Goldman sees a "new era" of improved music monetization, led by better pricing, the creation of super-premium plans, and a focus on the most profitable music listeners.
Goldman Sachs raised its long-term growth estimates for the global music industry in its latest update to its influential ‘Music in the Air’ report.[1] What prompted this upward revision? What does it say about the industry’s future potential?
Goldman raised its long-term compound annual growth rate (CAGR) estimate for 2023-2030 to 7.6% from 7.4%. Goldman estimates that the global music revenues will reach $163.7 billion in 2030, versus its previous $151.4 billion estimate. The increase was primarily due to:
Results for 2023 were stronger than expected, attributable in part to:
Goldman describes 2023 as a turning point for the music industry based on three events:
There may be opportunities to better monetize the music fan base. Music streaming is relatively cheap compared to video and gaming pricing. Goldman estimates that average revenue per stream decreased by 10% in 2023 versus 2022 as the number of streams increased much more than prices. Therefore, major streaming companies are expected to pass through additional rounds of price increases. Goldman is estimating 3% annual price increases through 2030.
Price increases can take several forms. The most straightforward is an across-the-board increase, e.g., prices for the platform are raised.
Super-premium plans catering to superfans are also expected to be instituted. Goldman estimates this could drive an additional 13% in annual revenue increases.
Also, more product-centric or artist-specific plans may be instituted.
Growth in emerging markets may power the industry. Emerging markets contributed 60% of net music subscriber increases in 2023 and is expected to rise to 70% by 2030.
Companies in the global music industry may be poised to benefit from expected future growth.
How May Individuals Gain Exposure to Companies in the Global Music Industry?
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] Music in the AirFocus on Monetisation, Emerging Markets and AI; Updating Global Music Industry Forecasts. Goldman Sachs, 5/1/24
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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