By: Jamie Petersen
Music is a hobby for many, but for others, it is their life!
There is a lot more behind strumming a guitar or being able to sing. It is a passion, a lifestyle, and an income for many artists who follow their dreams. The music industry is highly profitable. And not only for those who can sing a tune or carry a beat, but there are also open doors for investors who may not share any musical talents.
It may sound a little risky investing your hard-earned funds into a rock band or hip-hop artist, but musical investment doesn’t have to be risky. There are a few options available when investing in music, many of which will appeal to a weary investor.
Let’s catch the beat and find out more about investing in music…
Stocks and Funds
If you are not about to hand over an investment check to the upcoming rock band next door, then look at stocks and funds available in the music industry.
Many music companies are publicly traded, and while record labels may be your first thought; do not forget the following in the music industry:
- Baldwin Pianos
- Guitammer ButtKicker Bass Shakers
- Singing Machine Karaoke Systems
- Apogee Digital Audio Equipment
All of the above are large, publicly traded companies that you can invest in and purchase stocks. In addition to the above, you can explore stocks in Spotify too.
Two of the three major record labels are also subsidiaries of publicly traded corporations, including:
- Universal Music Group (under Vivendi)
- Sony Music Entertainment (under Sony Corporation)
Another opportunity for investing is by trading binary options of the stocks of publicly traded music labels, such as the above record labels.
Something a little more unconventional, but another option is to explore royalty-backed bonds. David Bowie is an icon in the music industry and is one of the musicians that has sold the value of his royalties as bonds on the investment market. Royalty backed bonds allow investors to purchase a portion of the artist’s income from their back catalogs’ sales. Musical investment is growing with this unique form of issuing bonds using various forms of collateral.
If it is nerve-wracking for you to put your money out there into stocks, then perhaps take a look at musical collectibles. Of course, there is some risk involved, but the right purchase will definitely be rewarding. Autographed items, records, and even collectible instruments can see some serious profitable gains if you are happy to hold onto your items for a couple of years.
When the “Lady Blunt” violin was sold in 2011, it was sold for almost $16 million! In 40 years, since its sale in 1971, it accumulated an annual return of more than 20%. Purchasing musical equipment is a great way to invest in music and to get a greater price than what you paid for it originally.
Artist Crowdfunding; Purchasing Royalties
Here is the risk you may have been avoiding; making a direct investment into the music industry itself, but it can really prove to be a highly profitable avenue of return.
One way of investing is in the form of artist crowdfunding. Similar to investing in the stock market, you can help fund an artist and enjoy a financial return on your investment. Initially, this idea originated in 2006 by German Startup Sellaband. The company had a great backup of $5 million and enabled investors to fund artists in return for a share of their future music revenues. Sadly, the business went bankrupt in 2010. However, after ten years, there has been a turn of events. Investors have come around to the idea thanks to a streaming dominated music industry. Today’s climate of downloading and streaming is perfect for the fan-fueled equity crowdfunding concept to take off.
Artists can set up the duration and the percentage of the revenue they want their fans/ investors to receive. While the artist holds onto the ownership of their copyrights, they are under a contract to share a percentage of their future revenue with their investors. The great motivation behind issuing their royalties as “shares” is that artists will not be bound to traditional recording companies. Instead, they will collect an advance from their fans/investors.
The advantage of this financial model for fans and investors alike is that even if you have never written a song or carried a beat, you can collect royalties. Another benefit is that stock prices fluctuate daily, increasing the risk of investment. However, royalty revenues continue to grow.
Bridging Musical Investment
Historically, there has been extraordinarily little comfort between the music industry and the financial community. Bridging the gap of musical investment has taken years, and perhaps with the intervention of new technology that allows paid streaming and organic outreach, financial contributors will feel more comfortable.
Investing in a startup musician or band has become noticeably rewarding, and fans feel closer to artists than ever before. It has been difficult to align with a financial system that expects consistent returns and limited risks. However, the gap is slowly closing with innovative creativity. Financial investors have seen the potential of investing in the music industry, regardless of their chosen platform, whether it is stocks, collectibles, or purchasing royalties.
Music is a valuable investment. If you have ever sung along to a catchy song in the car, you will surely appreciate the artist behind the music.