The possibilities of investing in music
Here comes the Sanremo Festival with music at the center. Not only songs but also investment opportunities with specialized platforms and investment funds that focus directly on royalties, i.e. on listening rights. And therefore, in addition to the record companies that keep the artists under contract, the possibilities for those who want to invest in the sector have multiplied. Music royalties are also considered an alternative investment since returns do not follow the same pattern as the stock market.
Royalties can be purchased directly, with some caution, through platforms such as Royalty Exchange which promises returns of 10% per annum or by investing in publicly traded companies such as Hipgnosis Songs Fund. Royalties are paid for 70 years thus giving the singer who has made a real hit time to grow old in peace. Just think that Neil Diamond’s Sweet Caroline, written in 1969, has grossed an average of between 300 and 500 thousand dollars a year. For this reason it is not surprising that Hipgnosis Song Capital, owned by Blackstone, has acquired Justin Bieber’s music catalog for 200 million dollars. While Sony Music has won the catalog of Bruce Springsteen for an amount of around 500 million dollars.
The universal case
Goldman Sachs believes that global music industry sales to grow at a compound rate of 12% between 2021 and 2030 to over $150 billion. And therefore investing can be useful for diversifying the portfolio even in record companies such as Warner Music o Universal listed in Amsterdam after the spin-off from Vivendi to which it brought a maxi dividend.
Universal, which is the largest record company in the world, has not respected the forecasts of analysts who, at the time of the IPO at a price of 18.50 euros, per share expected no growth beyond 50 billion in capitalization. Today it is worth around 42 billion but has the Abbey Road studios in its portfolio, which hosted the Beatles and artists such as Lady Gaga, as well as Kanye West and Amy Winehouse, EMI Records (Justin Bieber, Keith Richards, Metallica) and Capitol Records (Katy Perry, Paul McCartney).
How much is the Italian music market worth?
It’s Italy? Among the ten most listened homegrown songs there are still classics like Fly (from 1958) , You want to be American (1956) o I will leave with you (1995). In terms of market size, our country is tenth in the world, behind Canada and Australia, two much less populated nations.
But the growth is there. In 2021 according to Fimi, the Italian music industry federation, revenues grew by 27% to 332 million euros. And in the first six months of 2022 there was a further increase of 17.2% to 153.2 million: 25.5 million from CDs and vinyls, 119 from streaming and 6.5 from film and advertising royalties. Revenues that also depend on the success of a festival that can appear dated, like Sanremo.