We stand at the threshold of a new golden age in the music industry, as technological advancements disrupt the way we consume music. From virtual reality concerts to unlimited access to any song at any time, these innovations are reshaping the landscape. Experts predict that this transformation will lead to an increase in the value of music royalties, licenses, and related assets, offering significant opportunities for artists, labels, listeners, and investors alike. In this beginner’s guide, we will dive into the investment potential and explore some popular trends within this rapidly evolving industry.
The Rise of Music StreamingÂ
The advent of the internet and improved bandwidth has revolutionized the music experience, with brands like Apple, Spotify, and YouTube leading the way. Streaming services have witnessed remarkable growth, with hit songs amassing billions of views. Thanks to technology, the music industry is firing on all cylinders, driven by streaming companies, device makers, and social media platforms that leverage big data and analytics to cater to listeners’ interests. Streaming provides a simple model, offering both free, ad-supported access to on-demand music and premium subscription plans for uninterrupted listening, allowing companies to collect valuable data on listeners’ preferences.
Streaming Benefits for Artists and InvestorsÂ
Streaming platforms not only generate revenue through advertisements and subscriptions but also provide valuable insights for music artists. The data gathered from streaming services enables musicians to make informed decisions, such as planning tour locations, pitching new songs to editors, understanding audience demographics, and even fundraising for new projects. With over 422 million listeners on Spotify alone, the potential reach and impact are immense. Moreover, streaming services have become an integral part of many public companies, presenting investment opportunities in platforms like Spotify, Apple Music, YouTube, and more.
Music Royalties and Additional Revenue StreamsÂ
Beyond streaming services, integrating music playlists into products and platforms has created additional revenue streams in the form of royalties. Companies like Peloton, through exercise equipment, and smart-home devices such as Sonos speakers, Amazon’s Alexa, and Google Nest, have further deepened listeners’ engagement with music. As internet accessibility expands and technology reaches emerging markets, the music ecosystem is expected to attract millions of additional listeners, leading to higher streaming numbers and, consequently, increased royalties.
Investing in Royalties and Alternative AvenuesÂ
Royalties can be a lifeline for artists, providing a continuous source of income. Some artists have even utilized intellectual property as collateral, paving the way for innovative investment opportunities like “Bowie Bonds.” Investors, seeking diversification in their portfolios, can consider investing in royalties alongside traditional asset classes. Non-fungible tokens (NFTs) have emerged as a direct way for artists to release their music while retaining more significant control and reaping benefits. Crowdfunding platforms like SongVest and Royalty Exchange offer avenues for investors to participate in music royalties, but thorough due diligence is essential.
Live Music and the Post-Pandemic RevivalÂ
The global pandemic severely impacted the live music industry, causing significant losses for many public companies. However, as lockdown restrictions ease and venues reopen, live events are expected to make a comeback. Live Nation Entertainment, which owns Ticketmaster, foresees a surge in concert attendance, driven by pent-up demand for in-person experiences. Companies like Madison Square Garden Sports and Eventbrite may also benefit from the anticipated increase in ticket sales as artists resume music tours.
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Investing in the music industry presents long-term opportunities as it continues to evolve. Retail investors have access to public stocks, exchange-traded funds, and crowdfunding platforms. Memorabilia and music instruments can also become valuable collector’s items. However, it is crucial to conduct thorough research and consider the potential risks associated with any thematic investment. Stay informed to determine whether the music industry strikes the right chord for your investment portfolio.
