Music rights can offer investors significant diversification opportunities with sustained cash flows, argues Marzio Schena, founder of ANote Music.

Speaking exclusively to Fundeye, Mr Schena outlined that royalty agreements over the publishing rights of artists was an exciting investment opportunity for clients looking for a credible alternative asset class.

Firstly, he suggested that music rights have a high growth potential, due to the development of new monetising options online and the continued expansion of streaming. The number of hours people were listening to music via streaming platforms was continuously increasing, while he was convinced that new methods would be found to profit from music despite the current value gap for artists.

He also noted that publishing rights in the music industry could function as an alternative asset class, that was resilient to capital market trends and global economic downturns. This is a particularly attractive proposition in an investment climate recovering from the Coronavirus pandemic. Investors would be able to benefit from sustained cash flows not reliant on macroeconomic factors.

Mr Schena said: "You have particularities of the music business that make it very appealing for investors seeking diversification and higher returns, which is zero correlation with the capital markets and with the mood of the of the global markets. The second point is the growth factor, mainly thanks to streaming, new technologies, new ways of monetizing online. So, there is a very interesting growth profile, that you can see in music royalties and music rights."

Outlining a specific possibility for monetising music more efficiently, he added: “Improved tracking of music consumption is something that I'm sure that we will see. Thanks to blockchain technologies many people are now focusing on this.”

Investors also benefit from not having to rely on a third party to distribute dividends.

Mr Schena explained: “This is the most important characteristic of investing in music, which is the constant generation and operability of cash flows that don't depend on an executive team or a board or shareholders that decide to distribute dividends at the end of the year."

In addition, he felt that music rights are set to benefit from a growing investor appetite for liquidity, provided by a reliable source of cash.

He said: "As an owner of music rights you receive something that in finance has been somehow forgotten, which is cash flows. Cash is king.”

ANote Music was created in 2018, and aims to connect music and finances. It provides listings and catalogues on its platform which have been fragmented into shares that can be acquired by users. The platform has catalogues across European markets such as Poland, Italy, and France, alongside partnership agreements in Japan.

When a user acquires a share in a catalogue, they also require the right to music royalties. The royalties give investors the right to receive an economic compensation every time that a song is played or performed.

In the case of artists, ANote Music aims to make agreements with them and create situations where all parties can benefit from the investment possibilities. It is well aware of the various fall outs involving famous stars such as Taylor Swift over music rights being owned by external parties. In an effort to be accommodating, the platform makes agreements to sell shares in life rights, alongside limited duration deals.

“One very important part that we deal with is that we don't deprive the artists of the music rights itself but only of the royalty flow if they are interested to listing. They always have ownership of the rights,” noted Mr Schena.

It also provides a buyback clause for artists, so they can buy back the secondary market from the same investors that they sold to at the beginning. while limiting the sale of music rights to investors to 50 percent. This level of flexibility is beneficial to dealing with any sense of stigma around ownership of music rights and artist integrity.

Mr Schena concluded: “What we do is apply the logic, the transparency, the liquidity and standardisation on the traditional capital markets in the music industry. It's a market where there are a lot of transactions but most of the times are somehow opaque.”