The value behind the music

Lynn Norris: Welcome to Navigating Beyond the Expected, a podcast from Truist Securities. Few industries have gone through changes as significant as what's happened in the music industry. As a listener, chances are you're no longer buying albums, but instead you're using a streaming service to listen to your favorite tunes and try out new ones. This enormous shift has forced music producers, artists, and rights holders to evolve in terms of how they think about revenue and value. Recently, music catalogs and royalties have been proving to be examples of how asset-backed securities can unlock value in some unexpected ways. I'm your host, Lynn Norris, and today I'm talking to CJ Johnson, managing director and head of Entertainment Investment Banking at Truist Securities. And also Charlie Dann, who is managing director and head of Esoteric ABS Banking. Hi, CJ and Charlie.

CJ Johnson: Hi, Lynn.

Charlie Dann: Hey, Lynn.

Lynn Norris: I want to start with you, Charlie, because before we get into some of the specifics of the music industry, I want to make sure we're all on the same page with our terms. So asset-backed securities, or ABS, are, as the name implies, securities that are backed by assets. But for someone who's never encountered securitization before, what does that actually mean?

Charlie Dann: I'd say it all starts with a predictable pool of assets. A pool of assets has predictable cash flows, is diversified, and these can be anything from music royalties to auto loans to credit cards. One of the other key tenets of securitization is the legal structure. So in a securitization, we move a pool of assets into what's called an SPV or special purpose vehicle. This SPV is bankruptcy remote. So, meaning the assets are safe from a bankruptcy at the parent level.

Lynn Norris: So, how does ABS differ from more traditional bank loans or corporate bonds?

Charlie Dann: It's not corporate guaranteed, it's backed by just by the pool of assets. You could have a company that's unrated; in many cases, we do. ABS is the first time many companies actually access the institutional-grade capital markets. So you can have companies completely unrated, corporate balance sheet wouldn't warrant it, but they're getting AAA rating on their portfolio or their ABS. So that just comes down to the fact that it's based on asset performance and not the corporate balance sheet or the corporate balance sheet scale or anything else that goes into a analysis of a bank loan, a traditional corporate bank loan, or corporate rating.

Lynn Norris: So is ABS more of a niche type of transaction, or is it used more often than we might think?

Charlie Dann: ABS has really grown, particularly since the '08 financial crisis. One of the big drivers of ABS growth has been growth in esoteric ABS. So non-traditional, you have autos and credit cards that have historically been the major asset classes in ABS, but really, since the crisis, we've had explosion of growth. So, for example, in 2016 we had 36 billion of issuance in esoterics, which accounted for 20% of the market. In 2025, that was 142 billion, which was about 40% of the market. It's become very widespread and driven by some of these new asset classes.

Lynn Norris: Can you define esoterics a little bit more for me?

Charlie Dann: It's a little bit of a catchall term, but some will call it non-traditional ABS. So anything that's really hasn't been around for 20, 30 years kind of gets thrown into this catchall bucket. Data centers, solar leases, device payments, for example, your Verizon contract will likely end up in a securitization, buy now pay later loans from companies like Affirm, small business loans, student loans. So there's really a bevy of asset classes and asset types that make their way into the securitization market.

Lynn Norris: Well, that's a lot. CJ, at a high level, what attributes make music such a compelling example of the value of ABS?

CJ Johnson: Well, I think if you look back to what Charlie was talking about earlier in that these assets tend to generate steady and predictable cash flows, that's really the definition of music royalties. Anytime a song is released, it's going to have its peak performance the first 18 months, and then at some point it's going to level off to some steady state. And listenership is going to, for most songs, particularly popular songs, remain at that steady state almost indefinitely. And that allows investors to look at this asset class and have confidence in how the cash flows are going to perform over time, which makes for, in my opinion, and I think Charlie would agree, music royalties the ideal candidate for securitization. The music industry began pivoting to this form of financing as we began to see more and more sophisticated investors, particularly institutional investors, whether it's private equity, hedge funds, you name it, and they were looking to apply more leverage to the catalog of assets that they had acquired.

