The US asset manager Pimco has teamed up with BMG to acquire music catalogues, according to people familiar with the matter, the latest large investor to wade into the frenzy for song copyrights.
BMG, one of the world’s largest music companies, last year agreed a partnership with the private equity group KKR, allocating $1bn to buy music rights. The amount that Pimco has committed could not be determined, but the fund manager is looking to do smaller deals than those of KKR, one person familiar with the situation said.
The advent of streaming on platforms such as Spotify has transformed the scale of the music business, boosting the appeal of music rights as an investment in an era of ultra-low interest rates.
Large institutional investors are treating music copyrights like bonds that offer a predictable yield. Copyrights generate consistent cash flows and are relatively uncorrelated to financial markets or the global economy.
The largest private equity groups, KKR, Blackstone and Apollo Global Management, have poured billions of dollars into song copyrights in the past year as streaming, which relies on monthly subscription fees, offers steadier revenue than sales in the age of compact discs.
The arrival of Pimco, with $2.2tn under management and known for its bond investments, presents an escalation. The group co-founded by Bill Gross and based in Newport Beach, California has until now stayed on the sidelines.
As more buyers enter the market, song valuations have soared, spurring musicians and songwriters to become “willing sellers” of their catalogues, particularly with touring income on hold during the pandemic.
Earlier this month, the estate of David Bowie agreed to sell his catalogue to Warner Music for more than $250m. Bruce Springsteen last month sold his catalogue to Sony Music for more than $500m. A KKR-led group in October agreed to buy a catalogue which included hits from The Weeknd for $1.1bn.
Revenue in the recorded music sector has grown for six consecutive years with a 7.4 per cent rise in 2020 to $21.6bn, according to the IFPI, an industry trade group.
BMG and Pimco declined to comment.