Technology and music have always been inextricably linked. Recently, much of the news surrounding developments in technology and music has been dominated by artificial intelligence. However, one of the most dynamic areas relates to innovation in music investment and royalties.
Stockholm’s MasterExchange is a trading platform for music rights. It gives fans and investors the chance to invest fiat currencies in individual songs. These investors receive quarterly revenue royalty payments, which they can trade. The company was co-founded in 2022 by Alexander Fred-Ojala (MasterExchange CEO), an AI, Data Science, and Blockchain expert and director of the Learn2Launch Program at UC Berkeley. The other co-founders include investor and entrepreneur Johan Edfeldt and producer Jakke Erixson. MasterExchange is positioned between LA and Stockholm and is available for investors in the UK, EU, and EEA territories.
MasterExchange outlines how it works on its website. A song comprises a master recording, master rights, and produces master royalties. Artists, labels, and producers often share these. These master royalty beneficiaries are able to request to launch an Initial Music Offering (IMO) on MasterExchange. If the beneficiaries are accepted, they can divest a percentage of their master royalties, divided into royalty shares. Legal agreements are made between the artist and the platform, fixing information including the quantity and price of the shares. This information is presented transparently on the Master Exchange platform, in order that customers can evaluate it ahead of investing. The Initial Music Offering is a set period in which customers can buy royalty shares of a song. If an IMO is oversubscribed, shares are distributed on a first-come, first-served basis, with VIP users guaranteed to receive an allocation.
Corite is another Stockholm-based company that allows fans to invest directly in musicians. Corite’s CEO is Mattias Tengblad, who previously held the role of commercial director at Universal Music Group. Tengblad co-founded Corite with Emil Angervall, another experienced music industry professional, in 2019. Corite differs from MasterExchange. It is designed to allow rising artists to circumvent the traditional route of signing with a record label, instead obtaining financial backing from individual fans and investors. These investors can earn or lose money, depending on the success of the artist.
Artists launch a “campaign” on Corite, often an upcoming single release. The campaign outlines the amount of money the artist is looking to raise, and the proceeds investors will receive should the song reap specific streaming statistics within its first year of release. Corite takes 10% of capital raised and future royalties. The BBC states that rates of return are typically “1.4 and 1.7 times the amount a person invests”. Individuals are able to listen to a 30-second clip of the song before investing.
Corite then uploads the song to streaming services once it is complete and takes responsibility for collecting revenues to distribute to the artist and investors. Tengblad has stated that they are “challenging the status quo in the music industry”, and that the platform allows fans to “get a piece of the success” when the music they love does well, and gives artists a “cheaper way of funding [their] career than signing an expensive deal with a record label”. He suggested that with the advent of social media promotion, record labels have lost their power to “make things happen”. One of the platform’s successes is DJ Alan Walker. Walker is one of Spotify’s 100 most-streamed artists of all time, and he raised $25,000 via Corite to release the single “Unity”. It was streamed over 4.1 million times in a single month after its release, and Tengblad estimates that it could earn approximately £6.3 million in 5 years.
Business psychologist Stuart Duff has commented that the feeling of “closer involvement” with the artist could be central in Corite’s development. He noted that although the financial aspect plays a role, the notion of investment is “creating a stronger psychological bond with the fans”.
This idea is supported by Tengblad’s emphasis that profit is not the only thing driving the platform. This is inherent in the platform’s structure. Fans can only invest small amounts of money at a time ($10), and portfolios cannot exceed more than $1000 as of June 2023 according to wired. He noted that “If Alan Walker wanted to, he could have let one rich guy fund the whole total, but that would have served no purpose. What is that one guy going to do to promote it?”. Corite enhances the sense of community in the industry, even facilitating collaboration between fans and artists. Fans submitted vocals through Corite, which Walker used, and Walker sold NFTs of his YouTube video on Corite. Corite can also be used to allow fans and investors to access new songs early, as well as secret gigs and merchandise. Tengblad summarized this by stating that Spotify is “passive”, and requires additional applications such as Instagram, Twitter, and TikTok for fans to engage.
These Stockholm-based companies are by no means the only two platforms exploring the potentials created through the intersection of music and financial technology. For example, KOMI is an “all-in-one creator commerce platform” boasting artists such as Lizzo and Usher. The platform recently raised $12 million in a Series A funding round, with investors including Sony Music Entertainment and Laffitte Management Group.
Investment or commerce platforms are not the only transformation in music investment. Following the K-pop and Korean Entertainment ETF launch last year, earlier in 2023 Tidal ETF trust filed paperwork to start trading its Clouty Tune ETF. This tracks the index of the stocks of 50 music and entertainment-related companies. In addition, a new ETF, The MUSQ Global Music Industry Index ETF, will track businesses across different areas including music streaming, content, and distribution, radio, technology and equipment, and live events. The ETF has been submitted to the United States SEC for licensing, with an expectation that it will be trading “soon”, according to investment advisor Exchange Traded Concepts.
Technologies such as Blockchain and NFTs have been revolutionizing how fans and investors interact with music for a number of years. However, the preponderance of community and fan-focused investment platforms could indicate the growth of a different kind of consumer activity, and change how musicians receive royalties.
By Katrina Toner, Master’s Degree Student at The Juilliard School, New York City.
