Are music royalties a legitimate institutional asset class?

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AcadiFi · Accepted Answer

Music royalties have matured into a credible alternative asset class, driven by streaming economics. Songwriters and publishers receive mechanical, performance, and synchronization royalties...

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Return profile: acquisition multiples typically 14-22x annual net publisher share for enduring catalogs, translating to approximately 5-8% unlevered yield plus residual growth. Streaming growth (Spotify, Apple Music, YouTube, TikTok) has driven 8-12% annual revenue growth for well-curated catalogs over the past decade, though growth has moderated post-2023.

For Silvershore: a diversified royalty fund targets mid-teens net IRR with duration features similar to infrastructure — long-dated, inflation-linked to consumer spending, and low correlation with equity markets. The asset does require specialized platforms for rights administration, collection, and audit of PROs (ASCAP, BMI, SESAC) and digital distributors.

Risks AcadiFi candidates must evaluate: (1) Streaming pricing pressure — per-stream rates have declined as services add tiers. (2) Changes in PRO distribution formulas can shift revenue between catalogs. (3) Songwriter settlement litigation and mechanical royalty rate changes (MLC in the US). (4) Genre decay risk — some catalogs depreciate faster than expected as generational tastes shift. (5) Valuation opacity and recent mark-to-market declines (Hipgnosis) expose the 'private valuation vs. exit price' gap. For disciplined allocators, 1-3% of portfolio is a defensible bite.

Are music royalties a legitimate institutional asset class?

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