The next superstar can come from anywhere. By investing in music as we do with any form of infrastructure, communities can have a stake in their success.
2022 was a positive year for the business of music rights. While growth was not as high as 2021 due to interest rate increases and the cost of securing catalogues, billions were still invested by venture firms, multinationals and hedge funds in songs. And with it, the value of global music copyright increased to $39.6 billion, up from $27 billion in 2021, according to economist Will Page. This growth was not solely dominated by heritage artists. All music usage grew. For example, Epidemic Sound, who sell sound effects and production music, amassed $69.5 million in revenue in 2022. White noise, such as rainfall and music to sleep, raked in millions. According to Statista, 524 million people streamed music every day in 2022, compared to 487 million in 2021. And to follow suit, new products were introduced, including a $335 million bond issuance backed by Adele’s licensing revenue by international licensing agency SESAC and a new service called JKBX offering a song stock exchange for fractions of music rights. Songs remain big business.
However, the beneficiaries of this growth were not spread evenly across the commercial music sector. The grassroots live sector, comprising of smaller, grassroots or community owned venues, continued to face financial hurdles. Many artists could not afford to tour, while others chose to stop for mental health reasons. Inflation and supply chain issues continued to wreck havoc, from delays in vinyl manufacturing to an increase in equipment costs.
This demonstrates a paradox. If we are collectively listening to more sounds and music, even if it is rainfall and whale sounds, it should widen the pool of those who benefit. Wall Street, for one, is proving that music pays. This is not the case for the majority of those who work in the commercial music ecosystem. But this can, and should change. We just need a new pool of investors. And I believe all of us, no matter where we live, can be those investors. We just need a model, and I think that model can be found in how community development is financed.
In the United States, community development finance institutions (CDFIs) offer debt-financing to businesses at better repayment rates than commercial banks. In the United Kingdom, similar community investment funds exist, as well as in other countries. Investments are made with public money, or public money as collateral to retrain or reskill people, upgrade or build facilities and establish programs that address inequity. Keeping with the U.S., the State Small Business Credit Initiative (SSBCI) doled out $10 billion in American Rescue Plan funds for just that to help small businesses, or those with under 10 staff. Much of the U.K. Government’s Levelling Up funding is aimed at increasing the amount of money available to local communities to invest, such as in upgrading high streets or expanding community centres. In each of these circumstances, public money spent now is being judged on its return to the local community now, and with it increased jobs and tax bases – later.
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Now let’s look at music. It is a business that continues to grow in value, year-on-year. It is a product that is inherently local. It may be uploaded online and shared everywhere, but it originates from somewhere. Music can be a long-tail, patient investment, especially if the music continues to be listened to long after it is made. This is the premise underlining the Adele bond issuance, for example. All music made now may not make any money in the future, but some will. This is no difference to developing experimental drugs, backing app developers or supporting restaurants. Not all drugs will make it to market, but a few will, because like music, we all need drugs to survive. Moreover, few apps will become unicorns and not all bars and restaurants that open will survive, but we will always need a place to eat and an app to guide us.
If a similar approach was taken by a community, a local music development finance institution could be created that offers loans, grants or seed capital to a suite of artists, writers and producers. For each investment, 10% – for argument’s sake – of what is created would be owned by the community development organisation, under general terms similar to those of the private sector. And if one or two songs, co-writes or productions became successful, the return would benefit the community in addition to the artist and their business that created and owns the majority of the IP. Moreover, a local music library would emerge, full of shared stories and experiences that could be placed on local ads to support local businesses, used in tourism campaigns or marketed to external partners – all of which pay.
A version of this has been done, and it works. Take Barcelona. There, the Catalan Finance Institute (CFI) offers low interest rate loans to music and cultural firms. Capital is distributed at a rate that wouldn’t suit banks and high street lenders. Both the interest and capital repayments, when repaid are then recycled, with the increased income the interest engenders, to then support more Catalan cultural firms, including music firms. A virtuous circle is created, allowing for more investment in music, talent and local talent. Barcelona has one of Europe’s leading music tech industries, and it is due, in part, to these investments. While no ownership is taken by CFI, all profits are reinvested back into the source of the revenue – the music related IP, made and developed in Barcelona.
Wall Street has already capitalised and continues to benefit from the value of music rights and music tech. No matter how much this increases, if there is no direct link between the value the music accrues and where it was created, any potential local return – where the artist or writer – or entrepreneur – first realised they had a voice and the confidence to share it – will be minimal. Neil Young, Fleetwood Mac, Bob Dylan, Spotify and other unicorns are all from somewhere. So is the next superstar. Let’s ensure that everywhere, there’s opportunities for them to realise their success.