A good rule of thumb for investors is go with what you know, and who doesn’t know something about music?
You might be wondering how a regular person can invest in the music industry, and up until now the simple answer was you couldn’t. But then Marzio Schena listened to the radio.
Mr. Schena is the CEO of ANote Music, the European marketplace for investing in music royalties. ANote allows people to invest in the song catalogues of established artists, ones with a proven track record, Mr. Schena explained. Investors can view the past financial performance of the catalogue and listen to songs.
He said he was listening to the radio one day and heard a great song on the radio. It was new and fresh and he believed it could win the festival it was entered into. He was so sure he was willing to bet on it, and began to wonder what a system would look like which enabled people to invest in the music industry.
“The music market was totally cut out of any investment opportunity,” Mr. Schena said. “There was no connection between finance and music, there is no opportunity to create financial leverage for people in the music industry.”
He spoke with some friends, including cofounder Matteo Cernuschi, and began due diligence.
“It was a marvel to understand a new sector, a sector that at the end of the day everyone loves, one everybody is emotionally connected to,” Mr. Schena explained.
The education process was intensive, as none of the cofounders had worked in the music industry. They spoke to people in every corner of the sector and learned music is a capital-intensive industry.
“The idea that everybody has that you can actually get a phone and make a video, record it yourself and put it on YouTube and you’re going to be a star is actually misplaced,” Mr. Schena said.
Doing it properly means recording, marketing, promotion, media and more. And that takes money – lots of it. Yet plenty of money circulates, as labels and publishers exchanges royalties, intellectual property and rights every day.
“It just happens behind closed doors so what we are doing is making it more transparent, more traceable by the public,” Mr. Schena said.
The music industry has been grappling with change ever since live music peaked around 1999, Mr. Schena added. While it has seen upticks in the past 20 years, it still heavily relies on live events. Already a risky formula, it has tanked in 2020.
“This is collapsing,” Mr. Schena said. “It’s a moment in which the main sector…is the only channel of the music business which is connected with the economy.”
So even if the economy is in a downturn and people aren’t going to concerts, they are still consuming music, and that on its own makes it a unique opportunity as it is not contingent on the health of the external economy.
Mr. Schena likens ANote to a hybrid of Bloomberg and Spotify. Find something you like and which you believe is a good investment and put your money down.
When a song debuts, it is like an IPO, Mr. Schena said. There is plenty of buzz, it gets media play, and companies market the hell out of it. Then the support calms down but the songs go on, with some resonating decades after the first play. Those reliable catalogues can be consistent revenue generators with five to 15 per cent returns.
ANote works with parties at all points in content creation, Mr. Schena said.
“We are agnostic to the counter party as long as we can provide investors capital in which you can find iconic songs.”
