On Artificial Intelligence, Blockchain, and Waves of Music’s Evolution
Music consumption has evolved from physical to digital mediums, like streaming. Explore how Artificial Intelligence and Blockchain may influence the future of the global music industry.
Since the invention of the phonograph in 1877, technology has played a key role in shaping the music industry. It has changed how music is created, recorded, distributed, and consumed. Artificial intelligence (AI) and blockchain may define the next wave of music’s evolution, increasing music’s reach, enhancing creativity, and providing additional ways to monetize musical assets.
Advances in Physical Mediums
Back in 1877, Thomas Edison used two needles on tinfoil cylinders. One needle was for recording and the other for playback. This was the creation of the phonograph and ushered in the age of recorded music.[1]
For more than 100 years, recorded music was created and distributed in a physical format.
During this time, music was recorded on vinyl records, 8-track tapes, and cassettes. The birth of the compact disc (CD) bridged the gap between the physical and digital ages.
The Digital Age
The late 1990s and early 2000s saw the introduction of the digital age. Instead of physical mediums, music was increasingly distributed via digital and electronic means, such as MP3 files. The age of the digital download and streaming was born.
Streaming Dominates
Streaming has become the dominant way in which individuals consume music. Streaming represented 67% of global recorded music revenue in 2022.[2] Within the United States, streaming accounted for 84% of music revenue in the first half of 2023.[3]
Steaming can potentially increase music’s reach, allowing individuals to listen to the music they want when they want.
Social Media as a Music Medium
Music is now readily available on social media. You can find your favorite songs on YouTube, SoundCloud, Snapchat, TikTok, and similar platforms.
AI and Blockchain: The Next Wave?
AI and blockchain have the potential to further transform the music industry.
In a previous note, we highlighted the potential of AI on the music industry. AI may usher in a new age of creativity in the music industry, providing artists with new tools. AI may create entire compositions from scratch. It can create musical or lyrical suggestions, fill in empty pieces of a composition, or enhance what has already been written.
It can separate parts of recordings, such as voices or instrumentals, which can be monetized for use in commercials, video games, and films. In one case, John Lennon’s voice was sampled to create a new Beatles recording.
Blockchain can create a direct payment rail that can aid in monetizing digital assets. It can allow a direct payment to artists anytime their songs are played. It can also facilitate further monetization through non-fungible tokens (NFTs) and other digital assets.
How may individuals gain exposure to companies that can adapt to the continual evolution of the music industry?
The MUSQ Global Music Industry ETF (MUSQ)
The MUSQ Global Music Industry ETF (MUSQ) seeks to provide investment results that, before fees and expenses, correspond to the total return performance of the MUSQ Global Music Industry Index (MUSQIX). The MUSQIX Index is designed to provide exposure to global, publicly traded companies and royalty funds with a core business interest in the global music industry.
MUSQ may provide individuals with an attractive vehicle to gain exposure to the global music industry.
[1] Hilton, Stewart, The History of Recorded Music, Musical-U, Retrieved 8/17/23
[2] IFPI, Global Music Report, State of the Industry, 2023
[3] RIAA Mid-Year 2023 Revenue Report, ROAA. 2023
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).
Risk Disclosures
There is no guarantee the Fund will achieve its stated objectives.
In addition to the normal risks associated with investing, international investments may involve the risk of capital loss from unfavorable fluctuation in currency values, differences in generally accepted accounting principles or social, economic or political instability in other nations.
Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume.
In addition to the normal risks associated with investing, investments in small- or mid-capitalization companies typically exhibit higher volatility.
The Fund’s concentration in an industry or sector can increase the impact of, and potential losses associated with, the risks from investing in those industries/sectors.
The Fund is non-diversified.
The Fund is new and has a limited operating history for investors to evaluate. A new and smaller fund may not attract sufficient assets to achieve investment and trading efficiencies.
The Fund may invest in securities denominated in foreign currencies. Because the Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if currencies of the underlying securities depreciate against the U.S. dollar or if there are delays or limits on repatriation of such currencies. Currency exchange rates can be very volatile and can change quickly and unpredictably.
All investing involves risk, and asset allocation and diversification do not guarantee a profit or protection against a loss. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, might be worth more or less than their original cost. ETFs are subject to risks similar to those of stocks, as well as other risks specific to the particular ETF.
ETF shares are traded on exchanges, and are traded and priced throughout the trading day. ETFs permit an investor to purchase a selling interest in a portfolio of stocks throughout the trading day. Because ETFs trade on an exchange, ETF shares are bought and sold at market price (not NAV). The prices of ETFs may sometimes vary significantly from the NAVs of a ETFs’ underlying securities. Brokerage commissions will reduce returns.
Exchange Traded Concepts, LLC serves as the investment advisor. The Funds are distributed by SEI Investments Distribution Co., which is not affiliated with Exchange Traded Concepts, LLC or any of its affiliates.