Over the last twenty-five years, the music industry has experienced its fair share of highs and lows. After piracy and unbundling drove 15 years of revenue decline, the global industry has returned to growth, with major cash infusions from financial giants and industry-shifting tech disruptions.
As a result, we are in a new golden age of the music business, with hundreds of millions of songs readily available to anyone with a mobile device almost anywhere in the world and an extraordinarily well-capitalised and well-resourced collection of companies across entertainment, tech, and finance leading the way.
The music industry continued its robust growth in the first half of 2023, according to the RIAA’s latest mid-year report. Total revenues grew 9.3% at estimated retail value, reaching an all-time first-half high of $8.4 billion; at wholesale value, revenues grew 8.3% to $5.3 billion.
Paid streaming subscriptions continued to be the strongest driver of revenue growth, according to the report, increasing by more than $550 million and growing to around 96 million subscriptions during the period.
Due to this new dynamic, activity in the royalty market has risen sharply. Private capital and global commercial banks have invested billions in music catalogues in recent years. With the advent of streaming, music royalties have a similar payoff structure to bonds.
Royalty payments from copyrights offer a predictable, recurring, and diversified source of income for investors. For catalogues, music streaming platforms are often credited for the boom in song and recording valuations, but that’s just one slice of the pie. The licensing of music for film, television, and advertising is also a steady and growing component of revenue due to increased investment in original content on streaming services. As entertainment and media diversify, the demand for music in various mediums will expand, resulting in increased potential for music royalty income.
In addition to publicly listed funds, private investors also can invest in royalties directly thanks to a platform called “ANote Music” which acts as an intermediary. It is an online auction house where people can buy and sell shares in music catalogues which allow them to receive royalty interest.
The platform has existed since 2018 and it claims that the average return on investment for investors is 10%, with a profitability rate of nearly 90%. This asset class might be interesting for anyone who is looking for a way to diversify their portfolio.
There is no doubt that music as an asset class has received much attention and appreciation from conventional financial giants. One of the reasons is that they provide what are known as “uncorrelated returns.” The stock market might crash, but people will always listen to music no matter how dire things get. The thinking goes that royalties will continue to flow in, regardless of economic despair. This makes including music royalty shares in a larger investment portfolio an appealing option for people looking for modest but steady returns.
Jumping into this world will require fans to take a closer look at what exactly they’re buying, and how royalties work. Music is a collaborative field, there are often many different people who hold copyrights. With a marketplace like ANote, what you tend to be buying is a specific slice of a royalty stream, not the whole cake.
ANote Music is led by some industry big-names like Marzio F. Schena, Forbes 30 under 30, alongside Matthew Knowles, father of Beyoncé, as one of the senior advisors. Companies like ANote appeal to people who like trading assets in a regulated environment. They’re trying to help performers get cut into these deals, which often take place between financial firms and recording companies. The company has also announced its 100th Royalty payout to its investors.
The market for investments in music rights catalogues is not saturated yet. New players keep coming in and large sums of money are still being paid for some catalogues. Of course, whether all these investments actually pay off, remains to be seen. So, despite changing market conditions, the market for investments in music rights catalogues does not seem to be at a standstill, for the time being.
