The music business is continually developing and is unlikely to disappear soon, making it an attractive investment opportunity.
Aspiring musicians are increasingly attempting to build a following on social media platforms and streaming services, while the live music business has continued to expand.
The decentralization of power and influence in the music industry presents both possibilities and problems for music industry businesses.
What is the definition of a music stock?
A music stock is the stock of a business engaged in the production/distribution of music or the staging of live music events. According to Toptal, the worldwide music industry has expanded from $14 billion to $20 billion in less than five years since 2014.
With a worldwide pandemic wreaking havoc on the music industry over the last year, investing in music stocks might provide very lucrative profits. As a result, investing in music stocks now has the potential to provide significant profits for investors.
The entertainment and music businesses are presently regarded as among the most lucrative sectors, and it is no accident that any of the world's greatest technological corporations closely monitor the music business. The revenue earned by music streaming services increased by 20% in 2019, reaching $9 billion, and this amount accounts for roughly 80% of all music earnings.
This phenomenal rise is a consequence of technology becoming more accessible and tangible things, like CDs, gradually becoming outdated. Indeed, tangible items account for just 5% of overall music income. In 2019, paid subscriptions to stream services increased by 30%, producing over $60 million in income, up from $45 million in 2018.
Shakespeare once said that music is the bread of love - and music stocks have an uncanny capacity to satiate the investor's needs. Yet much has changed since Bard's day, and not only in his lifetime. Not long ago, music meant vinyl records, traditional radio stations, and the Sony Walkman. And, although vinyl is making a return, the majority of music listening now occurs on mobile devices (not that the Walkman, in its lovely box form, wasn't mobile).
While the music industry is ever-evolving, it will never fully perish. Now maybe an excellent moment to invest in music stocks, particularly those that provide streaming services.
After years of trial and error, businesses have developed a financially viable and consumer-friendly business model for streaming services.
Numerous streaming providers are also extending their content offerings, adding concert footage, podcasts, and other forms of media.
Even the strongest firms in the music industry face stiff competition from tech behemoths. While music entertainment stocks might continue to be winners, potential investors should keep an eye on the industry's music. The finest music firms are well-positioned to compete aggressively and remain ahead of the music industry's transformation.
Investing your money in music stocks might be a beneficial strategy. Investments in music and entertainment stocks may be made in a variety of methods, including via investing trading. This is when an investor acquires a stock and pays the whole purchase price in advance, thereby acquiring ownership of the asset.
On the other hand, short-term traders may choose to speculate on the share's shifting price fluctuations rather than making a purchase and hold strategy. This is when derivative goods prove to be advantageous. To begin, follow the instructions below:
Create an account. You will right now be granted access to a demo account in which you may trade risk-free with fictitious cash.
Establish a trading plan. You may go longer if you believe the stock will rise in value or short if you believe it will decline in value.
Discover how to manage risk in trading. We provide a variety of order types to assist in safeguarding your wealth, including stop-loss orders.
Place your order when you are ready. Keep an eye out for any slippage or gapping in your trades on the stock price chart.
1. Spotify
Spotify was the first company to pioneer music streaming more than a decade ago. Since then, it has diversified outside music by purchasing other podcast brands, and the streaming behemoth now boasts podcasters such as Joe Rogan and Bill Simmons.
Spotify's premium member base has surpassed 200 million and is expected to expand by 24 percent in 2020. It has approximately 400 million monthly vibrant users, which includes listeners who are monetized by advertisements. Along that route of development, the firm faces constant competition from Apple (NASDAQ: AAPL) and others but is on track to surpass the iPhone manufacturer in podcast listeners, demonstrating that the pure-play audio stock is outperforming the tech behemoth. Profitability is ramping up after years of investment, and the firm should benefit from the subscription business model, which implies that the majority of new revenue goes straight to the bottom line.
2. Sirius XM (SIRI)
2020 may have been a total catastrophe had it not been for the recent excellent results. The satellite radio and streaming music company hasn't delivered for shareholders in recent years, with shares down 10.3 percent year so far.
The firm has embarked on an acquisition spree to address this, acquiring companies it believes would help it grow its entire subscriber base. In July, it spent $300 million to acquire Stitcher, an E.W. Scripps-owned podcasting business (NASDAQ: SSP).
In 2019, podcast advertising-income increased by 42% to $678 million. They are estimated to hit $1 billion by the end of 2021.
Stitcher offers both a free, ad-supported podcasting service and a $4.99 per month premium, ad-free subscription. Previous acquisitions, such as Simplecast, a podcast hosting business, provide Sirius XM with a vertically integrated podcasting business that it can compete with larger companies such as Spotify and Apple.
