The Music Financial Market

At the top of the music industry are Right Owners, including artists, labels, and music investment funds, who monetise their intellectual property (songs and catalogues) through various licensing agreements. Monetisation channels such as streaming, digital downloads, physical sales, merchandising, sync licensing, and live events each have distinct characteristics. Streaming is particularly significant for its stability. It offers consistent returns by relying on widespread music consumption, which minimises risks associated with the rights owner's actions.

Investment in the music industry primarily occurs through IP Right Purchases or Cash Flow Advancements.

• IP Right Purchases involve acquiring active or passive IP rights and are typically accessible only to specialised investors due to high capital requirements and the need for industry expertise.

• Cash Flow Advancements allow music distributors to provide upfront capital in exchange for future royalty shares, but these transactions are often illiquid and restricted to industry insiders.

Passive rights refer to music rights that generate income without requiring ongoing actions by the rights holder, such as royalties from streaming, radio play, or album sales. These rights are largely driven by consumer behaviour and do not depend on active promotion or management by the artist or rights holder.

Active rights, on the other hand, involve rights that require the rights holder to take specific actions to generate income, such as sync licensing (where music is actively pitched for use in films, commercials, or TV shows), live performances, and merchandising. These rights are directly influenced by the efforts and decisions of the rights holder.

The key difference is that passive rights produce more predictable, steady income streams, while active rights are more variable and dependent on the rights holder’s active involvement and decision-making.

The lack of accessible investment infrastructure creates capital inefficiencies and barriers for external investors, presenting opportunities for higher returns.

Music investments generally offer annualised returns between 10% and 15%, significantly surpassing traditional corporate bonds. Additionally, music returns are less correlated with the broader economic cycle, providing stability and diversification benefits during periods of market volatility.