While the music industry, specifically record labels’, demise has been well-documented, what has garnered less attention is the resilience of the music publishing industry, which has continued to thrive. Whenever songs are downloaded, streamed, sampled or performed, whoever owns the publishing rights to the songs makes money. The royalties from music publishing provide dependable revenue streams that some savvy investors are now bundling and securitizing.

Q. We all know that record companies get paid when their hit recording gets played somewhere. But they’re not the only ones, are they?
A. No there’s a different copyright holder who’s also getting paid at the same time.
The hidden winner is the music “publisher” — the company that owns the rights to a song’s words and music. The record company owns some particular recording and gets paid when it’s bought, but the publisher gets paid every time anybody’s recording of the tune is “performed”: streamed over Pandora, sung on Broadway, or used in a commercial.

Q. I remember that the biggest part of Michael Jackson’s estate was not his own work, but his rights to a large chunk of the Beatle’s library, right?
A. Yes, and now you know why. Those great songs of the sixties are still churning out many millions of dollars a year for the publishers who own them. And they can make great investments when packaged up the right way.

Q. So, how are they packaged?
A. It’s a developing area. A couple of groups have actually issued bonds backed by music royalties. But the more interesting approach is a partnership that passes through the tax benefits, because the holder of the music library gets to depreciate it over time… that means the income can be largely tax free.

Q. So do these libraries change hands often? Are they bought and sold?
A. Yes, they are. But there’s more to it than that. Once you own the rights, the big idea is to “work the catalog”… promote the songs so they get used in movies or jingles, cut deals so they get more play on the radio, or even try to organize a successful play that features the music. That can really jack up the revenue streams and also the residual value of the library. So investing with a good music publishing group is a little known, but very attractive, way to “jazz up” your portfolio.