As the UK opens up, the opportunity to invest in cultural and music events could hold lucrative opportunities. Marzio Schena, CEO of ANote Music, a business which invests in music royalties and image rights, is confident the future looks bright for an industry which has suffered so greatly during the pandemic.
Over the last twenty or so years, the music business has changed, grown and adapted immeasurably. Once-unheard of singers have become superstars by releasing demos on their own online pages, music streaming saw the death of CDs and enterprising companies such as Hipgnosis Songs Fund, which according to the company website offers investors “a pure-play exposure to songs and associated musical intellectual property rights,” have come to the fore.
Although similar to such funds, ANote Music’s approach is slightly different. Investors, instead of buying into the catalogue of songs the company already owns, use ANote’s platform to select their own investments. We caught up with Schena to discuss how the model works and the current state of the music business.
Why now?
The arrival of ‘Freedom Day’ heralded the return of live music events and gigs. Finally, the music industry was offered a long-awaited opportunity to recoup some of the money lost over the course of the pandemic and various lockdowns.
While buying music rights and royalties is an established investment opportunity with companies such as Hipgnosis, ANote music has launched a world-first opportunity to purchase image rights, an idea made more interesting by the arrival of Freedom Day.
Although events are permitted with fewer restrictions, Schena points out that the industry is likely to host more events with fewer audience members, to mitigate risks and help punters and performers alike feel safe. Doing the maths, this means artists should perform more regularly, broadening the opportunity to generate income from image rights.
What are image rights?
Every time a band or performer puts on a show, the performance contributes to their image rights, which are owned by a number of stakeholders. Typically, these will include the performer themselves, their music label and perhaps other key shareholders. So, each time the performer generates an image, whether by putting on a show or because the pictures are used for merchandising for example, the image rights owners take a cut.
Artists can never release 100% of their image rights, as this would understandably meddle with their incentive to perform.
With ANote, like purchasing music rights, which generates income for performers each time a song is played, investors are now given the opportunity to cash in on physical performances, too. However, there is a difference with ANote.
Typically with music funds, investors buy into the portfolio. This offers diversification: Hipgnosis investors buy into the fund and the artists it has predicted will bring returns, rather than targeting their own chosen performers. Instead, ANote is much more direct: investors buy through their platform from sellers, so would have to know who they want to buy from, how much and when. It’s a more hands-on approach.
Whose songs should I buy?
The artists that you might want to buy from through ANote differ depending on whether you are interested in image or music rights.
With image rights, you’ll want to target a living, currently performing artist whose ability to perform for large audiences is established and doesn’t seem set to diminish. Alternatively, you could opt for an up-and-coming star you’re confident could one day sell out big-ticket venues.
With music rights, investors tend to behave differently. Some investors prefer to imitate music labels, seeking out young talent and placing bets on whose voice, performative charisma or song writing abilities might make it big in the future. The trouble with this, however, Schena warns, is that you’re taking on the role of a music label without the expertise, tools and backing to make those hunches a reality.
Instead, many investors opt for the old but gold rule: if “the artist is iconic,” says Schena, you have a more realistic chance of raking in returns. In the music industry, “old has a positive connotation,” he says. “If people listen to a song this year, they will still listen to it next year.”
Schena recommends investors take some time to think about and research broad listening habits to get better at sniffing out lucrative opportunities. Investors should also think about the spread and reach of an artist or band. Schena points to rock band Queen as one of the most lucrative money-spinners in the music world because of the various channels supplied by their catalogue. Films, music, merchandise, musicals: Queen has a stake in each.
There are, of course, artists that you can’t buy: whether that’s because they don’t want to sell or because their rights are already tied up elsewhere. Generally, however, the market can be liquid.
What’s the price of entry and how do you exit?
Buying through the ANote model, investors can start to get involved with only a few pounds, so it’s an accessible opportunity which grows with you and your interests. If you chose to exit an investment, ANote’s secondary market allows you to list your rights for sale on their platform. “Transactions will always happen and continue,” says Schena.
Will music and image rights prove a success?
Given the long slog of the pandemic, Schena is confident the market is ready for something interesting and exciting to invest in. Investors, he says, are looking for “new ways of investing” with a “thirst for something different”. He suggests the cryptocurrency boom and Bitcoin’s subsequent crash is a good example of the market searching for inventive ways of generating capital.
Coupled with the idea that Freedom Day will have sparked an injection of life into the music scene, perhaps an interesting trajectory for the industry lies ahead. With a low barrier to entry and a taste for adventure, perhaps investors might like to put on a record and mull it over.
More on alternative investments:
Vintage Pyrex as an alternative investment
Cask whiskey investment guide offers all the essentials
Credit: Source link