Lynn Norris: How do the changes in the music industry going from album sales to single song streaming and catalogs being put together with different amounts of songs from single artists? How does that affect the choice, or does it affect the choice going to ABS?

CJ Johnson: I don't know that it affects the choice of going to ABS, but the fact that streaming is a technology that provides enormous amounts of data to investors, and that data allows them to analyze and determine what that decay curve is going to be on these songs. Whereas before, if you purchased albums or if you purchased an individual song, you didn't always have the ability to determine how many times I might listen to Hotel California, because I own the album, I own the vinyl, I'm playing it alone at home. No way to track how many times that song has been played. You only track when that album has been purchased. With streaming, you can determine how many times Hotel California has been listened to and how many people are listening to it. And so that data helps investors and the industry get more comfortable with the predictability of the cash flows that these songs generate.

Lynn Norris: Are there other factors for investors? Alternative yields? Is there anything else driving it other than predictable cash flow, easier valuation?

Charlie Dann: Music offers a nice relative value pick up, even to other non-traditional ABS; it offers a significant pick up to corporate spreads of similar ratings. So, typically, music deals that have been issued are rated single A for the senior tranche. And so if you compare that to corporate bonds or corporate index at the same rating, you get a nice and healthy pick up due to the complexity. There's a bit of liquidity trade-off versus on-the-run corporate bonds, which are very liquid, but people really have come to appreciate music as an investment in not being correlated, and it's also a nice investment for insurance managers that are looking to buy and hold.

Lynn Norris: And so do you feel like it's cyclical or this is more structural at this point?

Charlie Dann: I think it's certainly less cyclical than most of the asset classes that we see in our market and maybe in the broader financial markets. If you look at consumer credit, or if you look at credit cards, or if you look at auto loans, it's hard to see how this is even close to as correlated to the macroeconomic environment as the others. The subscription amount's not that much, and it's cheap entertainment in a bad time.

CJ Johnson: If you look at the predictability and the stable cash flows, these cash flows have been stable throughout the various economic cycles. All you have to do is look at COVID and the fact that the streaming platforms experienced very few declines in subscribers during that platform. People, while they may have cut their budgets and their expenditures on a lot of other things, they kept their streaming service because you're locked in your home because of COVID, you don't know what's going on from a health standpoint. And people wanted to continue listening to music. They wanted the ability to escape. I would say the same thing about some of the visual platforms like Netflix.

People wanted to maintain some connectivity to the real world pre-COVID. They wanted to have an outlet; they wanted to continue to enjoy their lives despite the fact that there was this health crisis going on. And so again, you think about some of the other industries and sectors that, during that COVID timeframe or other periods of economic instability, music continued to perform at a steady state. And so that gets back to the fact that investors view it as a non-correlated asset class. And so I'm not an investment manager, but I think the term that some would use is a defensive strategy as they think about building out their portfolios.

Lynn Norris: Well, I can say as a listener and a watcher that streaming has changed completely the way that I consume. I want to be able to binge-watch an entire season, and I like when artists release single songs, and I don't have to wait for the album to come out. So yeah, it's definitely changed a lot. Is ABS only relevant to companies with huge portfolios of whatever their asset is?

Charlie Dann: I think it comes down to the asset class. We've seen deals done as small as $100 million. We've seen deals in the couple billion, anywhere in between it can get done. I think what comes down to is predictability and diversification that could support that predictability. So size matters relative to diversifications. In music, for example, some of the factors that matter in terms of the diversification are the number of songs, the artists, the genre, the vintage; all of those things matter. When other asset classes like data centers, the top tenant, the number of in triple net lease, the number of properties, the ratings of the tenants, those are all important factors that also matter.

Lynn Norris: So that explains why ABS is getting a lot of attention these days, including in the music industry. But let's talk a bit more about how these transactions actually work. CJ, you told us earlier how advances such as streaming and digital tracking have opened up ABS as a tool for the music industry. How does all that information help you evaluate the long-term value of a music catalog in an ABS deal?

