Music is often perceived as a form of entertainment, relaxation, and leisure. However, today the relationship between music and finance has become intricate with new platforms and emerging markets creating investment opportunities that both musicians and investors should be aware of. Generating income with music is now more exciting than ever.
Throughout history, music and business have always been interlinked. In order to live, musicians and composers need to find ways to make money from their compositions. Many centuries ago, classical artists would work under a patronage system with wealthy aristocrats or charge for music pieces commissioned for specific events.
Over time, this has evolved into a royalties system and incomes through merchandising and stadium concerts. This link between business and music has never been more true than over the past two decades, in more ways than any of us could have imagined.
One of the significant transformations in the music industry over the past three decades has been the appearance of streaming services. Platforms, such as Spotify, Apple Music, Soundcloud, and YouTube, have appeared and now offer an extensive variety of artists, songs, and podcasts to serve a worldwide audience. This solution offers a reliable source of income for established artists.
The advantages of these platforms are clear, they generate cash flow from individual streams, subscriptions from premium accounts, and advertisements. As a retail investor, one can also engage in this business model by investing in the stocks of streaming services like Spotify.
The question is: What do songs such as Justin Bieber’s “Purpose”, “Nobody Else” by Backstreet Boys, or Little Mix’s “Power” have in common? Well, every time you listen to or stream them, somebody is getting paid and it might as well be you! A recent trend is for renowned artists to sell their music rights to private equity companies like Blackstone, and KKR Apollo, or stock-exchange platforms such as ANote Music.
The overall spending on music catalogues increased from 1.9 billion to 5.4 billion USD between 2020 and 2021. Music rights as an asset class have been traded since the creation of copyright laws, but they have never been available to retail investors to trade at scale. ANote wants to transform the music industry by unlocking access to this asset class, and by offering shares in music royalties of hit songs and popular artists from all eras on its platform via catalogues. The trading platform has successfully raised over €3.3 million to date, with nearly 90% of its investors enjoying profitability, boasting an average annual return exceeding 10%. Furthermore, the trading platform has disbursed over €500,000 in total royalties.
“Our goal is to unlock the hidden value in music for both investors and artists by creating Europe’s leading marketplace for music investments,” Marzio Schena, CEO of ANote Music told Investing.
So what’s in it for the parties involved? For artists, it allows getting a relatively large lump sum immediately instead of waiting for revenues gradually emerging from streaming or radio stations. For investors, it boils down to a simple diversification story. Investing in music catalogues provides a steady and consistent cash flow, and is uncorrelated with traditional asset classes such as fixed income or equity. Moreover, they may offer the additional advantage of being intellectual property and, thus, intangible assets.
Music is also not subject to the usual risky fluctuations of the financial markets. The most-heard hits of all time are truly timeless in that sense. A song that has sold millions of copies over the decades will most likely continue to be heard in the future and generate corresponding returns. These are therefore concrete assets with a proven track record. Such music catalogues ratings also often increase consistently. The music industry assumes annual net returns of between 5%-16%.
The music rights industry, traditionally, has been a walled garden, accessible only to a select few. The inherent complexities of music rights ownership and royalty collection have been major roadblocks for many. ANote’s platform allows music rights holders to auction fractional music royalty interests, artists gain both monetary benefits and retain their artistic freedom. For music enthusiasts, this platform is a golden opportunity to earn passive income from their favourite tracks’ royalties and for music creators, it’s a chance to monetize their art without compromising their creative integrity. This innovative approach enhances current global music business revenue streams and adds a multi-billion-dollar opportunity on top.
Marzio Schena, also added “Our mission is to make music even more valuable to even more people.”
Music may not only be deemed an attractive alternative investment but also indirectly affect the public by shifting market sentiments. Behavioural economists have also long advocated the use of psychology and human behaviour to explain the drivers of stock markets and how our behavioural biases and emotions affect our choices in financial markets.