The Financialization of Music: A New Asset Class Emerges

Music as a financial instrument!
Wouldn’t it be great if you could make money off your favorite song/artist?

Well, there is a start-up that aims to make that a reality.
Chicago based Clouty™ has created an index, MUSIQ™ 500, that compiles the top 500 songs in the US based on streaming data.

The goal is to develop music as an asset class which is uncorrelated to markets, by launching futures segmented by genres, artists and songs.
Using the index, investors can trade or owners of the music rights can hedge their risks, similar to how commodity traders such as Trafigura hedge volatile oil prices.

Buying music rights is hardly a new phenomenon, Michael Jackson bought portions of the Beatles catalogue in 1985 which later served as collateral for personal loans.

Clouty is capitalising on the investments made by private equity behemoths- Blackstone and KKR. In recent years investors, have invested upwards of $5 billion buying the rights of artists such as Whitney Houston, Leonard Cohen, Neil Diamond and Bruce Springsteen hoping to secure regular cash flows that are immune to economic downturns.

By converting Music into an asset class, Clouty hopes that investors who have spent heavily on music rights could also use futures to shield themselves against the risk of songs falling out of fashion.

As investments continue pouring into the music industry, the development of markets allowing investors to trade music rights in a secondary market is “an inevitability” according to David Umeh, CEO of Clouty. Another company in the music industry making waves is NUSIC. Adam Place, one of the founders of Nusic states the purpose is to ensure musicians get paid fairly for their art. By leveraging blockchain, smart contracts and automation that enables creators and rightsholders to claim sovereignty over their music.

What do you think? Would you consider investing in your favorite artists latest hit?