Can Hit Songs Make Good Investments? A Primer on Music Royalties

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When most of us hear the words ‘music royalties,’ we picture Michael Jackson’s estate collecting checks on Thriller, or the Beatles’ catalog changing hands for staggering sums. In other words, we picture something that happens to famous people, not to us.

Here’s the thing: you don’t have to be a music legend– or even a musician– to earn money from a hit song.

Music royalties have emerged as a fast-growing new class of alternative investments, and for good reason. According to the IFPI Global Music Report 2026, global recorded music revenues grew by 6.4% in 2025 to reach an all-time high of $31.7 billion, marking the 11th consecutive year of growth.

Today, investors can buy interests in music royalties, earning a share of the income generated whenever songs are streamed, played on the radio, or licensed for television, film, or commercials. It’s a small but growing corner of the investment world, and one that’s becoming increasingly accessible.

Who Gets Paid When You Press Play?

One can own or acquire:

• The copyright in the master recording (the specific recorded performance, typically owned by record labels);
• The copyright in the composition (the melody and lyrics, typically owned by songwriters and music publishers or, increasingly, by artists themselves); or
• A fraction of one or both copyrights.

These copyrights generate different streams of income, through four main types of music royalties:

• Master recording royalties, which make up the bulk of royalties, are paid
• Performance royalties are generated each time a song is played on the radio,
• Mechanical royalties are generated when a composition is reproduced or distributed
• Sync licensing fees are paid when a song is used in visual media, e.g., in a film or a commercial. These fees are generally shared between the owners of the master recording and the composition.

Why Invest in Music Royalties?

For starters, music royalties provide a passive income stream, like a stock that pays a dividend. As Gary Young, CEO of Royalty Exchange, a marketplace for royalty assets, put it to us, “Music royalties provide actual cash yield just for owning them, and don’t share the same overhead and ongoing upkeep costs that[, for example,] real estate might carry.”

Secondly, in stark contrast to stocks, music royalties are uncorrelated to other asset classes. Young explains, “When real estate lags, or stock prices dip, people don’t suddenly stop listening to music.” Put simply, people keep pressing play in good times and bad, and that steady listening turns into steady cash flow. Historically, that has made royalties a useful diversification tool. In this way, this asset class has more in common with litigation funding than stocks, bonds, or mutual funds.

Earning potential in music royalties has also expanded thanks to the rise of streaming culture, which has made legal access to music inexpensive and convenient. Platforms like Apple Music and Spotify have generated far more predictable royalty streams than during the peak of the piracy era. What’s more, streaming algorithms will often resurface older songs, introducing them to new generations of listeners, and extending the earning life of established catalogs.

The ways artists and rights holders earn money are evolving, too. TikTok has begun revising its royalty model, shifting away from a flat licensing fee for song use to one that rewards ongoing video views and engagement. While the rollout is still evolving, changes like these could increase the long-term earning potential of some music catalogs.

Institutional investors have taken note, injecting capital into the market and legitimizing music royalties as an investment asset class. In 2024, for example, Blackstone acquired the music investment fund Hipnosis for $1.58 billion. After rebranding as Recognition, the company now owns more than 145 artist catalogs, including those for Justin Bieber, Neil Young, and Fleetwood Mac.

So what does all this mean for the rest of us? According to Young, the institutional money hasn’t overcrowded the market– it has validated it.

“The presence of institutional investors has largely strengthened the market,” Young says. “Seeing the institutional interest has instilled confidence in a lot of individual investors, which translates to fair price discovery on our marketplace.”

More investors vying for a finite number of assets can drive up their prices. On the other hand, more buyers should simply lead to prices that better reflect what a catalog is worth, and not just what a small number of buyers are willing to pay.

Either way, the growing presence of institutional investors in this space may be making music royalties more sensitive to broader financial conditions, potentially reducing some of the diversification benefits they have historically offered. At least one study suggests as much.

What are the Risks?

Of course, popularity doesn’t erase (or even speak to) risk. Ever hear of tulips?

“The biggest risks really come from speculative purchases,” according to Young, “paying a large multiple for an unproven track, even if it’s from a superstar artist, can be a recipe for lower returns.” The star power of the artist, in other words, is not the same thing as the reliability of the earnings. The safer play, according to Young, is older, more established catalogs with years of earnings history. “They have proven their staying power, and therefore often have more consistent royalty payments,” he explains. Current streaming trends back this up– according to The Wall Street Journal, one in three Spotify streams from January through April 2026 went to songs more than 10 years old. One in six streams went to songs more than 20 years old.

That’s a reminder that today’s “oldies” can keep earning for decades to come.

So, How Do Investors Actually Price a Song?

Valuing a catalog isn’t as simple as multiplying last year’s earnings by a tidy number. Young points to a handful of factors serious investors weigh together, which include:

• The age of the earnings.
• The source of the earnings (e.g., from streaming, ad placements, or a viral TikTok moment).
• The number of individual songs that are meaningfully contributing to the earnings.
• The geographic regions that are driving engagement.

That last point deserves a little explanation. Geography can influence a catalog’s future earning potential. While streaming is well established in North America and Europe, subscription growth is expected to continue in emerging markets such as Latin America, Southeast Asia, and parts of Africa. A catalog with a growing international audience may therefore have more room to increase its royalty income than one whose listeners are concentrated in more mature markets.

“There is no magic formula, but reading into all the contributing factors can help an investor gauge how the earnings may perform moving forward,” Young says.

Qualitative factors also matter, such as the cultural relevance of the artist and/or their song.

An artist with a large public profile who is still touring, or a timeless song that’s deeply embedded in a perennial holiday, will both carry more cultural interest.

The genre of the song also matters. Contemporary genres like pop and hip-hop may generate high earnings initially, but classic genres like rock or country tend to see lower rates of decay over time and greater long-term stability.

Also consider how much weight you place on the current virality of the song. Platforms like TikTok have helped certain songs blow up when they’re used in a viral trend, but the spikes in streams are often short-lived.

A music catalog earning steadily from a diversified mix of older songs tells a very different story from one relying on a single viral clip from six months ago. Both might show similar numbers on a spreadsheet, but only one of them is likely to still be generating meaningful royalties five years from now.

A Good Song Doesn’t Always Make a Good Investment

The story of a song is not the same thing as the reliability of its earnings. The investors doing well in this space aren’t the ones chasing hits. They’re the ones reading the royalty statements.

Like any investment, the best opportunities aren’t always the loudest. Sometimes they’re simply the ones that keep paying long after the charts have moved on.