This is a guest post from Marzio Schena, co-founder and CEO of the music investment platform ANote Music. The music rights investment space is has, in the last few years, seen billions of dollars invested into catalogue before experiencing a slowdown in the last 12 months. Here, Schena argues that the royalties market is still booming, with, he predicts, some big changes in how royalties are regarded by investors – and how regulation of streaming platforms might increase the value of royalties as an asset.
Money, Money, Money. It’s not just one of the most famous songs in Abba’s world renowned catalogue, it’s also the direction the music royalties market is heading in.
We are in a golden age for music royalties, and the good times are only going to get better. Expect to see the industry evolve rapidly in the coming years in a number of ways. Firstly, artists diversifying the ways they monetise their music rights will become the norm.
Secondly, music royalties will further cement themselves as a bona fide asset class to compete with more established investments, and we will see an explosion of interest from music fans and everyday investors as the music industry becomes more accessible than ever before. All of this will be further influenced by potential regulation of streaming platforms, which could tilt the balance of power further in favour of artists.
A post-pandemic boom
It was only a matter of years ago that the pandemic was disrupting live events and creating a dark cloud of financial uncertainty above the market. That disruption seems a distant memory now. We are in the midst of a music money boom. Festivals and live events are back bigger and better than ever, while the inexorable growth of the music industry at large continues apace.
The sector looks set to flourish further, with Goldman Sachs forecasting that music revenue will surpass $130bn by 2030. The UK market is thriving, with UK music exports recently surpassing a value of £700m for the first time.
Central to this growth is the maturation of the music rights market in recent years, driven by the billions being pumped into the sector by major players including Sony, Universal, Roundhill, Blackrock and BMG.
Selling off music catalogues and music rights had historically been regarded as reserved for heritage artists; the likes of Fleetwood Mac, Bruce Springsteen and the late David Bowie, with transactions usually strictly reserved to happen between industry insiders. The landscape is shifting further now, with the market showing an interest in younger artists. Two prime examples that made headlines are Shakira, and Justin Bieber, who sold rights to his catalogue to Hipgnosis for $200m. This trend will continue, with rights holders not only diversifying their revenue streams by selling catalogues, but also exploring other ways to list their catalogues on exchanges so they monetise their assets while retaining creative control of their music.
For investors, the appeal is clear. Royalties are a reliable, passive income, and largely insulated from broader economic changes.
For investors, the appeal is clear. Royalties are a reliable, passive income, and largely insulated from broader economic changes. On the ANote Music platform, our investors enjoy an annualised return of 10% on average, with a profitability rate of nearly 90%. Crunching the numbers, it’s not hard to see why catalogues are being bought up for astronomical sums – investors expect the good times to keep rolling. This is evidenced by the near-constant news around rights sales – Nelly and Logic are two of the latest artists to sell a portion of their catalogues in recent weeks.
This growth will have a trickle down effect. It’s not just rights holders and artists who have more choice in how they monetise their catalogues, music fans and everyday investors will also have more opportunity to buy into the industry.
This is why investment platforms are springing up around the world and changing the market. These businesses boast huge investor backing, and are creating platforms through which anybody can invest into their favourite artists. We are seeing strong appetite in Europe, with thousands of fans taking the opportunity to invest into royalties from as little as six euros on our platform.
“Regulatory change looks inevitable”
But this evolution of the market has not been without controversy. Questions abound over what all of this means for intellectual property, and how much power artists have versus the big industry players. The running story around Taylor Swift’s master rights being sold to Scooter Braun is the most obvious example of where the lines risk becoming blurred between financial freedom for artists and control over intellectual property. Bridging the divide between the worlds of finance and music can be positive, but it should always be to empower rights holders, and not to infringe upon their IP or control.
Regulatory change also looks inevitable. In the wake of the pandemic, British musicians including Paul McCartney, Kate Bush and Chris Martin signed an open letter calling for artists to be paid more fairly by streaming platforms, prompting UK MPs to open an investigation into streaming platforms. A more balanced distribution model between artists and platforms feels inevitable, and that too could benefit investors.
This is a time of seismic change in music. From investors saying Gimme, Gimme, Gimme, to artists imploring those with the purse strings to Take a Chance on them, everyone is searching for that nuggets of Royalties Gold.
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