predictable data.

Like it's, you know, like it makes sense to me why this asset class is sort of this particular one anyway has really been associated with the rise of streaming. Because you get that is the type of transaction. That is the type of thing where you can just sort of. easily translate a monthly check or a quarterly check into something that could be diced up and sold. Yeah, exactly. Do we leave it there? Yeah, let's save it there. All right. This has been another episode of the Alldlots podcast. I'm Tracy Allaway. You can follow me on Twitter at Tracy Allaway. And I'm Joe Wisenthall. You can follow me on Twitter at the stalwart. Follow our producer, Laura Carlson. She's at Laura M. Carlson. Follow the Bloomberg head of podcast, Francesca.

Levy at Francesca today, and check out all of our podcasts under the handle at podcasts. Thanks for listening. This is Caroline Hyde. And I'm Ed Ludlow inviting you to join us for Bloomberg Tech, a daily podcast focusing exclusively on technology, innovation and the future of business. Every weekday, we bring you the top headlines from the world's biggest tech companies. From finance to defense, AI to entertainment and from startups to the magnificent seven. We highlight the latest stories of the people. and companies pushing the tech sector to new frontiers and the politics that shape global tech markets. We do this all every weekday, then bring you the most important conversations and analysis in our podcast.

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