Striking Markets is excited to announce its investment in Sonomo, the Amsterdam-based music investment platform.
On Sonomo, investors can buy and sell music rights today, starting with as little as €10. The environment is familiar to traders of other assets (such as equity or crypto) and shows rich data highlighting asset performance, streaming numbers, consumption patterns and yield. Once you’ve bought your first works, Sonomo ensures your yield is paid monthly - like clockwork.
In addition to individual songs, Sonomo now allows investors to trade “baskets” - which are curated collections of songs, or essentially an investable playlist. Baskets are the equivalent of ETFs, which have been highly popular amongst retail investors for their simplicity and diversification.
Over 1,000 labels and artists globally already use Sonomo to raise money by selling (a portion of) the royalties of their existing works. A convenient way for rightsholders to manage their rights and avoid constrictive record or publishing deals to access funding. In addition, Sonomo offers an exceptional distribution and automated accounting service for a monthly flat fee.
We’re thrilled to be able to support Faris, Sameh and Zaki and their team on their journey. Syndicate investors included, among others, Nicolas Gallet and Tim van Doorne.
Start building (or listing) your portfolio today
You can skip the waitlist and create your own portfolio using this link.
Artists and labels can access distribution and monthly accounting for an affordable monthly fee, with the option to “IPO” music on the exchange to raise money.
To learn more, keep reading.
Why invest in music? Many reasons!
- Alternative assets (like music, fine wine, art and fractional real-estate) have fast gained adoption because they can produce uncorrelated returns and help counter inflation. Institutional investors like endowments and pension funds love this special property and have been increasing their allocations over the past decades.
- Within alternative assets, music is unique because the rights are 1) virtually stored and consumed (vs. having to store wine or paintings under the perfect conditions), thus avoiding yield leakage. and 2) they generate cashflow (from streaming, radio/TV/public spaces, advertisements and film). This last feature makes them similar to a fixed income instrument like a bond.
- The cashflow is only moderately correlated to the general market cycle. While many businesses significantly weaken during an economic downturn, music royalties remain fairly constant. During COVID arguably more people listened to music via streaming services than before - and I’ll bet you that Mariah Carey’s “All I want for Christmas is you” will remain a staple for decades to come.
Alternatives require domain expertise
Sophisticated investors love these properties and have been investing in alternatives via specialized funds. Managing alternative assets require domain expertise, infrastructure and operations. For example, one can’t just buy a basket of music rights and passively make money from it. You’ll need to manage the rights with streaming services, performance rights agencies (who collect for radio, TV and industrial use), licensing managers for film and TV, have account managers to engage with the artists and an accounting team to ensure everyone gets paid accurately and in time. Music funds like Hipgnosis or Round Hill have all these resources and acquire music catalogues, while they accept investments from institutions who want exposure to the rights they manage. But they charge high fees (for their unique proposition) and minimum investment tickets are usually $100K or more. Diversified and managed music investments are therefore inaccessible to most individuals.
Illiquidity is a hurdle
Additionally, music rights are “illiquid” in the same way real estate can be. If you own music rights, selling them isn’t straightforward and requires going onto the private market to find a buyer. The most liquid route would be buying shares in a publicly traded music fund (like Hipgnosis) or lending to them. But this results in a lot of implied risk, such as how said fund is managed, the capital structure and operating practices. You are effectively investing or lending to a business, not just in the underlying rights. This also makes most of the category inaccessible to hedge funds or traders who require more liquidity.
Sonomo fixes this
I explain all this to make you understand why Sonomo is such an exciting company. I believe that many investors would benefit from having a small portion of their portfolio (1-2,5%) allocated to a diversified collection of music. And that more professional investors would invest in music there were better infrastructure and liquidity.
Here’s how Sonomo makes this possible:
- Sonomo is a music rights exchange that allows anybody to invest in individual and collections of music royalties, trade them and collect monthly royalty dividends.
- The order-book exchange creates liquidity for the assets. Bid and ask orders can be placed on an intuitive interface that is familiar to your securities and crypto exchanges. Investors can see unique properties of music rights, such as their consumption patterns, streaming trends and yield to review each asset or collection.
- Guaranteed consistency of performance data and royalties by Sonomo’s infrastructure. Almost all rights on the platform are distributed via Sonomo’s distribution stack, and payments are managed by their automated accounting solution. Rightsholders such as investors, artists and labels receive payments monthly, which is blazing fast.
- Artists, labels and funds can distribute their music via Sonomo and optionally sell (a portion of) their royalties on the exchange, resulting in a bulk cash raise akin to an “IPO”. This is a powerful tool, since it is a great alternative to signing a constrictive label or publishing deal to access that advance you might need to fund your next project.
- Investors can curate collections of records based on a particular thesis; could be love for a particular artist, genre or curating mature or up-coming artists from a particular country. You can be opinionated and concentrated in the music you invest in, or very diversified.
Interested in joining the syndicate? Learn more here.
Striking Markets Newsletter
Reflections on blockchain, markets and venture capital.