CJ Johnson: The biggest driver for the growth of the music industry has been the evolution of streaming. But there have been other technological advances that have to do with the copyright owner's ability to identify songs and determine if they have been properly registered in certain geographic territories. And proper registration is key to ensure that you're collecting your royalties. So there are tools that are out there that have helped owners of copyrights identify those songs. There's a lot of talk now about AI and its role in music. There are now tools out there that some of the publishers are using to kind of help weed out inappropriate use of songs generated by AI.

And by that I mean, someone creates a song without securing the proper license to use someone else's song for the learning model of that to create that song. So there are so many technological advancements beyond streaming that have helped the industry, and all of those things come into play when analyzing a catalog of songs that consists of diversified genres, diversified vintages, artists, et cetera. And that forecasting enables you to do a very basic and simple discounted cash flow to determine what the value of the song or the catalog of songs are. And once that value has been determined, then that's the first step in trying to triangulate on the size of a transaction, the structure of a transaction, the pricing of a transaction, determining that value.

Lynn Norris: It sounds to me like when you're choosing these assets to put together into the security, that it's not necessarily the entire catalog then of any given rights holder.

CJ Johnson: It's on a client-by-client basis in terms of what they want to achieve. Some clients are looking to issue a certain amount of debt, and so what Charlie's team, what my team, and I will do is sit with them and say, quot;Based on your catalog that's valued here, comprised of these songs, we think you can get the best execution if you focused on this subset.quot; However, there are other issuers where we want to securitize as much of the portfolio as we possibly can. Charlie and I, when we are sitting down meeting with clients, the one thing we do before anything is listen. We listen to what is it that the client is trying to achieve, what's important to them. And through listening, we are able to come back and advise them on the best path of execution to reach their targeted goals.

Lynn Norris: That makes complete sense. Building on that, Charlie, there are various revenue streams from a given catalog, so royalties, streaming income, licensing fees. Are you typically bundling them all together in a security, or are you parceling them out?

Charlie Dann: Bundling it all together. But as you might probably gather from the conversation, the biggest component is the streaming income. That's driving a lot of the growth that we've seen. But the other revenue line items are extremely helpful from additional diversification, not just on a deal basis, but on a individual catalog basis.

Lynn Norris: So they don't make it harder to price or understand?

Charlie Dann: It's all about balance. I would say if it was too overweight and one thing or another or streaming wasn't the lion's share, there would be some explaining to do about what the catalog was and why it wasn't streaming, because that's been by and large what we've seen come through the market.

Lynn Norris: Well, what I'm hearing is investors like to see a lot of diversification. CJ told us before about some of those factors that make a good potential security, but they also like numbers. What numbers do they want to see?

Charlie Dann: It's a great question. So the hard stats are like diversity, songs, artists, royalty types, vintage. Going deeper, how are these songs going to decay or grow? How are you going to adjust for viral events? I don't think anyone could have predicted how Creed re-emerged in recent years and has really come to be everywhere. So you see these kind of pops in the data, and there's a lot of times spent thinking about how do you scrub that or normalize it. So I'd say that's when we're having dialogue with investors. A lot of the conversations go there. We also spend a lot of time on the structuring and the cashflow analysis. We run what's called a stress breakeven. So we haircut the cash flow until we see a dollar of principal interest loss on the bonds.

And so these deals are structured at the single A level to withstand anywhere from 30 to 50% haircut. And so we'll spend time running those types of sensitivities. But CJ hinted at this a little bit, and some of the softer points to consider are music, probably more than any other asset class, or anything we touch really elicits a personal viewpoint. Everyone has their tastes and their preferences, and they're different. So a lot of times we spend, beyond the hard data, we spend time kind of connecting investor perceptions with reality and trying to ground it in the data.

Lynn Norris: CJ, once a company is determined they've got an asset that could be securitized, one decision they have to make is whether to put it up for public or private transaction. Why does that distinction matter in the music business?

