Music royalties are becoming a more appealing asset class in the current market context of low yields and interest rates. Because of their poor association with macroeconomic performance and strong income potential, more investors have become interested in their financial potential.
In this blog, we'll look at the financial side of the music industry, including why music royalties are an appealing asset class in today's market, how active investors may raise the value of their music IP, and what to look out for when considering an investment.
Reasons of Music Royalties Considered an Attractive Alternative Asset Investment .
Stability of Streaming
Why are more and more people investing in music? Music royalty cash flows have become more stable as a result of streaming. After 15 years of reductions due to piracy and the demise of the physical album, digital streaming has fueled increase in global recorded music revenues, as we discussed in the State of the Music Industry. Ownership of music IP assets and the royalty money generated from them is now more secure.
On a song-by-song basis, new music royalties are typically highest 3-12 months following release. Over the next 5-10 years, income begins to drop. The remaining "tail" of income frequently fluctuates at this point, but it remains rather constant after that.
Recurring Revenue Potential
Music royalties are a dependable source of revenue. Music royalty money is collected by a number of different distributors, with payments sent to music IP rights holders on a regular basis. Investors seeking a steady stream of income prefer recurring payments, which are common in asset classes like real estate.
Investing in a World of Low Interest Rates and Dividends
The returns on music royalties are frequently attractive. In today's economy, investors are looking for ways to generate a return on their money while minimising the danger of losing their principle.
Low Correlation to Economic Activity
Historically, music spending has had little to do with overall economic activity. Music expenditure and associated royalties are holding up well in comparison to other industries during the COVID-19 pandemic, as demonstrated in State of the Music Industry. Historically, neither recorded music nor music publication data have shown a strong link to overall spending.
