ETF Trends: ‘Funflation’ & Technology Driving Music Industry Resurgence
Below is an article written by Jane Edmondson and appeared in ETF Trends on 3/5/24:
It is earnings season in music land, and some exciting growth trends are emerging among companies involved in the global music industry. At the forefront of the industry has been renewed interest in live music in the post-pandemic environment. Call it “funflation” or revenge spend, but music fans are paying big dollars to attend live music events.
Live Nation (LYV), the concert promoter and owner of Ticketmaster, posted record results in 2023, with revenues up 36% to $22.7 billion. That’s the biggest year ever, thanks to strong concert attendance and ticket sales.
Over 145 million music fans attended some 50,000 concerts last year, despite an average price of more than $250 per ticket, with concert-goers at Taylor Swift’s Era’s Tour willing to pay an average price of over $1,000 per ticket! The average price to see U2 at the new Las Vegas Sphere (SPHR) venue is $500 per ticket.
Streaming at Record Levels
All this concert spending is also translating into increased music streaming spend. Music streams hit 4 trillion in 2023, a new single-year record, helped by country and global acts and, of course, the Taylor Swift effect. We have seen funflation price hikes among streaming services as well. Last July, Spotify raised its prices by 10%, following similar moves by YouTube Music and Amazon Music. Apple Music and Deezer also joined the trend, increasing their subscription prices from $9.99 to $10.99 per month in October of last year.
These streaming service dollars then trickle down to music content companies like Universal Music (UMG), Warner Music Group (WMG), and Sony Music Entertainment. According to industry expert and MUSQ ETF CEO David Schulhof, “70% of streaming dollars get paid down to content providers.”
It is no surprise then that Universal Music Group, with artists like Taylor Swift and Olivia Rodrigo, and Warner Music Group, benefiting from expansion into global markets, both beat earnings estimates, and Sony Music’s revenues were up 16% thanks to artists like SZA and streaming.
Underappreciated Growth Story?
But even with higher prices for concerts, events, and streaming services, MUSQ CEO Schulhof thinks that music remains an “undervalued, underhyped, and under-monetized, compelling growth story for investors. He created the first global music industry ETF, MUSQ, which passively tracks the VettaFi index MUSQIX.
Many music stocks have seen a strong performance this year, helped by strong earning results from French music distributor Believe (+37%), streaming services Spotify (+35%) and LiveOne (+21%), and entertainment venue Sphere Entertainment (+18%). Over the last 3-month period, MUSQ is up 3.5% vs 2.3% for the MSCI World Media TR Index.
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The long-term story for the music industry still remains attractive relative to other media assets. J.P. Morgan maintains in its January 2023 report that music “represents the best content story in the history of media.”
Technology Another Catalyst
Streaming technology has been a game changer for the music industry. Barriers to creating and distributing music have lessened, and the number of songs released on streaming platforms and the consumption of music streams has soared. Goldman Sachs is projecting a compound annual growth rate of 11% for streaming through 2030.
But other technologies like Artificial Intelligence (AI) and blockchain are also transforming the music industry. AI is stretching the boundaries of content and creativity and personalizing the music experience, while blockchain facilitates direct payment and managing royalties. Advancements in live performance technology, like the Sphere, which uses immersive augmented reality, also offers a glimpse into the future and potential for concert experiences.
Music Industry Trends for 2024
As we enter 2024, the music industry continues to evolve and transform. Another trend to look for is the increasing prevalence of “genre fluidity.” Country music star Luke Combs had a huge hit last year with his version of Tracy Chapman’s “Fast Car,” and already this year, Beyonce has released a country album. Physical forms of music media like vinyl are also making a comeback. And expect to continue to see new and novel ways to monetize music content and connect with audiences.
Ways to Play in ETF
The MUSQ ETF remains the only broad-based pure play on the global music industry. A strong case can be made that we are amid a music industry resurgence. Once this is understood and appreciated by the market, a satellite investment in music companies could become a compelling thematic investment play.
For a full list of MUSQ holdings, please click here. Holdings subject to change.
The above third-party article represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the fund or any security in particular. MUSQ claims no responsibility for its accuracy or the reliability of the data provided. Any opinions expressed in this article reflect analysis at the date of publishing and are subject to change.
MUSQ Global Music Industry Index ETF is offered by prospectus. Carefully consider the investment objectives, risks, charges, and expenses. This and other important information can be found in the MUSQ ETF prospectus, which should be read carefully before investing and can be obtained by visiting https://musqetf.com or by calling 1-855- MUSQ-ETF(687-7383).
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