How to Invest in Music Stocks
Are there music stocks to trade? Since the beginning of time, the music industry has grown and evolved. A few decades ago, we listened to it on the radio, cassettes or CD players. When MP3 players came out, new possibilities were unlocked. Who doesn’t remember using LimeWire or an MP3 converter to download tracks? To limit music pirating, platforms had to innovate and change their business model.
Can You Invest in Music Stocks?
Today, dozens of companies are competing to gain listeners. However, it’s not only about music anymore.
Podcasts are also gaining much more attention over the last few years. What does that mean for music stocks?
Since most music companies have an app, we have them at our fingertips. Which means their brand recognition is off the charts.
Many platforms are diversifying their media portfolio to please as many consumers as possible. Which ones are doing the best job? Let’s find out.
Spotify (NYSE: SPOT)
We begin our music stocks with a Swedish company that revolutionized the music industry. In 2011, Spotify launched in the US.
Since, users benefitted from millions of tracks with no limits. Oldies or contemporary, there was something for everyone.
Spotify offers a premium paid version and a free version. The free version is riddled with advertisements and provides the platform with an alternative source of revenue. The transition to mobile music greatly benefitted consumers and artists. Music pirating is practically inexistent and artists can be paid for their work.
Between 2010 and 2020, Spotify’s market share rose from 7% to 83% in the US. During this period, Apple’s monopoly with iTunes came to an end.
Globally, the platform is in the lead with 31% of the market share. Spotify’s innovations and platform were very user-friendly and iTunes was no longer a match. How can Spotify keep growing and outshine its competitors?
Music Stocks Growth Opportunities
How do you combine a radio show and a music platform? Podcasts. How do they help music stocks? Since the pandemic, they have grown considerably. Artists found new ways to keep their audience locked in. Spotify is the home to over 3.2M podcasts and that number keeps increasing.
Furthermore, the platform keeps updating its footprint. In 2020, 85 countries were added to its list. This represents millions of potential subscribers. Those in poorer countries can use the platform for free, but are subject to ads. Even premium members are sometimes subject to ads.
One of the most important entertainment segments is streaming. Spotify can continue growing by teaming up with music venues and artists to stream concerts and festivals.
Users around the world can be part of a performance outside of their borders. This can be for an extra fee. Users can gain access to a live performance and artists can earn a percentage of the proceeds.
I don’t think we’re too far off from this kind of technology. However, every great idea brings competitors that wish to steal some market share.
Apple (NASDAQ: AAPL)
Next on the music stocks list is Apple. The platform isn’t new to the music industry. For over a decade, users relied on iTunes to download files and listen to them on their iPods or MP3 players.
However, its relevance disappeared with Spotify’s new technology. It took Apple a few years to release Apple Music to be able to compete with Spotify.
Today, the platform is second among music streamers with 15% of the global market share. Apple has one big advantage over Spotify. The company has millions of loyal iPhone customers who will prefer to use Apple Music over Spotify.
Apple can certainly capitalize by offering reductions to Apple users or other incentives. Apple can also innovate in the same growth opportunities as I mentioned above. Once again, they aren’t the only ones in this market.
Google (NASDAQ: GOOGL)
Some readers may think that Google doesn’t have a music streaming platform. So you might be wondering why they’re included in our music stocks list.
For those who aren’t aware, Google owns YouTube, the largest video streaming platform. In recent years, YouTube has been developing its movies and music section.
Today, YouTube has 8% of the market share for music streaming. Not bad. There is always a free version with way too many ads. Those who succumb to the pressure and stay away from ad-blockers, must get the premium version.
It has the same features as all its competitors. Ads remain an incredible source of revenue for YouTube. It’s safe to say the platform has a monopoly on video streaming and there aren’t any competitors in sight.
Tencent Music Entertainment (NYSE: TME)
In this section, we will shift geographically. Although Tencent is listed on the NYSE, the majority of its listeners are in China. The app is available to download on all major platforms for anyone.
Tencent shouldn’t be underestimated. In 2021, the platform had over 790M users and it has a significant market share in China. It owns QQ Music, Kugou, Kuwo and WeSing.
Tencent has 13% of the global market share, although mostly concentrated around its borders. Regardless, it is a profitable business.
The company owns a few labels to create and promote various music genres. Artists on these labels can stream their music on Apple and Spotify. I
t also has partnerships with other countries, notably South Korea to create and distribute music. There is still a lot of growth left for Tencent Music.
Fun fact: As of right now, Spotify owns almost 17% of TME’s Class A shares. Similarly, Tencent ranks third among Spotify’s top shareholders. What does the future hold for this partnership?
Sirius XM (NASDAQ: SIRI)
It’s time to switch it up a bit again with music stocks. Sirius isn’t exactly a global music streaming platform. In fact, it only operates in the US, Puerto Rico and Canada.
In 2019, Sirius acquired Pandora with hopes of competing in the music streaming industry. Pandora is very limited geographically.
The platform is only available in the US. So we established that Sirius doesn’t have an international footprint, but how is the company doing in the US?
Well, Sirius is the only satellite radio provider in the US. Internet isn’t always available on the road to stream our favorite album on Spotify, Apple Music or wherever else. Fortunately, the radio is available in those places.
This is where Sirius makes its bread and butter. However, since 2019 the number of active users has been dropping. It’s easier than ever to be connected in remote places of the world.
Radio listeners hence become more and more scarce. What about Pandora? Unfortunately, the streaming platform’s quality is nowhere near its competitors and it has also been losing users year after year. What a waste of $3.5B dollars.
Sirius is for those who are looking for some new music every once in a while, but it isn’t posing any threat to capturing any market share in the future. If anything, it’s an excellent target to get acquired by one of the top companies.
Warner Music Group (NASDAQ: WMG)
Last but not least is Warner Music Group. This company is in charge of producing, marketing and managing artists.
They include renowned artists such as Coldplay, Cardi B, Ed Sheeran, Dua Lipa, Gorillaz and many more.
A variety of genres and the return of music festivals and concerts are sure to give Warner a boost in the upcoming quarters.
I included them on the list because they are essential to the music industry. Without them, artists would have a hard time finding promoters or getting famous Not everyone can make a TikTok video or record a YouTube video and become famous thanks to someone who discovered them.
Warner is expected to keep growing. They are unlikely to start a streaming platform, but many of their artists are getting a lot of listens on them. In turn, Warner receives a portion of those as well.
Now You Know How to Invest in Music Stocks
To conclude our post on music stocks, there are many ways to invest in the music industry. In the last decade, streaming platforms such as Spotify, Apple Music and others revolutionized the music industry for both artists and listeners.
It’s one industry that definitely made the world better for all the parties concerned. As for the investing aspect, investors have a variety of choices. The big players have a growing international footprint.
Smaller local players can also license their products to the big players to make a buck. Finally, some are part of the artist’s team and made them a star. The industry has a bright future both live and on various supporting platforms. There is also a lot of innovation left.
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