Intangibles And NFTs: Can Creators Make Beliebers Of Companies? – Forbes
Long anticipated by industry insiders, Justin Bieber sold the rights to his music catalog to … [+] Blackstone-backed Hipgnosis Songs Capital.
As Bitcoin
Intangible Assets: What Do You Mean?
For many, intangible assets can be difficult to comprehend, much less value.
Intellectual property (IP), including trademarks, copyrights, and patents, make up a large portion of what are known as intangible assets—identifiable non-monetary assets without physical substance. During the past two weeks, stories involving IP and how it’s valued and monetized piqued my interest. One story was about Justin Bieber’s music rights sale, while the other focused on the tokenization of 25 million global patents as dynamic NFTs by US-based IPwe.
While seemingly worlds apart, the stories further strengthen the argument for the tokenization of real world assets (RWA). For creators and companies, the earnings and value derived from IP can be significant. For both camps, however, the process can be opaque and wrought with inefficiency. As innovators continue to explore the tokenization of RWA, they should consider the data that point to intangible assets as another store of value that could further clarify The Road ahead.
How Musicians Monetize IP
David Bowie successfully leveraged his IP in 1997 via Pullman Bonds.
While creators argue that it is impossible to assign value to their art, musicians have long leveraged their IP (their music catalogs) to discover a price. The finance behind these deals can be artistic in its own right. Musicians have tapped the capital markets for some time. David Bowie made history in 1997 by issuing a first of its kind Pullman Bond, a $55 million Asset-Backed Security collateralized by the revenues during the bond’s tenor of his 25 albums recorded before 1990. The 10-year bond priced at 7.90% yield, a 153 bps premium to 10-year US Treasury notes—at current credit spread levels, this would equate to roughly a BBB credit—not bad for an intangible asset. Ironically, technology would play a significant part in the Bowie Bond story.
Technology Changes The Game
Technology changed the way consumers bought and listened to music. Eventually, it provided the music … [+] industry with valuable data.
“Pressure pushin’ down on me
Pressin’ down on you, no man ask for”
Bowie, D. (1981). Under Pressure
MP3s, the digitization of musicians’ IP, were just one of the new technologies that flourished in the internet’s early years. Without an infrastructure and supporting technology to measure who accessed the IP and how often, music piracy rose and sales dropped. Bowie’s bond issue was downgraded by Moody’s “due to weakness in sales for recorded music.” Fortunately, the bond matured without a default.
The evolution of music streaming has enhanced the collection of data and analytics, catalyzing dealflow in music IP. Technology has empowered musicians and investors to accurately determine how often, when, and who uses their IP to forecast future sales. This transparency allows creators and the industry to standardize valuation metrics.According to Music Business Worldwide, slightly over $5 billion was spent on the acquisition of music IP rights in 2021. In 2021, Blackstone invested $1 billion to establish Hipgnosis Songs Capital to invest in songs, recorded music, music IP and royalties, raising the bar for investment in this form of IP.
Monetizing A Prized Possession
Justin Bieber made history as one of the youngest artist to sell his music catalog rights for north … [+] of $200 million.
“I Thought You’d Always be Mine, Mine”
Bieber, J. (2010). Baby
In last week’s reported sale, Bieber sold 100% of his rights to a portion of his music catalog (290 songs produced before December 31, 2021) for north of $200 million. While not the largest of its kind—that title belongs to Bruce Springsteen’s $500 million catalog sale to Sony in January 2022—the deal is unique because at 28 years old, he is the youngest to capitalize on his IP at this order of magnitude. Prior to this, 41-year old Justin Timberlake sold his entire song catalog for upwards of $100 million. (For all of you finance junkies, I empathize with the number of time value calculations running through your heads.)
Armed with data, Blackstone-backed Hipgnosis, made their largest single investment in an artist’s IP to date. Bieber’s sale of over 150 million records, over 30 billion streams, and army of 82 million monthly listeners (8th most popular on Spotify) made the opportunity to good to pass up.
Creators Begin To Leverage NFTs For Their IP
MetaKovan, showing the digital artwork non-fungible token (NFT) “Everydays: The First 5,000 Days” by … [+] artist Beeple in his home in Singapore. MetaKovan purchased this work for an eye-watering $69 million.
Even with a mountain of data, Bieber’s IP sales process is rumored to have taken place over months, perhaps pointing to the inefficiencies of transacting in IP. It’s clear that merging analytics and IP into an asset that can be monetized– a task that has long been the holy grail for entertainers and artists alike – is one NFTs are deft to accomplish.
Perhaps the most famous example of this i
