Most of us love music, and it only feels natural as part of our investment journeys that we consider this sector of the music industry in our portfolios. Investing in music can be fun and at the same time provide you with opportunities to reach your financial goals.
The music industry is a multifaceted world where art meets commerce, creating a symphony of investment opportunities that can be music to an investor’s ears. If you are looking to diversify your portfolio, the industry presents an attractive series of sectors, from streaming giants and record labels to instrument manufacturers and concert promoters. In the following we will dive into the the music industry’s various branches of relevance to us stock market investors.
Streaming services
Streaming services have redefined the music landscape and does not seem to be stopping any time soon.
The global revenue for music streaming, as reported by Statista, is projected to reach $23.8 billion in 2023, with an anticipated annual growth rate of 7.4% from 2023 to 2027 (Statista, 2023).
This growth trajectory highlights the increasing relevance and profitability of streaming services in the music industry. Investing in these companies provides exposure to the growing digital entertainment sector.
Let us look closer at two of the main players in the music streaming service industry:
- Spotify (NYSE: SPOT), a leader in this realm, not only offers a vast library of music but also podcasts, catering to a diverse range of audio interests. Its user base, surpassing 365 million active users, indicates its expansive reach and influence. Investing in Spotify means tapping into a growing digital audience and a company that is consistently innovating in the streaming space.
- Apple Music, part of Apple (NASDAQ: AAPL), represents another significant player in this sector. With Apple’s ecosystem of devices, Apple Music benefits from seamless integration and brand loyalty, offering a unique advantage in user experience.
Record labels
Record labels have long been the backbone of the music industry, and their evolution in the digital age makes them interesting for investors who see a potential upside for these companies.
The global recorded music market, as reported by the IFPI, witnessed a growth of 7.4% in global revenues in 2021 (IFPI, 2021). This growth reflects how record labels are adapting to streaming and digital sales, finding new revenue streams beyond traditional album sales.
Let us look at two of the main players in the record label industry:
- Warner Music Group (NASDAQ: WMG), with its roster of renowned artists and labels, offers investors a share in a wide array of music genres and global reach.
- Universal Music Group (Euronext Amsterdam: UMG), on the other hand, is a behemoth with a substantial market share, representing some of the world’s most famous artists.
These companies are not just concerned with discovering and promoting artists, they are increasingly involved in digital distribution, rights management, and diversified music content strategies.
Live music and concert promotion
The live music and concert promotion sector is a dynamic and vital part of the music industry. Not to mention, a lucrative part as well.
This sector is positioned for significant growth, especially as the world recovers from the pandemic and live events resume in full swing. According to PwC, the live music sector is expected to grow to $31 billion by 2023, showcasing a strong rebound and an increasing demand for live entertainment experiences (PwC, 2023).
Let us have a closer look at one of the main companies in this sector:
Live Nation Entertainment (NYSE: LYV), in particular, is a key player with a global footprint, benefiting from both its promotion of live events and its ticketing platform, Ticketmaster. The company’s diverse portfolio, which spans numerous genres and types of events, positions it to capitalize on the broad appeal of live entertainment.
Investing in this sector offers exposure to one of the most engaging aspect of the music industry, where the emotional connection and unique experience of live music continue to draw crowds.
Music equipment and instrument providers
The sector of music equipment and instrument providers is an essential component of the music industry, which caters to both professional musicians and casual hobbyists.
The global musical instruments market, according to Mordor Intelligence, is projected to grow at a CAGR of 3.2% during 2022-2027 (Mordor Intelligence, 2022). This growth is driven by increasing interest in music education, the rising popularity of music-related leisure activities, and technological advancements in instrument manufacturing.
Companies like Yamaha Corporation (TYO: 7951) exemplify this segment, offering a wide range of products from pianos to professional audio equipment. Yamaha’s diverse product line and global presence make them a compelling option for investors interested in the hardware side of music.
Another notable mention, though not publicly traded, is Gibson Brands, Inc., renowned for their iconic guitars. While Gibson is not available for stock market investment, Yamaha’s public listing offers a window into this market.
Music licensing and services
Music licensing and services play a pivotal role in the music industry. While often operating behind the scenes it is crucial to the business’s economics.
According to a report by Grand View Research, the global music publishing market size is expected to reach USD 9.11 billion by 2028, growing at a CAGR of 3.6% from 2021 to 2028 (Grand View Research, 2021). This growth is indicative of the increasing value and potential of music licensing in a digitally driven world.
This sector includes companies like Universal Music Publishing Group, a part of Universal Music Group (Euronext Amsterdam: UMG), and Sony Music Publishing, a division of Sony Group Corporation (NYSE: SONY). These companies manage the rights and licenses of music compositions and caters to a wide range of industries from film and television to advertising and digital media.
The demand for music rights has surged with the proliferation of digital media. Companies in this space are not only managing traditional licensing but are also navigating the complexities of digital rights in a time where music is used across various online platforms. Investing in these companies, particularly giants like Sony, means investing in a diversified portfolio that includes music publishing revenues.
Audio equipment and technology
The audio equipment and technology sector is integral to how we experience music and with companies like Dolby Laboratories (NYSE: DLB) and Sonos (NASDAQ: SONO) are leading the way in innovation.
Dolby, known for its advanced audio technologies, enhances the listening experience in various environments, from cinemas to living rooms and mobile devices.
Sonos, on the other hand, has carved a niche in the world of smart speakers and home audio systems, renowned for their sound quality and seamless integration with various streaming services.
Investing in these companies is an investment in the future of audio technology.
The global market for audio equipment is on a growth trajectory, which is driven by advancements in wireless and smart technologies and an increasing consumer focus on high-quality sound experiences. According to a report by Fortune Business Insights, the global audio equipment market is expected to grow from $29.37 billion in 2021 to $42.54 billion in 2028 at a CAGR of 5.4% (Fortune Business Insights, 2021).
This sector’s potential is amplified by the rise of podcasts, audiobooks, and the growing importance of audio quality in entertainment and communication, making it a promising area for investors who are keen on the technological aspects of music and sound.
In conclusion: Investing in music can provide a symphony of opportunities
In conclusion, the music industry presents a diverse and dynamic landscape for investors.
From the digital realms of streaming services and music licensing to the tangible worlds of live concerts and audio equipment, each segment offers unique growth opportunities. The industry’s adaptability to technological advancements and changing consumer behaviours emphasizes its resilience and potential for long-term growth.
Whether it is through investing in the digital streaming giants, the traditional power of record labels, the emotional engagement of live music, or the technological innovation in audio equipment then the music industry offers a symphony of investment possibilities suited for a variety of portfolios and investment strategies.
May the rhythm of the market be ever in your favor!
Always make sure that your investments are aligned with your investment strategy.
