The music industry is approaching a golden age as technology changes how music is consumed, from virtual reality concerts to unrestricted access to any song at any time. As a result of increased rivalry, analysts expect music royalties, licenses, and other related assets to appreciate. This trend benefits artists, labels, listeners, and investors alike.
30 years ago, music enthusiasts relied on portable CDs and cassette recordings. With the advent of the internet and increased bandwidth, corporations like Apple, Spotify, and YouTube have transformed music. And with good reason. Music income might reach $131 billion by 2030, according to Goldman Sachs, thanks to global music streaming.
This beginner’s guide examines the investing potential and current industry developments. Check out online cash loans from Oakparkfinancial
Despite the global pandemic, streaming services have grown. Popular songs like Luis Fonsi’s “Despacito” have nearly matched the world’s population of 7.8 billion. A number of other musicians have recorded songs that have racked up billions of views, demonstrating the potential of mass distribution.
Not without technology, of course. Businesses like Spotify, Apple, and even social media companies that employ big data and analytics to construct a picture of people’s interests are all thriving in the music industry.
The streaming model is simple. Listeners can access a free on-demand music library if they accept commercials between songs. Streaming firms then profit from the commercials. Streaming services demand monthly payments for uninterrupted listening. Subscriptions can include personalized playlists or family plans.
Artists benefit from streaming services’ data mining of listeners’ habits. Aside from royalties, musicians can utilize streaming data to plan a tour, pitch new songs to editors, gather audience demographics, and even seek funds for new projects. Spotify alone has 380 million users in 184 countries.
The Recording Industry Association of America (RIAA) predicts $10 billion in revenue from streaming services in 2020. That’s 83 percent of the music industry’s entire revenue. The RIAA also claims that paid subscriptions to on-demand streaming services jumped by 25% in one year, from 60.4 million in 2019 to 75.5 million in 2020.
Spotify (SPOT), Apple Music (AAPL), YouTube (GOOG), Amazon Music Unlimited (AMZN), Sirius XM (SIRI), and iHeartMedia are all publicly traded music streaming services (IHRT).
Beyond streaming services, companies like Peloton (PTON) build music playlists into their products. These measures increase payments for music owners like Warner Music (WMG).
Sonos speakers, Amazon’s Alexa, and Google Nest are among the smart-home gadgets that have increased listener involvement with music at home. Listeners now expect high-tech equipment like cordless headphones. Listeners consume content quickly from home to work and beyond.
Analysts expect that increased internet use and technology accessibility will add millions of new listeners to the music industry, particularly in emerging economies. This means more music streaming and higher royalties.
Royalties can save an artist’s life. Consider British singer-songwriter David Bowie, who raised $55 million in 1997 from his former manager to buy back his music rights. The asset class, dubbed “Bowie Bonds,” was one of the first to use intellectual property as collateral.
Diversification is one of the advantages of royalties for investors. Stocks, real estate, art, and possibly royalties are used to diversify portfolios. Of course, different asset types have differing amounts of risk, so carefully weigh your options.
Artists are also turning to non-fungible tokens (NFTs) to publish their music more directly while retaining more of the benefits. In addition to facilitating royalty payments, NFTs employ blockchains to register ownership. 2021 saw Kings of Leon release the first major-label album incorporating NFT, allowing token owners to access exclusive content.
Some investors are turning to crowdsource sites like SongVest to earn from royalties.
The fintech startup was founded in 2007 to buy and sell music royalties online. SongVest creates a listing after estimating the value of a music catalog. Investors get quarterly or biannual payments, like stock dividends.
Royalty Exchange, for example, connects budding artists seeking money with potential investors in exchange for royalties. It claims to have raised over $100 million for content creators through over 1200 transactions.
Retail investors should research royalties, investment lengths, and licensing agreements before committing funds to crowdfunding platforms.
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Live music and shows
The global epidemic hit the live music industry hard, with many public companies losing more than half their market value. Live activities may return once lockdown restrictions lessen and venues reopen.
Live Nation Entertainment (LYV), which controls Ticketmaster, forecasts higher concert attendance in 2022 due to pent-up demand for live events. This tendency will likely continue as musicians restart music tours in the coming years.
Other names like Madison Square Garden Sports (MSGS) and Eventbrite (EB) may also benefit from the increased attendance.
Investing in music offers long-term gains. Retail investors now have access to public equities, ETFs, and crowdfunding companies. Vintage guitars and pianos are among the objects that have become collectibles and can command tens of thousands of dollars.
But, like with any thematic investment, there are hazards. So, before you invest, think about if music is a good fit for your portfolio.