CJ Johnson: The clients that we've worked with on transactions are concerned about how much information they have to disclose. Keep in mind, in many cases, they are acquiring these assets from the songwriter, particularly when it comes to publishing rights. And the songwriter is oftentimes represented either by a business manager or a lawyer. In some cases, the songwriter might be represented by an investment banker like myself. What the purchaser of the catalog doesn't want to see happen, particularly if they are acquiring the assets and plan to have an ongoing relationship with the artists or the estate, is for them to see financial information after the fact and feel that they have been taken advantage of. I don't believe any of our clients take advantage of the artists or the estates or anyone that they acquire that they assets from, but there could be the perception of that. And so for the issuer to have to put certain information in a public transaction and run the risk of the party that they acquired those assets from seeing that information and not totally understanding it could put them in an awkward situation.

Charlie Dann: For a public versus private, there's some efficiencies on the documentation front to doing a private deal. There's a little bit more of a negotiation process for private transactions, and you're able to negotiate key terms and spend a bit more time with investors, translating the merits of your catalog and portfolio.

Lynn Norris: Well, and the first time you do anything can be a little daunting. What are the particular challenges of an inaugural ABS transaction?

Charlie Dann: I would say it requires a ton of grit and focus. If you think about the data gathering, the drafting of documentation, the marketing materials, the road show meetings, the discussions, and the back-and-forths, and the Q and A's with radio agencies and investors, there's a lot of time. And I've also found it's really no one's day job to assemble an inaugural securitization at the company. So what tends to happen is, myself and CJ and our colleagues end up being outsourced employees of the company and get into the guts of the organization and try to really handhold and help to make this as easy and smooth as possible and meet our timeline while the client's not getting totally distracted from their day jobs.

Lynn Norris: Well, what better way to get to know them than getting in the weeds?

CJ Johnson: And what I would add, Lynn, is many of our clients have relatively small finance staffs, if you will. And so to Charlie's point, to take them away from their day job is to make that decision, that's a big decision for them to be honest with you.

Lynn Norris: Sure.

CJ Johnson: And so we do believe that that is one of the value propositions of our platform, and that is for the period that we are engaged and working with them on that transaction. It's almost as if we are employees of that company, because we get in and we work with them hand in glove. We try to take as much off of their plate as it pertains to this transaction as possible. We've had members of our teams literally sit in the offices with our clients and work from the client's office to sort of focus on getting the deal done and getting the information needed to execute the transaction.

Lynn Norris: So, Charlie, what part of that process tends to surprise first-time ABS clients the most?

Charlie Dann: I would say it's the appetizer effect. A lot of times, these companies are not rated, haven't gone public. This is their first experience with institutional capital markets. So you get to meet all these large-scale institutional investors that do more than just buy ABS. And I think what clients have been surprised by is the fact that after establishing a relationship through an ABS transaction, you continue the relationship with these large institutions into other products and opportunities, whether that's Mamp;A or equity raises or other strategic transactions down the road.

Lynn Norris: Well, you're really getting to the value of having experienced advisors along for the journey. So let's talk a bit about how your teams work together and with clients to put together ABS deals. You've both been involved in lots of these transactions. Charlie, walk us through one that shows how the elements we've been talking about come together and what challenges arose that Truist was able to help navigate.

Charlie Dann: Yeah, so there's one transaction in music that comes to mind. It was a private transaction, and Truist was sole structuring agent and a placement agent on this one. This came in April of 2025. And if you remember, that there was a lot of tariff related noise surrounding Liberation Day. And we were fortunate enough to be in the market right around that time, and what turned into a really choppy market with lots of turmoil, we were pretty proud of the fact that we were able to hang in there and lead and price one of the few transactions that got done in the days following the tariff announcements. We built subscription to over five times with a blue-chip group of institutional investors. And we were able to hold the deal together even after these announcements. And I think what we did extremely well, and the client did extremely well, was translate the merits of their catalog and of the asset class as a perfect investment at a pretty rocky time. So that's a transaction that we're very proud of. It's private. We can't share too many details, but it definitely stands out.

Lynn Norris: Was this a client that had done ABS before, or was this new territory for them?

