Why Music Catalog Investors Are Finally Warming to Hip-Hop

Recently announced sales of music assets by Dr. Dre, Juice WRLD and Future are fueling investor interest in hip-hop song rights and catalogs, prompting skeptics of the genre’s near-term value to take a fresh look, sources in the music publishing and valuation industry say.

Dre sold his music assets to Universal Music and Shamrock Holdings in January for a deal estimated to be worth over $200 million. Influence Media Partners acquired superstar Future’s music publishing catalog in a deal Billboard estimated to be worth $65 million to $75 million last September, and a majority stake in the late rapper Juice WRLD’s rights and income streams went for a nine-figure sum in early 2022.

Those deals call into question a common assertion in the music investment space that because hip-hop assets are newer than rock and pop assets, they have sharper — or as yet unknown — decay curves, and would sell at a comparable discount.

The decay curve refers to a period in the life of a song when its popularity wanes and eventually reaches a state of predictable income generation. This curve, which is often assessed based on the past performance of other songs in a genre, is key in analyzing a song’s future potential revenue.

But as the Grammys’ recent star-studded tribute to hip-hop’s 50th-anniversary shows, the genre is no longer young. Dre’s storied 1992 album, The Chronic — which notched three Billboard Hot 100 top 40 hits, including “Nuthin’ but a ‘G’ Thang” — is getting a special 30th-anniversary rerelease on Interscope Records.

Sources say those milestones, Dre’s recent deal, plus market factors like competition for assets and the cost of capital, are all contributing to diminishing skepticism about the genre’s decay curve and increasing the appetite for hip-hop songs and catalogs.

“Dre’s catalog withstood the test of time, and that’s why he can sell,” City National entertainment banking leader Denise Colletta says. “There are certain names that have been around for a long enough period that they are now of an evergreen standard. Those household names in hip-hop will continue to resonate with audiences.”

Assets in the hip-hop genre have so far made up only a slim percentage — sometimes slightly more, sometimes slightly less — of all catalogs bought by frenzied investors in recent years. Data from valuation experts Citrin Cooperman shows that started to change last year.

“According to our data, the number of hip-hop deals increased in 2022,” says Nari Matsuura, a partner and co-leader of the firm’s music economics and valuation services practice. Matsuura declined to speculate on the outlook for assets in the genre.

Sources say one contributing factor has been a bias among some financial buyers against genres they were less familiar with, like hip-hop and Latin, and a lack of relationships with artists in the music industry, but that bias is starting to fade.

“Hip-hop and Latin [assets] were trading at a discount five years ago, but those genres’ valuations have caught up with the marketplace,” says one music asset trader.

Also, most financial investors initially eschewed any music assets perceived as new. R&B/hip-hop’s popularity — it is the most-streamed genre in the United States — sometimes results in songs by current big-name artists remaining on the airplay charts long after their release, which defines them as current despite their age. Remaining on the airplay charts longer may also delay the point when a song no longer receives airplay revenue, which can exacerbate that song’s decay curve.

Companies like Sherrese Clarke Soares’ HarbourView Equity Partners have signaled an interest in acquiring assets in the hip-hop genre. Influence Media, which bought the Future catalog, is also showing an appetite for new music. It just purchased a portion of the catalog of Tyler Johnson — a Harry Styles collaborator who has written and produced for other popular contemporary recording artists.

Natalia Nastaskin, chief content officer at Primary Wave Music Publishing, says that hip-hop is uniquely suited for creating content that appeals to core fans and a new audience, which could make it attractive to firms focused on a song’s potential for content.

“Hip-hop is a genre of storytelling and of personal experiences,” Nastaskin says. “In the IP creation space, those stories are gems. Every song is prospectively a film, TV series or podcast, dissecting the song for the rich story it is.”

Although part of Dr. Dre’s assets sold for over 20 times its net publisher’s share, the prices that hip-hop catalogs may fetch as their appeal grows is unclear. Sources say that across all genres, the multiples being paid for assets have dropped from the eye-popping levels of recent years, but remain in the range of 15 to 17 times the net publisher’s share. The multiple a catalog may receive will depend on its vintage. Sources say smaller deals may also occur because hip-hop’s collaborative nature often results in many artists holding small stakes in songs.

And while the jury is still out on the value of contemporary hip-hop artists, the genre’s long tradition of sampling beats and the music of earlier artists can create more immediate value — in the form of streaming and synch revenue — for the work of those legacy or catalog artists. After the success of Nicki Minaj’s “Super Freaky Girl,” which interpolated Rick James’ “Super Freak,” Hipgnosis, which owns a stake in the song, invested in Timbaland’s online beat marketplace, Beatclub, and opened its catalog up to samples by the website’s producers. Beatclub connects users to major brands, labels and video game companies, which place the producers’ songs in their content and pay the rights owners a slice of the resulting synch revenue.

“What works in hip-hop’s favor is that this is the genre of music that millennials and Gen Z are listening to on streaming,” says Dan Runcie, founder of music and media company Trapital. “I fully understand that you don’t know the decay curve from Trippie Redd, but Dr. Dre’s Chronic came out more than 30 years ago. If streaming is the biggest source of revenue, hip-hop is the most popular genre on these platforms.”

Additional reporting by Ed Christman.