Music as an Asset Class

Abstract: In the streaming era, music revenues distributed to rights holders have become more transparent. However, it is not yet clear how to quantify the risk and return characteristics of music royalty assets, as is done with equities. In this paper, we fit three discounted cashflow models to transactions on the Royalty Exchange platform. We use our best model to backtest the one year and five year performance of music royalty assets, after transaction costs. We find that Life of Rights (LOR) music assets had risk and return characteristics comparable to stocks in the S&P500, when held over 5 years. Since the performance of stocks and music assets are likely to be uncorrelated, this result may help investors assess this asset class within the context of a more traditional stock and bond portfolio.