Put your ray gun to my head
Press your space face close to mine, love
Freak out in a moonage daydream, oh yeah!
—Moonage Daydream, from album The Rise and Fall of Ziggy Stardust and the Spiders From Mars
Legendary and storied British prog-rock band Pink Floyd’s published canon contains numerous tributes to its late co-founder Syd Barrett. In their search for cash flows, the band members are probably also doffing their collective hats to another late British rock star, David Bowie.
When David Bowie released his iconic 1972 rock-opera album, Ziggy Stardust, his music was sowing multiple seeds of changes—blurring gender binaries, rendering indistinct the sharp lines around identities, or even redefining the grammar and vocabulary of live rock performances. But the super-successful rock star was also quite the financial forerunner: his pioneering $55-million bond placement in 1997 with insurance company Prudential (10-year note with a 7.9% coupon), which securitised future royalty proceeds from sale of albums and songs, has provided multiple rock bands and artists with a viable route to monetising values locked in back lists and languishing catalogues.
Rock band Pink Floyd is now in the market looking to monetise its back list. A bunch of institutional investors–which include private equity funds like Blackstone and Michigan Retirement Systems owned Concord—are in the race to acquire one of prog-rock’s most popular catalogues. The band that penned the hit 'Money' (part of knockout album 'Dark Side of the Moon') in 1973—'Money it’s a gas/Grab that cash with both hands and make a stash'—is likely to earn close to $500-600 million from the deal whenever it fructifies.
The trend of monetising future cash flows—in the form of royalties received every time an album or a CD is sold, or an artist’s song pops up on a streaming service, is spun on the radio, performed live, covered by another artist or is used in an advertisement, video game or even a television show—accelerated in the months following the outbreak of the covid pandemic in 2020. Rock artists depend on live performances for a large part of their regular revenue flows but the social distancing norms put a complete halt to live concerts, forcing artists and bands to explore alternative revenue arrangements.
Nobel laureate and songwriter Bob Dylan also sold his entire back catalogue, stretching back six decades, to Universal Music Group for a rumoured nine-figure deal during this period.
From David Bowie to Pink Floyd, the long arc of asset-backed securitisation has covered not only rock artists but also related institutions. Music studios also realised that securitising back lists sitting in their archives could unlock large values. Even movie studio DreamWorks raised $1 billion by securitising future revenue from its old and new releases.
But beyond the financial succour the financing route offers to musicians, aggressive bidding by private equity investors has raised renewed questions about market norms and intellectual property rights versus ethics and rights of artists. Numerous cases of marauding private equity money denying artists their due have bubbled up in recent times. Pop artist and 2022 winner of MTV’s Video Music Award, Taylor Swift is re-recording her entire back list after private equity backed investors bought out the masters and even prevented her from using her own music.
Streaming is another reason for the renewed interest in discounting and securitising future royalty cash flows. Media data from the USA shows that revenues earned by streaming platforms—primarily through paid subscriptions and advertising revenue—have jumped by over 450% during the five-year period of 2015-2020. Investment banks, which included Morgan Stanley and Goldman Sachs, have predicted an annual growth of over 10-15% for streaming services.
But streaming platforms come with their own share of controversies. Their revenues have generated fresh debate over how each additional dollar gets split between various contending parties, including the streaming platform, the record company, the artists and, if separate, the songwriters. Platforms have been opaque in disclosing how they are divvying up the spoils and this has led to associated problems of valuing the catalogue that an artist wants to securitise. In many cases, market observers feel that artists may have been forced to undervalue their catalogues, or provide a deeper discount than was necessary.
The Pink Floyd deal, whenever it is done and in whatever shape, will perhaps set new benchmarks for the market. Pink Floyd, with its vast and popular catalogue, can dictate its terms. After all, they did write and trill:
And did we tell you the name of the game, boy?
We call it Riding the Gravy Train
(Have A Cigar/Wish You Were Here; 1975)
