Here’s how we’re empowering music education: use our retirement pots

Public sector pension funds – including teachers’ funds and national pension funds – invest in the music sector. The Michigan State Teachers Pension Fund, for example, has invested $1.1 billion of its $72 billion under management in Concord, the world’s largest independent music publisher. The Ontario Teachers’ Pension Plan, one of Canada’s largest pension funds, has invested C$400 million, in addition to providing an additional C$150 million facility to Anthem Music Management and Teachers owns the majority stake in Olé, another major Canadian music publisher. As early as 2008, the Dutch State Teachers’ Pension Fund invested in Imagem, which is now owned by Concord. Additionally, Korea’s national pension fund invested $27 million in HYBE, the K-Pop company behind BTS. According to a fund analysis, it got an 8.9x return. Alekta, a Swedish pension fund that manages 2.6 million personal pensions and the pension funds of 30,000 Swedish companies, has invested $300 million in Epidemic Sound, a label that releases soundtracks and music from royalty free atmosphere to help sleep, relax or concentrate.

Public pension funds, whether for municipal workers, teachers or public sector employees, emphasize regular dividends and long-term patient capital. A pension fund should be conservative in nature, to ensure that the return matches the needs of its investors or members who will eventually retire and demand payment of their pensions. Music rights, if listened to or used by a large enough group of people, fit this strategy well. Each time a song is played or used, it triggers a payment to the authors and publishers of that track. And more music is being made and listened to than ever before. The International Federation of Phonographic Industries (IFPI) reported an 18.4% growth in the global recorded music market, totaling $25.8 billion. The total value of music copyrights, according to former Spotify chief economist Will Page, is US$31.6 billion. Additionally, Goldman Sachs projects that this growth will continue regardless of externalities, up to $142 billion CAGR by 2030. This growth provides a stable platform for public sector pensions to invest; And with over 60,000 tracks uploaded to Spotify every day, one every 1.4 seconds, music isn’t going anywhere.

However, the growth of the recorded music industry and subsequent investment in it by pension funds has not translated into simultaneous investment in the infrastructure and educational programs needed to sustain the dividend over time. Music education in many parts of the world is in crisis. In the UK, it is predicted that A-level (high school) music education could disappear by 2033, due to a lack of state funding. According to the latest estimate in the United States, more than 8,000 public schools lacked music programs. In Oregon, for example, one in seven schools offers no music, arts or cultural education. The result may not be less music, but less development of talent and skill to produce music that will one day pay a dividend.

This growth and interest in music rights as an asset class should represent an opportunity for all pension funds around the world. If music is a stable investment, investing in it structurally – in the communities where investors and members live – would expand and protect that investment. While musical creation seems endless, music that pays for pension funds is not. There are only a limited number of heritage acts and hit songs. The Beatles are not reforming. And if funds are interested in long-term, patient capital, as these investments demonstrate, it would make sense to focus so much on creating the environment for more music to succeed, rather than just selecting those who come. from the top.

Sustained investment in music would require that, for that return to continue, there must be a pool of talent to harvest. The best farms practice crop rotation, test different seeds, care for their plants, and understand the nutrients in their soil; they do not simply live off a successful harvest. The same goes with music. However, this opportunity – local pension funds that invest as much in development as they do in talent extraction – has yet to happen. This is what must change.

All successful artists come from somewhere. Even an artist who was first successful on TikTok, whose first live performance is at a festival in front of thousands of people, comes from somewhere. If that location did not have a school music program, or access to musical instruments or equipment, the chances of success would be reduced and with it the potential return the artist could bring to the over time. If local pension funds invested in local music programs, access to instruments and training, these investments could create, over time, an expanded pipeline for more artists to come through. This will lead to a richer and fuller harvest.

Although most artists do not succeed, the few who do do add to the stability of the investment. Instead, a dichotomy has emerged where a public pension fund benefits from something that is often disinvested locally. Correcting this mistake would not only improve communities – as access to music provides a host of social benefits – it’s the financially smart thing to do.

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