Here’s How We Bolster Music Education: Use Our Pension Pots

Public sector pension funds – including teachers funds and national pension pots – are investing in the music business. The Michigan State Teachers Pension Fund, for example, invested $1.1 billion of their $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, invested $400 million CAD, alongside providing a $150 million CAD incremental facility in Anthem Music Management and Teachers owns the majority stake in Olé, another large Canadian music publisher. As far back as 2008, the Dutch State Teachers Pension Fund invested in Imagem, who are now owned by Concord. Moreover, the Korean National Pension Fund invested $27 million USD in HYBE, the K-Pop firm behind BTS. According to an analysis of the fund, it has earned a 8.9x return. Alekta, a Swedish pension fund that manages 2.6 million in personal pensions and the pension pools of 30,000 Swedish firms, invested $300m in Epidemic Sound, a label that releases royalty free soundtracks and mood music to help sleep, relax or focus.

Public pension funds, be it those of municipal workers, teachers or public sector employees, prioritise steady dividends and long term, patient capital. A pension fund must be conservative in nature, to ensure that the yield matches the needs of their investors or members who eventually will retire and require their pensions paid out. Music rights, if listened to or utilised by a large enough group of people, fit this strategy well. Every time a song is played or used, it triggers a payment to the writers 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 18.4% growth in the global recorded music market, to a total of $25.8 billion. The total value of music copyright, according to former Chief Economist of Spotify Will Page, is $31.6 billion USD. Furthermore, Goldman Sachs predicts this growth to continue regardless of externalities, to $142 billion CAGR by 2030. This growth offers a stable platform for public sector pensions to invest; And with over 60,000 tracks uploaded to Spotify alone every day, one every 1.4 seconds, music isn’t going anywhere.

However, the growth of the recorded music sector and the subsequent investment in it by pension funds has not been mirrored by a 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 United Kingdom, it is predicted that A-Level (high school) music education could disappear by 2033, due to a lack of state funding. At last estimate in the United States, more than 8000 public schools lacked music programs. In Oregon, for example, one in seven schools do not offer any music, art or cultural education. The result may not be less music, but less talent and skills development to produce music that will return a dividend someday.

This growth and interest in music rights as an asset class should demonstrate an opportunity for all pension funds around the world. If music is a stable investment, investing in it structurally – in the communities where the investors and members live – would extend and protect that investment. While music creation seems infinite, music that returns a yield to pension funds is not. There are only so many heritage acts and so many hit songs to go around. 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 as much on creating the environment for more music to become successful, rather than only cherry-picking those from the top..

Sustainable investment in music would require that for this yield to continue, there must be a pipeline of talent to harvest. The best farms rotate crops, test different seeds, tend to their plants and understand the nutrients of their soil; they don’t simply live off one successful harvest. The same goes with music. However, this opportunity – local pension pools investing in talent development as much as talent extraction – has not yet happened. This is what needs to change.

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

While most artists may not succeed, the few that 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 offers a host of social benefits – it is the financially clever thing to do.