Why Is The Market So Bullish on Music Royalties?
Music royalties are one of the hottest investment tickets in finance right now.
Barely a week passes without news of another artist being offered big bucks for the rights to their back catalogue.
Producer Bob Ross is one of the latest to cash in on the royalties investment craze, selling his rights for Metallica’s Metallica and Michael Bublé’s Call Me Irresponsible, Crazy Love, Christmas and To Be Loved. News of that deal arrived just one week after the sale of the publishing and writer’s share of Shakira’s entire catalogue.
The buyer for both lots was Hipgnosis. Since launching in 2018, the investment company has raised more than $1.6 billion in funding and purchased the rights to over 60,000 songs.
They aren’t alone in the market either. Earlier this year, Universal Music Group acquired Bob Dylan’s entire catalogue for a nine-figure sum; at the end of 2020, Primary Wave Music bought up Stevie Nicks’ publishing rights.
But why are investors so keen to get a piece of the pie when it comes to music royalties?
An industry on the rise
Recorded music revenues have increased every year for the last five years — and this trend shows no signs of slowing down.
The industry may have contracted through the first decade of the millennium as illegal downloads killed off physical sales, but its return to growth is thanks to streaming, which in 2019 accounted for 56% of recorded music revenues.
Streaming is now the de-facto choice for fans, while investors have renewed confidence in the music industry and its current money-making model.
It’s not only streaming driving the growth of music industry revenues. Publishing and sync royalties are also heading in the right direction. There’s an insatiable global demand for new movies, TV shows, games and advertising campaigns. And what do these forms of media need? Music, of course.
In layman’s terms — whenever a track is used in any of these formats, whoever owns the rights to that song gets paid. And the biggest production companies will pay top dollar for the perfect soundtrack.
Goldman Sachs predicted music industry revenues to more than double to around $131 billion by 2030. And it looks like their predictions are coming true. In 2019, total revenues for the global recorded music market grew by 8.2% to $20.2 billion, before increasing by a further 5.6% in the US during the first half of 2020.
With these kinds of numbers, it’s hardly surprising the market is so bullish right now and investors worldwide are taking such a strong interest in music royalties as an asset.
The growth of streaming
Streaming has seen a massive growth in popularity over recent years, and that has only accelerated during the pandemic.
Sign-ups for Spotify, for instance, exceeded the company’s expectations for 2020, while users spent more time listening than ever before. The company’s shares are up a massive 60% since 2019, with the Guardian Fund predicting a further 5x growth by 2030.
In America alone, 72 million people pay monthly subs to streaming services. The market there has tripled in five years.
Unlike physical record sales, which historically suffered in lean times, streaming has commodified music consumption. More and more listeners are signing up and, once they do, see it as a necessity.
As this trend grows, streaming numbers will too — and therefore so will revenue.
While traditional financial markets can be volatile — particularly in uncertain times like these — music royalty revenues remain strong and most importantly; predictable.
More artists than ever before are earning a steady income from their royalties, with years of historic data to help understand how their music is being consumed.
This data not only offers an insight into their potential future earnings, but also assists with current marketing strategies, allowing them to target specific audiences and double down on hotspots where their music already performs well.
Every song is tracked down to the smallest data point. And this in-depth information is not only helping artists progress their careers, but also understand the real-world value of their music assets like never before.
Music is a constant
Putting all of the figures, stats and proven industry growth aside — music is a constant of modern life.
People aren’t going to stop listening, enjoying and sharing music, both new and old, especially when access is now so widespread and affordable. Music also shapes how people feel. Which is why advertisers and production houses will dig deep into their budgets for the right track.
It’s these universal truths that give music its true power as an asset class. And as investors and institutions are finally starting to understand that, the value of music will only increase further in the future.
Future royalties as collateral
At Opulous, we understand the value of music assets and will revolutionize music industry funding.
The Opulous DeFi platform introduces a new, innovative and decentralized way to connect musicians and investors through blockchain technology and smart contracts.
Artists can use their future royalty earnings as collateral for DeFi loans, and investors can stake their cryptocurrencies in our lending pools to generate daily passive income.