Charlie Dann: This was new. This is another inaugural transaction, and we really banded together to get through what was a tough time, and we were able to successfully price one of the few ABS deals in the market for the following weeks, candidly.

Lynn Norris: Well, thank you for sharing what you can about that transaction. CJ, music is just one part of the entertainment industry in your portfolio. What other types of companies can look to what's happening in music for lessons about ABS?

CJ Johnson: For US, entertainment consists of music companies, film and television production companies, live entertainment, location-based live entertainment, talent management agencies, and the broader business services and technology platforms that are dedicated to the entertainment ecosystem. When I look at those verticals, and I think about who else might be an ideal candidate for ABS transaction, I would say it would be in the film and TV space. We have a lot of clients that focus on buying film libraries or own film libraries, diversified collection of film, television programming, and they tend to have the same predictable cash flow dynamics that music does.

Now, the one difference with film and TV is music has the ability to have, as Charlie alluded to earlier, a viral moment. You can put a song from 1977 in a movie produced in 2026, and all of a sudden, that song experiences a resurgence. There's not much you can do other than re-release a specific movie released in 1977, since we're picking on that year, where you can increase the velocity of that experience, other than possibly getting it on another distribution platform, getting it distributed into a market where it may not have been distributed before. But music has the ability to have these viral moments, we call it sync, a sync placement.

The production company will pay the owner of the copyright for use of that song in a film, television, commercial. Those are things that can create a viral moment for a song. Short-form content has created a lot of viral moments for music. I also look at exercise apps and exercise equipment that incorporate music. Those are things that create a little bit of a viral moment for songs, film, and TV doesn't have those mechanisms at their disposal the way music does, but at the end of the day, there are certain films or television shows that people will watch over and over. I can't tell you how many times I've watched the movie Tombstone. Just a personal sidebar.

Lynn Norris: Yeah, I definitely have movies I've watched way too many times, probably to admit.

CJ Johnson: Now that I've mentioned it, I'm probably going to watch Tombstone when I get home this evening.

Lynn Norris: For sure. And I hadn't thought about exercise apps or equipment. That's fascinating. Charlie, look outside of the entertainment industry for me. Earlier, you mentioned a few other asset classes, seeing growth in ABS, such as data centers and solar leases. Where do you see the most potential for ABS deals in the future?

Charlie Dann: Data centers continue to just dominate issuance volumes. There's 15 billion that got done last year. We're expecting an estimate for '26 that dwarfs that number on the ABS side. So we're fortunate to have been a big part of the issuance. Last year, we were number four underwriter in hyperscale data center ABS by volume. So, triple net lease is another very interesting asset class where, in recent years, we've seen the launch of a number of institutional grade platforms that are using the ABS market to finance themselves, including a inaugural $350 million deal that Truist was sole structuring agent and lead book runner on for Reliant Net Lease, which is a portfolio company of Blackstone. So we're very excited about that asset class as well.

Lynn Norris: It's clear there are lots of reasons companies might consider an ABS transaction. So we've talked about a lot of great stuff on this podcast episode, but go back and tell me, what are the main considerations to be aware of in ABS?

Charlie Dann: So if I'm putting my client's hat on, I think ABS is an avenue to help provide higher returns, longer term financing, lower cost of funds, and a lot of these factors kind of intertwine. It's very capital efficient versus bank financing. That's all extremely attractive for folks. And going back to the example I gave earlier, companies that are unrated or able to access rated debt, so that alone leads to significant cost efficiencies.

Lynn Norris: Wrap this all up for us, CJ. What does Truist Securities bring to the table both as shepherds for ABS transactions and for the music industry in particular?

CJ Johnson: The first thing we bring to the table is just lots of experience and understanding of the industry. While I started our investment banking practice around entertainment in 2009, we have a legacy sports and entertainment team in private wealth management that has been focused on entertainment, particularly music, for almost 40 years now, if not over 40 years. At one point, we went by the name of the Official Bank of Music. We feel that we follow a song from the moment a songwriter picks up his guitar or she sits down at the piano and creates that beautiful piece of work, all the way through to its consumption on the streaming platforms. And we have relationships with entities that are involved in that song working its way through the ecosystem.

