Justin Bieber cashes out right as the music royalty bubble pops

Times are tough, even for Justin Bieber, who sold his catalog of 290+ songs to Hipgnosis Songs Capital for $200M.

This is the largest deal for an artist in his generation, but enough Biebs. Move aside.

Today’s spotlight is on UK-listed Hipgnosis Songs Fund (LON:SONG) — the company behind the deal.

Music catalogs have been selling like hotcakes in recent years. See: Justin Timberlake ($100M), Sting ($300M) and Bruce Springsteen ($550M).

• Between 2014 and 2021, music catalog sales (M&A) grew 600x from $20M to $12B.
• Investors like music royalties as they’re predictable and tend to be recession-resistant.

In 2021, legend Bill Ackman compared music to “food and water” — and took a 10% stake in Universal Music’s parent company, Vivendi SE (EPA:VIV).

Who is Hipgnosis?

Hipgnosis Songs Fund is structured as an investment trust that invests in music royalties — owning the rights to 65K+ songs by artists including Shakira, Lindsey Buckingham and the Red Hot Chili Peppers. +Biebs.

The company went public in 2018, but in the past year, investors have criticized Hipgnosis for overpaying for music rights.

That and rising rates have taken Hipgnosis down a few decibels.

• $SONG lost nearly 35% of its value from its 2021 peak.
• But that also bumped its dividend yield to 6.1%, juicy.

The music industry had a rough couple of decades — and has only recently found its footing as streaming took shape.

But investing in music rights is still a relatively new idea and valuing music royalties isn’t easy.

• Will Biebs’ songs still be a hit in 20 years?
• Will a song take off 37 years later, like Kate Bush’s Running up that Hill?
• Will music sales recover to their 90s glory?

It’s as much art as it is a science, but — never say never.