In the music industry today, we believe people paying for music via streaming platforms represents a huge growth opportunity. Where once consumers paid £10 to buy a single compact disc (CD), they can now spend a similar amount of money every month to gain access to just about any recorded music in the world. On this basis, we believe consumers are much less likely to give up their music subscriptions which, in turn, can help provide a more stable revenue flow to key players within the music industry.
As we get older, music has the power to take us back to earlier – perhaps happier – periods in our lives. People will listen to new music, but they will always go back and listen to music from their youth. That is a very powerful ‘hook’ in our view as investors in this space are buying into a back catalogue which resonates strongly with listeners and can provide streaming and royalty companies with more certain and stable revenue streams.
Another strength of investment in music/royalties is that the performance of the asset class is uncorrelated with the economic cycle. Over the pandemic, music streaming has held up very well. While musicians’ performance revenues have dipped because of a lack of concerts and live performances, this has largely been made up for by growth in music streaming.
Beyond these qualities there is also the potential growth of audiences in emerging markets such as China, India, Africa and South America. As listeners in emerging markets start to pay for music streaming services, we believe there is a huge opportunity for the music industry ‘pie’ to grow further.
Paul Flood, portfolio manager and strategist, Newton Investment Management