By Deborah Mary Sophia and Echo Wang
(Reuters) - Litmus Music, a music venture backed by buyout firm Carlyle Group (NASDAQ:CG), has acquired the rights to singer-songwriter Randy Newman's song catalog, which includes his work for Disney's "Toy Story" films, the companies said on Thursday.
As part of the deal, Litmus will get a share of Newman's recorded music royalties and publishing rights to hits such as Toy Story's 'You've Got A Friend In Me,' and scores from other popular Disney franchises such as 'Cars', 'Monsters, Inc.' and 'The Princess and the Frog'.
Private equity firms spent billions of dollars gobbling up catalogs of artists ranging from Bob Dylan to Justin Bieber during the height of the pandemic when interest rates hit rock-bottom, helping popularize music as an asset class.
However, as interest rates rose in the aftermath of the pandemic and made debt tied to music royalties more expensive, the sector became less attractive to the asset management industry.
Now, with the U.S. Federal Reserve commencing rate cuts, some private equity firms are starting to explore deals with well-established names in the music industry as they look to deploy capital from newly raised funds.
"Music is an industry with significant tailwinds. It provides investors with uncorrelated income - investors receive a stream of cash flows that is not correlated with more traditional economic activity - and it is a sizeable market," said Alex Popov, head of private credit at Carlyle.
Litmus has also bought rights to Newman's solo recordings from the 1970s and 1980s, including tracks like "Short People" and "I Love L.A.".
Last year, Litmus Music acquired the rights to five of singer Katy Perry's studio albums, while Apollo Global Management (NYSE:APO) invested $700 million in record label Sony (NYSE:SONY) Music Group earlier this year.
In June, Blackstone (NYSE:BX) agreed to buy music investor Hipgnosis Songs Fund for about $1.58 billion, a deal that handed the buyout firm the rights to music from artists including Shakira, Red Hot Chili Peppers and Blondie.
"With Randy Newman's catalog, there is a significant value that's being created by its affiliation with Disney and some of the storied movies like 'Toy Story'. This is the type of asset that we gravitate to. In terms of stability of demand, Newman is at the top of the list," Popov added.
A two-time Academy Award and seven-time Grammy Award winner, Newman began composing and producing scores for films in the 1980s. He has also worked on scores for films such as 'Awakenings', 'A Bug's Life' and the 2020 Oscar nominee 'Marriage Story'.