As music stocks rise, UK investors and traders show interest
The global music industry is estimated to be worth in the region of $20 billion. This comes after five years of steady growth and experts believe that this is set to continue, on the whole. This industry growth has been driven predominantly by streaming which accounts for more than half of all label revenue.
On the up
Figures from the Global Music Report for 2019 which was released this year showed that revenue increased 8.2% on 2018 with a 23% increase in streaming revenues alone. This equates to some $11.4 billion and over half of all sales. Now more than ever, music companies are relying on subscriptions to their streaming services and there are now over 341 million users of paid streaming services worldwide.
Online music streaming giant Spotify has been in the news over the last few weeks as its current market cap reached USD 13.5 billion (GBP 10.7 billion). Following its foray into podcasts, the company witnessed massive growth on Wall Street, placing it head and shoulders above other music industry giants like Warner Music Group. Even more impressive was the fact its market cap value and share price has doubled in the last three months. Other leading stocks in the digital music world include Amazon and Apple. But what about smaller companies?
UK industry growth
The Hipgnosis Songs Fund is the UK’s first investment company that focuses solely on music and intellectual property rights. Founded in 2018, it has so far raised over GBP 625 million to help it with its aim of acquisitions. By 2019, it held the rights to over 2000 number 1 hits and 3000 other well-known songs. Then in April 2020, it purchased a further 12,000 songs as a part of a deal worth an estimated billion dollars.
In July 2018, Hipgnosis was listed on the London Stock Exchange and was upgraded to the premium market just four months later. Then in March 2020, it became a part of the FTSE 250 index and its value has kept rising.
Just three days ago, its market cap topped $900 million as its share price exceeded its all-time high. This came after news it would sell a new tranche of shares and following the publication of its annual report. It closed the day on Wednesday with its share price trading at 119.50 GBX after peaking at 120.50.
Peaking investor interest
The industry is constantly evolving and companies are responding with new innovation. All of this leads to an increased potential for speculation on price movements in the stock markets. A growing number of music fans are beginning to get involved with buying, selling and trading shares on the stock market.
But it’s not just owning and then selling the assets that are drawing interest. CFD trading or contract for difference trading is becoming more popular. A form of derivative trading, individuals speculate on the rising or falling value of the shares. A contract is opened with the value at one point and then closed at another. The trader benefits based on whether they have speculated on the rise or fall in value and pockets the difference. This allows traders to benefit from huge surges like seen with Spotify and Hipgnosis, without owning the underlying asset. Traders can evaluate the best CFD trading platforms and go with the option that provides the most favourable terms and conditions for them.
As the music industry continues to grow, particularly in the climate of increased digitalisation, we can expect to see more increases in stocks and market caps. This, in turn, will drive more to invest in traditional stocks and shares or to speculate on price movements of some of the biggest entertainment companies. As for those small labels representing local bands that can only dream of a future IPO and going on the stock market, for now they will have to stick with being streamed on Spotify and the like. While they are unlikely to get rich off Spotify plays alone, for some, the exposure it brings is worth its weight in gold.