Bonds, Catalogs, or ETFs? Navigating the Music Asset Class

• AI-generated music accounts for less than 1% of actual consumer consumption.
• Investors who collect music royalties without managing the assets risk losing income to others’ decisions.
• Institutional demand for music royalty bonds is unlimited, but supply remains far below mainstream credit markets.

The event, co-presented by the Mondo.NYC Conference and the MUSQ Global Music Industry ETF (MUSQ B), carried one central message: Buying music catalogs and sitting on them is no longer a winning strategy. The investors generating returns today are the ones actively working their assets.

The morning keynote brought together Warner Music Group (WMG) chief executive officer Robert Kyncl and Lisa Yang, EVP and global head of strategy at WMG. CNBC anchor Jon Fortt led the conversation. Yang described how WMG now approaches its catalog investments like a portfolio manager, weighing each deal against the full portfolio and targeting returns in the high-teens range.

That shift reflects a broader change in how WMG evaluates opportunities. Rather than assessing deals by label or country, Kyncl said the company now runs a centralized pipeline review. That allows it to redirect capital to its highest-return opportunities more quickly.

Yang pointed to a valuation gap between where WMG’s stock trades and what comparable catalogs fetch in private deals. She said the company has recently traded at around 10 times EBITDA, a measure of earnings before interest, taxes, depreciation, and amortization. Private transactions for similar-quality assets have commanded multiples well above that level.

Yang said AI-generated songs are flooding streaming platforms daily, but actual consumer consumption of that content remains very low. “The actual consumption is probably less than 1%,” Yang said. Even in China, where AI adoption in music is further along, WMG has seen no impact on its market share.

Kyncl offered a counterintuitive read on AI’s long-term effect on established catalogs. Casual content creators, Kyncl argued, tend to reach for recognizable artists and sounds over anonymous AI-generated content. That behavior, he argued, should push demand for iconic intellectual property higher over time.

The “Music Rights as an Asset Class” panel covered similar ground from an allocator’s perspective. Larry Miller, clinical professor at NYU Steinhardt and executive director of the Sony Audio Institute, moderated the discussion.

Miller opened with a thesis: Music became a legitimate investment category when streaming arrived. It turned a volatile, hit-driven business into one with steady, recurring revenues that behave more like real estate or infrastructure.

Cameron Smalls, managing director at Morgan Stanley, made the case for why simply owning royalties is not enough. He warned that passive holders have no say if a copyright owner moves to a pricier distribution platform. They also have no recourse if that owner takes out an advance that cuts their income. Without the ability to make decisions, investors are at the mercy of choices made by others. “If you’re passive, you’re in the backseat,” Smalls said.

Josh Gruss, founder and chief executive officer of Round Hill Music, pointed to his own fund as an example of what that misunderstanding looks like in practice. He said Round Hill’s publicly listed vehicle once traded at a 50% discount to its net asset value. In other words, public market investors were valuing it at half of what its underlying assets were actually worth.

That kind of mispricing, he suggested, is what happens when investors don’t fully grasp what they own. Knowing what you own is the first step toward doing something about it.

Natalia Nastaskin, partner and chief content officer at Primary Wave Music, offered the clearest example of what taking action actually looks like. She gave an example of the company’s effort with the Luther Vandross estate.

That included producing a CNN documentary that Nastaskin said was the most-watched documentary film since 2022. It also capitalized on a Kendrick Lamar and SZA collaboration that sampled a Vandross recording, and a brand partnership with Waterford Crystal. An Alvin Ailey dance production tied to the catalog launches in November at New York’s City Center, with a biographical film also in development.

Steve Salm, chief business development executive at Concord, credited the company’s majority investor, a pension fund associated with the state of Michigan, with providing what he called permanent capital. That structure has allowed Concord to grow without the pressure of a fixed exit deadline.

Gruss added that the traditional private equity timeline of five to 10 years is simply too short for assets that grow in value across decades.

Smalls closed the macro discussion by noting that institutional appetite for music asset-backed securitizations, which are bonds backed by royalty income, is effectively unlimited. “No limit in investor demand,” Smalls said. “The problem is there’s not enough paper.”

He framed the gap: Music copyrights globally generate roughly $40 billion per year, while the U.S. mortgage market alone represents $15 trillion. The pool of music royalty bonds is a fraction of what large institutional investors are used to deploying capital into.

MUSQ, which co-presented the summit, tracks the MUSQ Global Music Industry Index and carries an expense ratio of 0.76%. The fund had approximately $22.4 million in assets under management, according to ETF Database.

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VettaFi LLC (“VettaFi”) is the index provider for MUSQ, for which it receives an index licensing fee. However, MUSQ is/are not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of MUSQ.