So we've got industry expertise that we think very few others have. Coupled with the capital markets expertise, we have so much insight on the industry that when we sit down with a client, they're getting guidance from professionals that have either been in the capital markets for an extended period of time and have done multiple transactions. And then you've got the industry coverage team that focuses exclusively on this industry, like very few others are able to do. And we think that's a value proposition very few can deliver.

Lynn Norris: Well, this has been a great look at how asset-backed securities fit in the broader financing landscape and also how truth securities helps clients think creatively about their financing needs. So thank you both for being here. It's been a really fun conversation.

CJ Johnson: It has been great. And thank you for hosting us and walking us through this journey. It has been absolutely amazing. Thoroughly enjoyed it. Anytime I get to partner with Charlie on something, I'm all in.

Charlie Dann: Hear, hear.

Lynn Norris: Before I let you go, I've got just a few more questions for both of you here, and I want you to answer them rapid-fire style. We'll go back and forth and we'll start with you, CJ. Ready?

CJ Johnson: Ready.

Lynn Norris: If you had to give a TED style talk on something non-work related, what would it be about?

CJ Johnson: Wow, that's a very good question. Probably the state of college athletics. And I say that because my son is a former college athlete, and college athletics has changed so much, and I would give a TED talk speaking directly to parents.

Lynn Norris: I would go listen to that TED talk for sure. Charlie, what's something you loved doing as a kid that you still enjoy?

Charlie Dann: As a kid, I loved playing football all the way through high school and college. Unfortunately, my joints and bones won't allow me to play today, but I get some enjoyment by, well, I guess it depends on the day, but as a Cleveland Browns fan, it's few and far between these days.

Lynn Norris: Sometimes it's more than just pain in your joints.

Charlie Dann: Yep, yep. Yeah, exactly.

Lynn Norris: All right, CJ, what's the most helpful kind of feedback you receive at work?

CJ Johnson: I think the most helpful feedback I've received at work is someone having a direct conversation with me about how I could have handled a situation better. I don't scoff at constructive criticism because oftentimes, that professional tension can make everyone better.

Lynn Norris: I think accountability doesn't have to be something that's terrible.

CJ Johnson: No, not at all.

Lynn Norris: It can be something that's very helpful. All right, Charlie, bring it home. What question do you try to ask yourself regularly?

Charlie Dann: I think I'm constantly asking myself, did I give it my all? Where can I improve? What did I learn? So I guess I gave you a few questions that I ask myself, but those are a few that tend to play on repeat. I had to make a pun here.

Lynn Norris: Those are great. And I'm going to add the last question for both of you. What's one way you try to go beyond the expected in work or in life, CJ?

CJ Johnson: I think in work and in life, in particularly if I'm engaging with other people, what is it that you ask of me? What is it that you want to see me do? How can I help you? And try to understand where you're trying to go and what can I do to help you get to that point, but is there anything else I could do to help you to get beyond that?

Lynn Norris: Charlie?

Charlie Dann: I think it's simple, powerful, but just deeply caring about people around you, whether it's your clients or your family. And really listening intently and taking the time to pay attention and then follow up thoughtfully, whether it's connecting dots, connecting people, thinking through the problem that you heard. It's not always easy. Really found that you can build deep relationships and trust.

Lynn Norris: Well, that was excellent, Charlie and CJ. Thank you both for being here on Navigating Beyond the Expected. I hope we get to have you back soon.

CJ Johnson: Thank you for having us.

Charlie Dann: Thank you. This has been great.

Lynn Norris: And listeners, thanks for joining us on Navigating Beyond the Expected. Each month, we bring you new conversations with Truist Securities experts on the issues shaping corporate and investment banking. Subscribe today so you never miss an episode and check out more beyond the expected insights, videos, and articles at www.truist.com/beyond. You can also subscribe to, I've Been Meaning To Do That, the podcast from Truist Wealth. I'm Lynn Norris. We'll see you next time.

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