Are Hip-Hop Catalogs Undervalued?

I was recently interviewed in a great article by Alaister Moughan in Synchtank about whether hip-hop catalogs will eventually get sold for nine-figure amounts like Bob Dylan, Paul Simon, and others. I shared some high-level thoughts in the interview but I've thought about it more and have more perspective on it.‍

Hip-hop catalogs may be undervalued. In the past six years, Tupac Shakur's music has been streamed almost twice as much as Bob Dylan's. That tracks with MRC's data on hip-hop being streamed twice as much as Rock music. Overall, hip-hop's total volume of all music is 50% higher than Rock. If we assumed this overall data tracks for Dylan and Tupac, then Pac's catalog could be worth $450 million, 50% more than Dylan's $300 sale.

But I doubt Tupac's catalog would net $300 million. Two months ago, eOne wanted $600 million for Death Row Records catalog, but I'm sure it got a number much lower than that. Hip-hop catalogs often have 10-12x multiples. It's still high, but nowhere near as high as the multiples Hipgnosis and others pay for classic rock catalogs.

‍The hip-hop generation. This is a generation that grew up on hip-hop. People love music that reminds them of the time they were coming of age. And since people now live longer than ever, they're going to listen to this music longer than ever. A lot of us have wondered what our generation's Frankie Beverly & Maze "Before I Let Go" will be. We'll have a lot of options.

The songs that came out from the mid-90s to mid-2010s will be especially popular. It's a bit ironic since most of those years were dark days for the music industry. But this was when Gen X, millennials, and Gen Z fell in love with hip-hop. The Miseducation of Lauryn Hill isn't going anywhere.

As Moughan pointed out, some investors may undervalue hip-hop because they identify more with Paul Simon than Paul Wall. But that's on them. Another group of investors will recognize the opportunity.