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Investment Tips | Invest In The Stock Exchange For Music With ANote Music

ANote Music is the European marketplace for music rights. Through ANote Music, anybody could invest in music and purchase those rights that artists, record labels and publishers decided to sell on the platform.

ANote Music’s purpose is to allow and facilitate the acquisition of music royalties, yielding to future earnings.

By merging the Blockchain technology with trading mechanisms and music IP, ANote Music is the bridge between the financial markets and the music industry. 

ANote Music provides a new and safe monetization opportunity, where music rights owners (Artists, Songwriters, Record Labels, Publishers, etc..) can offer their rights for sale on ANote’s platform.

1. Factsheet

Company type:

For profit

HQ Location:

Luxembourg

Founded date: 

2018

Status:

Active

Website:

Background

ANote Music’s idea definitely wasn’t developed in one sitting.

The Founders (Matteo Cernuschi, Marzio Flavio Schena and Grégoire Mathonet) first noticed the similarity between IP music rights and stocks (interview on Silicon Luxembourg). Both generate income (royalties vs dividends), and they are both subject to increase (or decrease) in prices based on expectations of future revenue generation.

Even if the Music Industry keeps growing, mainly thanks to streaming revenues, it still remains a very capital intensive industry. Continuous investments are necessary for an artist’s career to thrive, but the traditional financial markets lack the know-how for providing funds.

Music is performed, consumed and listened to, while collecting companies gather revenues from distributors, and redistribute the cash flows to artists at a later stage.

Artists, publishers and record labels therefore receive their legitimate royalties deferred and diluted over the years. The resulting time lag between performance and revenue collection means that financial independence and reinvestment opportunities are seriously limited for all the players in the music industry.

Business model

ANote Music business model is based on its trading platform, which generates listing fees, transaction fees and distribution fees when ANote Music distributes the royalties to investors.

ANote Music has created a marketplace and trading platform that runs on a private Blockchain developed internally.

After performing legal and financial sanity checks, ANote Music gives the chance to Right Owners to offer their future royalty earnings on the platform and collect bids for it. 

Right Owners have the possibility to either sell only a part of their rights, or to hand over only the royalty flows for a determined number of years.

If the auction is successful (meaning that the original target is met) ANote Music creates Smart Royalty Contracts. Then investors receive Shares of Rights (“SOR”) in their ANote Portfolios and the right owners receive the funds they are entitled to.

Once rights are listed on ANote Music, they become available on the secondary market (like on a traditional stock exchange model) and investors have the possibility to exchange the SOR freely, without commissions.

To close the money circle, ANote Music takes care of receiving the royalties from the national collecting companies and redistribute them to the investors according to their SOR.

Use of Blockchain technology: ANote Music decided to keep track of the ownership chain of the rights and transactions with its Blockchain, in order to add an additional layer of security and guarantee complete transparency.

2. How to make cash

How does ANote Music make cash

ANote Music has two main revenue sources:

The “listing fee” from the Rights Owners once their rights are listed on ANote Music for the first time.

The small “distribution fee” charged on the investors when ANote Music distributes the royalties to their portfolios. This fee only gets applied once royalty payouts are being transferred, so when you – the user – receives money.

• 4.00% on catalogues purchased in the Primary Market

• 8.00% on catalogues purchased in the Secondary Market

• Distribution fee is capped at 0.5% of your initial invested amount

Who are the Clients 

Being a marketplace, ANote Music has clients on two sides: the sell-side and the buy-side.

The sell-side: Represented by the Music Right Owners willing to receive a cash advance today in exchange for their future royalties. This side deals with Artists, Composers, Songwriters, Publishers, Record Labels, Managers, heirs of Artists, etc.

The buy-side: Users on the buy-side are investors (i.e. every Investment company, HNW Individual who aims to diversify his/her investment portfolio, Smaller Investor or Music Lover in general) willing to get exposure to an alternative asset class, which is income generating, offers competitive returns and is uncorrelated with the capital markets.

How do YOU make cash

Songs generate royalties EVERY time they are played, anywhere worldwide. 

Whether we are talking about shops, restaurants, clubs, bars, radio, Youtube, Spotify, Pandora, or even as part of commercials and movies, in that moment, the song is generating royalties for its creators and rights owners.

These money flows are collected by Collective Management Organizations (“CMOs” such as ASCAP, PRS, SACEM, SIAE, GEMA or Soundreef) (that collect from bars, clubs, restaurants, shops, streaming services, radios, TV and online content providers), royalty distributors and collectors, publishers etc.

Once a music catalogue is sold on ANote Music, ANote Music will take care of receiving these royalties and distributing them to you as Investor according to the Shares of Rights (“SOR”) you own.

3. Admission process

Investors are allowed to invest through ANote Music’s online platform (primary and secondary market), or by participating to offline deals (that will eventually be recorded on the platform).

The Primary Market (Auction phase) is about exchanging funds and catalogues between the original owners and investors.

Sellers of a catalogue might be record labels, publishers, artists, or any owner of royalty-generating rights. They might sell permanently, or for a limited period (e.g. 10 years). In the latter case, they are entitled to receive back the rights after the investment period expires.

Once rights are sold on the Primary Market, they become available for trading on the Secondary Market.

1. Primary Market – Online Auctions

For whom: For investors interested in taking exposure to specific music catalogues being listed for the first time on ANote Music. 

Benefit: As transactions happen according to a Dutch auction mechanism, the opportunities to get a catalogue at convenient prices are consistent.

2. Primary Market – Offline Deals

For whom: For investors interested in taking exposure with a Minimum entry ticket of €50k.

ANote Music is constantly gathering interest from investors to close deals offline, in private negotiations with the sellers. This grants the deal will close, plus a fixed price for the buyer. In order to participate, you should contact the ANote Music team, specifying the amount and terms of your interest in participating.
After the closing, the transactions will appear on the online platform, and will be accessible on the secondary market and in your portfolio section.

Benefit: Offline deals simply mean no auction, but they have all the upsides of a private first-buyer deal.

3. Secondary Market – Single Catalogues

Interested in cherry-picking when buying? This is the right place to look for under-priced catalogues. Interested in selling what you purchased? Place an offer to sell on a catalogue in your portfolio to realise a capital gain.

4. Secondary Market – Music Indexes [SOON AVAILABLE]

ANote Music offers the opportunity to invest in portfolios/indexes of music catalogues. This means better liquidity and higher levels of diversification.

4. Expected income

When compared with both liquid and alternative investment asset classes, the music business stands out in terms of recent performance. As the streaming component continues to outgrow the decline in digital downloads and physical sales, analysts from Goldman Sachs predict the sector to double by 2030 from 2017 levels.

Music is an alternative asset class, and, unlike traditional markets, they are not tied to any unpredictable stock fluctuations. On top of this diversification, music catalogues with a proven track record tend to achieve stable performance, with music industry valuation standards showing potential net yearly yields usually ranging between 5% and 16%.

5. Feedback

Thanks to ANote Music, Investors can now get a direct exposure on music revenues and earn the royalties produced by their preferred artists, who in exchange receive upfront cash to develop new music projects.

6. Site preview

Mat

Mat is the founder of cashtipsandtricks and has been working in the financial sector in Luxembourg for the past 10 years and brings his insights as an investor and entrepreneur.

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