MR MONEY MAKER: Tune in today to boost your income stream tomorrow, says JUSTIN URQUHART STEWART
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What’s happening?
Normally, I do not like fashion fads, as they tend to lead to next year’s disasters. However, I am willing on this occasion to find some exceptions.
One of these is the selling of record back catalogues, in which the value of nostalgic music can compensate for the fashion embarrassments of that time – where did I leave those flared trousers?
On song: In 1997 British musician David Bowie (pictured) sold ‘Bowie bonds’, which gave investors a share in his future royalties for 10 years
Why Does It Matter?
There is nothing new about artists selling access to their folio of creativity. After all, you may recall the enthusiasm for ‘Bowie Bonds’ when the late Starman raised cash backed by the future income of his music.
The success of such structures, though, is based upon the quality and longevity of the music or whatever art form is being sold.
The other factor is the control of the rights to this music. With free downloading so commonplace, effective measurement of your potential earnings is vague, to say the least, even though there will no doubt be litigation and other action to try to ensure artists do not lose out to freeloaders.
What Should I Do?
In 2018, a company called Hipgnosis was formed precisely to address this market and raised money to go out and purchase back catalogues of work, including those from Neil Young, Debbie Harry, Chris Stein and Beyonce.
Technically this company is an investment trust, so it trades as any other standard stock – although you always have to watch the discount value that such trusts tend to have against their underlying assets.
You might think that such a business is a ‘banker’ and what could possibly go wrong? Well to start with, your stars of yesterday could just become unplayable.
More importantly, suppose all those clubs, pubs and other outlets playing music are forced to shut down for some reason. Sound familiar?
Any Suggestions?
This company has come back to the markets to raise more money with the direct intention of doing more of the same. It is a simple model and one that I like.
The share price has not been that dramatic, but it provides a decent yield, currently at 4.27 per cent, which is better than any high street deposit account that I can see.
The concept of listening to the music and making money out of it is most appealing to me, although I think I would be happy to avoid Barry Manilow.
However, there is a passive fund which may be a good alternative, and that is the Invesco Dynamic Media ETF, although this does focus on US media companies.