Even public entities are investing in music and Intellectual Property rights
Entertainment companies and individuals are not the only ones aware of the financial potential of music and entertainment. As Intellectual Property (IP) rises as an investment option, even public entities are investing in IP rights related to arts/entertainment, especially music rights.
We can hardly say these entities are new players in the world of IP rights acquisition. For example, Imagem Music Group, a former music publisher formed by the Dutch state pension fund ABP to invest in music copyrights, dates back to 2008.
However, 2020 and 2021 were remarkable years for music investment. Several artists (from Bob Dylan to Shakira) sold their music catalogs, and music funds such as Hipgnosis spent more than USD 260 million in music rights acquisitions.
2022 kicked off with the news of David Bowie selling all his music publishing rights to Warner Chappell Music; so it’s only right that music continues to be among the hottest investments this year and in the upcoming ones.
With so much money from music flowing in the market, investment funds are creating products for investors who want to earn profits from music royalties as well.
After all, there is long-term potential for popular, well-known songs, until they fall in the public domain. In countries such as United States and Brazil, copyright protection lasts for 70 years after the death of the author.
There are also multiple sources of income for music rights owners (such as song placements, sales, streaming).
Public entities are well aware and attentive, which is why pension funds and other public entities are now among the biggest investors of music funds, publishers, and labels. Some of them are earning almost 30x their initial investment, as seen in cases like the ones below:
Case 1: United States
2010 —Michigan Treasury Department’s pension funds invested about $25 million into Concord Music.
2019 — According to Lansing State Journal, the pension fund “has earned $700 million from the investment”.
Concord Music currently owns copyrights over songs by some of the biggest artists on Earth, such as Beyoncé, Adele, Ariana Grande, Aretha Franklin, Lady GaGa, Eric Clapton, and more.
It’s no wonder the pension fund multiplied their invested money in 28x, in less than 10 years.
Case 2: South Korea
2018 — The Korean National Pension Fund invested KRW 31.2 billion (USD 27 million) in the pre-IPO shares of HYBE.
2021 — According to Blue Roof Politics, the pension fund has earned a return of KRW 282 billion (USD 240 million).
At the time of the investment made by the Korean pension fund, BTS were already among the Top 2 best selling artists in the world. Their label/management company (formerly called Big Hit Entertainment) would only go up from there: in 2021, HYBE was then the home of labels/management companies of not only BTS, but also Justin Bieber, Ariana Grande, Demi Lovato, J Balvin, TXT, ENHYPEN, and more.
The Korean pension fund has earned 9x their investment.
How IP Law can impact profitability from IP rights
All around the world, investments in music, culture, entertainment, and its IP-related assets are growing.
Check our article: Brazilian investment funds bet on copyright royalties and entertainment-based products
But the risks and profits involved in investments like these can be impacted by more than just market volatility. One determinant factor in identifying profitability from IP rights is their protection terms, which can vary from country to country, and type to tpe. A trademark, for example, can be renewed unlimitedly, while the rights over a song or a design patent will eventually expire.
Legal disputes over IP rights can also hurt profit potential, which is why it’s important to check about legal ownership of an IP portfolio before investing in it.
Therefore, it is highly recommended to seek Intellectual Property expertise, not only financial expertise, when investing in music rights, trademarks, and other copyrights or IP assets related to the businesses of art, culture, and entertainment.
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This blog post is published for informational purposes only, and is not intended to promote any of the brands or services here mentioned. The information on this blog post is based on the laws in force at the time it was written, and its use does not create an attorney-client relationship, as this blog post does not consist of or replace legal advice neither business consultancy services.
3Três Consultoria e Criação (Consulting & Creative) specializes in the intersection of creative, Intellectual Property Law, and communication services.
Contact us at: contato@3trescc.com