SIRI has managed to increase in 2020 despite fewer automobile sales during Covid-19, a critical distribution point for its satellite radio service. Revenues up 2.1 percent to $5.85 billion in the first nine months of the fiscal year, while operating profit increased 9.1 percent to $1.36 billion.
At less than $6, it is unquestionably one of the greatest music stocks to purchase.
3. Apple (NASDAQ)
Apple is a household name in the internet music industry, having grown to become one of the most popular streaming and download services worldwide. Apple was formed in 1976 and has since undergone multiple name changes and product redesigns.
Apple's stock skyrocketed in 2005 as the company shifted its focus to tablets and smartphones. Its early recognition of the appeal of these most-have devices was essential in propelling the corporation ahead.
By 2021, the corporation will be valued at more than USD 2 trillion.
Apple is undeniable one of the most well-known brands in the computing industry. Thus, even if its music streaming service isn't the most popular, the corporation has lots of other options. It generates enough money from its several businesses that it can tolerate financial losses, something that other streaming companies cannot accomplish.
Apple stock is not inexpensive. While holding these shares is not impossible, you will need to invest a significant amount of money. However, once inside, you are permanently within.
However, it should be noted that Apple's stock has lately fallen as a result of China's imminent financial crisis. Notably, if you're going to follow Apple stock, you need to understand what's happening in China. Like other large technology businesses, Apple depends on Chinese manufacturers and suppliers of raw materials.
4. Yamaha (OTC: YAMCY)
Yamaha is one of the few publicly listed musical instrument businesses. This firm, headquartered in Japan, is the world's biggest manufacturer of pianos. Yamaha also manufactures guitars, drums, sound mixers, and speakers, among other musical equipment and instruments.
Additionally, the corporation has a record label, Yamaha entertainment group, which distributes music and stages concerts. While Yamaha's stock originally suffered during the pandemic, the business has since recovered.
Many individuals took up music as a new interest during the lockdown period. This was excellent news for Yamaha since the company is one of the world's leading sellers of personal instruments.
5. Live Nation Entertainment
With a market share of over 70%, Live Nation Entertainment, which controls Ticketmaster, enjoys a near-monopoly in concert ticketing. Musicians are increasingly presenting live concerts for financial gain, and music festivals have grown in popularity in the music of social media.
Like many live entertainment enterprises, Live Nation faced significant losses during the pandemic, with the stock shedding more than 50% of its value. However, management states that its concert pipeline for 2022 is much greater than that for 2019 and that it has recovered the majority of its revenue losses by the third quarter of 2021. Additionally, the corporation claims evidence of pent-up demand, as events are selling out quicker than before.
When live music concerts are allowed to occur without restriction, Live Nation's income should skyrocket.
6. Sonos (SONO)
Without speakers, it's difficult to have music. Sonos is included on our list of music stocks to purchase due to its focus on in-home audio systems. It performed well in 2020, up 47.5 percent year to year, despite cutting off 12 percent of its workers in June.
Sonos went public in August 2018, offering 13.9 million shares at a price of $15, far below the $17 to $19 pre-IPO price. Despite its lower-than-expected IPO price, SONO stock gained 32.7 percent on its first day of trade. Since then, it's been treacherous sledding.
Engadget recently covered the company's battle to maintain customer relevance. Additionally, Sonos is battling Google over five of its speaker patents. While competition is heating up, Sonos should be able to compete at the upper end of the speaker market. Additionally, it may release its own $100 speaker to compete with the big players.
Sonos revenue increased 5% to $1.33 billion in fiscal 2020, with 21% of sales coming from its direct-to-consumer (DTC) website Sonos.com. Growing direct-to-consumer sales by 84 percent by 2020 is a significant aspect of the company's growth plan.
Even better, it produces free cash flow — $129.0 million in 2020, up 32.4 percent from 2019 — and it continues to expand at a double-digit rate.
7. Hipgnosis (LSE)
Hipgnosis Song's Fund, sometimes abbreviated as Hipgnosis, is a British music streaming service launched by producer Merc Mercuriadis and singer Nile Rogers. Both founders saw that songwriters were not receiving the financial acknowledgment and royalties they deserved and devised a strategy to rectify the situation.
They quickly formed Hipgnosis Song's Fund by allowing investors pure-play exposure to songs and any linked items.
Hipgnosis delivers a distinct business approach to music industry investments by redistributing income flow to artists, not only companies. Mercuriadis is a songwriter advocate, and his current inquiry into the contentious connection between music publishers and large companies may aid his cause.
8. Dolby Laboratories (DLB)
Sign and logo for Dolby Laboratories (DLB) on the Silicon Valley facility. Dolby Laboratories is a firm that specializes in noise reduction, audio encoding, and compression. - Sunnyvale, California, United States of America - 2020
Dolby Labs' stock has a rocky history. Year to date through December 30, it has returned 38%, much more than both its rivals and the whole US stock market.
