Why Music is a Hot New Wall Street Asset & Is It Beneficial for Artists?
Streaming music now accounts for more than 60% of global recorded music sales, and investors don’t see the trend slowing down.
Streaming services recently opened up about artist payouts as they seek to win songwriter trust, credibility and subscribers.
From the investor point of view, the life of a record’s copyright is long-lasting [and the] volatility is low — especially when investing in a big music catalog — and it’s growing tren… driven by streaming…. which is here to stay.
We recently wrote about why artists are selling their catalogs and masters. This usually declines income from live performances, tours and licensing which usually make up the majority of their ROI and business.
Private Equity Firms Are Getting Involved
Many leading financial institutions recently got involved with music companies to acquire rights, invests and drive growth.
Hipgnosis Songs Fund; a British music IP investment and song management company co-founded by Nile Rodgers himself raised $100M 2 months ago from Morgan Stanley and JPMorgan Chase Bank to offer pure-play exposure to songs and associated musical intellectual property rights.
“…we have both the Number 1 and Number 2 airplay songs in the UK this week with Miley Cyrus featuring Dua Lipa and Justin Bieber respectively, both written by our songwriter Stefan Johnson.” Said co-founder Merck Mercuriadis.
BlackRock, Inc. is another American multinational investment management corporation that invested $300M into Primary Wave, which owns copyrights of songs from artists including John Lennon and Kurt Cobain and, as of last December, Stevie Nicks.
In other news, a global investment firm KKR led a $48M investment into Israel-based Artlist to buy major stakes in a publishing catalog from Ryan Tedder (who btw wrote the new single featuring Brooklyn songstress Luxtides and flaunts a formidable team of other songwriters + record producers like David Guetta, Afrojack, Ellie Goulding, Stargate and Jamie Scott. These stars have a combined 28 Grammy nominations. Wow. )
KKR also owns One Republic’s catalog worth about $200 million, and joins BMG to become more competitive in acquiring rights.
Tempo Music Investments, a private-equity-backed inv. firm launched in 2019 in partnership with Warner Music Group Corp. , has quietly bought up music rights from the Jonas Brothers, Florida Georgia Line, Wiz Khalifa and some top producers. And they’re not done: The firm has more than $1 billion available to keep buying.
Gerber Kawasaki, who’s firm oversee $1.8 billion of investments across many industries (and two music companies) - recently said:
“A bank today looks at a mortgage and says ‘I can get 3.5%.’ With music it [can be] 5%”.
While the multiples of revenue that are being paid for music publishing catalogs today and last year are literally twice as high as they were well under 10 years ago…according to The Wall Street Journal, Apple Music pays artists a penny per stream.
The Recording Artist, Singer, Songwriter Situation Today
Today Streaming may be the future of music, but many artists are frustrated by the lack of payouts that go to the artists directly. Back in March, we covered more on Spotify’s possible PR Stunt and artist complaints.
Apple’s penny-per-stream payment structure—which music-industry experts say can dip lower—is roughly double what Spotify, the world’s largest music-streaming service, pays music-rights holders per stream.
Spotify pays an average of about one-third to one-half penny per stream, though its larger user base generates many more streams. Apple’s payments come out of monthly subscription revenue from users.
Artists, managers, executives and lawyers
Everyone is trying to recover from the loss of touring revenue during the pandemic and calling for higher payouts from companies like Apple, Spotify and many more that keep growing fast.
Artists are not compensated directly by streaming companies, so a single play of a song doesn’t even result in a penny… Before it hits the artist’s bank, it goes through other right holders including labels, publishers, distributors—which in turn pay artists based for their recording, publishing or distribution agreements.
There is an argument that in today’s post-format world, we should not even be thinking about the next thing. So, it is better to think about what new business models and user experiences can grow alongside streaming, to diversify the music industry’s income mix.
Music businesses, labels in particular, are busy exploring where future growth will come from. Signs tell us that there are enough opportunities in various ranges of sources to drive growth.
Here are a few of the music industry’s potential growth drivers and the next frontiers for music monetisation.
1- Gaming - content reigns supreme.
2- Social - content is a growth driver in entertainment boom.
3- Live Streaming - virtual concerts, new startups, partnership with streaming co.
4- Creator Tools - a new opportunity for artist-fan relationship and this existed for a long time. Even when Twitch was Justin Tv
5- Fitness - Take the Verzuz and Peleton partnership for i.e. Or Beyoncé’s Peleton partnership.
6- Fandom. Your fans miss you just as much as you miss them.
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