That is encouraging news. The bad news for long-term investors in the surround sound firm is that it has had a horrible decade, with an annualized total return of just 4.2 percent, less than one-third of the market's total return.
Dolby released their Q4 and 2020 financial figures in mid-November. Revenues decreased significantly year over year, from $1.24 billion in 2017 to $1.16 billion in 2020. On a more fundamental level, its net income was $231.4 million in 2020, down 9.3 percent from a year earlier.
Covid-19 has harmed few sectors to the extent that movie firms have, and it's remarkable how well it has performed in light of the obstacles encountered by their cinema clients. Despite these challenges, it earned $270 million in free cash flow in 2020, a 29% increase over 2019.
Dolby will face some fascinating comparisons in 2021. This is because the first two quarters of 2020 were mainly untouched, whereas the last two quarters were completely impacted. The reverse should be true in the next year, with the first two being impacted more than the final two.
9. Warner Music Group Corp. (NASDAQ: WMG)
If you're searching for a publicly-traded record label, Warner Music Group should be at the top of your list. This is a time-honored brand that has endured the test of time. By investing in WMGC, you're indirectly investing in other music industry heavyweights such as Atlantic Records, Warner Records, Asylum, and Elektra.
Warner Music Group Corporation (WMG) is a global music company with a broad roster of performers, including Ed Sheeran, The Rolling Stones, Bruno Mars, and Harry Styles. The firm has a long history, stretching all the way back to 1892 when it was created as an American subsidiary of the British music corporation HMV.
WMG is now a publicly listed firm worth more than $21 billion. It is financially sound, with yearly sales exceeding $5.3 billion and profits over $304 million.
The music library is one of WMG's most valuable assets. The company's catalog totals more than two million songs, and it maintains a significant presence in both the recorded music and publishing industries. Additionally, WMG is building its digital business, with over 50 million monthly active users across its streaming platforms. Global recorded music income is anticipated to reach $23.5 billion in 2023.
WMG is well-positioned to gain from this expansion, given its vast portfolio, diverse roster of artists, and expanding digital business.
10. IHeartMedia
IHeartMedia, formerly known as Clear Channel, is the largest operator of broadcast radio stations in the United States. It ended 2020 with 244 AM and 614 FM stations with the most No. 1 stations in the top markets, including 28 top-ranked stations in the top 50 cities. Additionally, IHeartMedia owns IHeartRadio, a digital audio streaming service that provides customers with access to both streaming music and digital radio station feeds.
The company's principal source of income is broadcast advertising. As a business reliant on vehicle commuters, advertising income fell precipitously during the pandemic but has virtually recovered to pre-pandemic levels. The company's advertising approach has historically been very successful, and its reach offers it a competitive edge since IHeartMedia can offer advertisers the greatest exposure on the radio by far.
While the recent rebound is encouraging, the firm faces substantial long-term competitive risks from digital rivals and even remote employment that eliminates commute time.
11. Sony (SNE)
In the first six months of 2020, Sony's music business made 416.8 million yen (US$4 billion). This accounted for around 10% of the company's total revenue until the end of September. In the first two quarters, the company's Game & Network Services sector, which includes the Sony PlayStation property, accounted for 22% of total revenue.
These figures are anticipated to increase in the second half of the year as customer interest in the PlayStation 5 continues to grow. The new system has been so favorably welcomed that its stock had surpassed 10,000 yen for the first time since 2001 when the PlayStation 2 launched.
According to current sales estimates, the PlayStation 5 is the best-selling system in United States history, both according to units sold and monetary worth. As my InvestorPlace colleague Josh Enomoto noted in late November, Sony pre-sold more PS5 units in the first 12 hours than it did in the first 12 weeks of the PS4.
Due to the fact that its next video game system is a sure thing, its music business will be free to do anything it wants in the coming years.
Final Thoughts
Due to the current growth of the music business, now may be a great time to begin investing in music stocks. There are various options accessible to practically every kind of investor. When selecting stocks for your portfolio, you want to verify that the business is financially stable and has room for growth in the future.
FAQs
Is Investing in Music Stocks a Good Idea?
Historically, music stocks have been excellent investments over recent times of history. Always consider the risk associated with any investment prior to making a purchase.
Can You Invest in Music Stock?
There are various music-related stocks to invest in, ranging from streaming to record labels. Indeed, the industry has seen significant growth, primarily in the proliferation of streaming services.
What Is the World's Largest Music Streaming Platform?
Spotify is presently the largest music streaming service. By the end of 2021, the firm had accumulated over 180 million paying members and 406 million monthly active users. It has a market capitalization of $32.63 billion.
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