David Schulhof, Founder and CEO of the MUSQ Global Music Industry ETF, discusses the rise of music ETFs, portfolio construction, investing in music ETF vs private equity, the Taylor Swift effect, and artist revenue sources in the streaming era.
The MUSQ Global Music Industry ETF offers investors exposure to stocks in the music industry, capturing growth in music consumption through streaming and live events.
Advancements in AI and blockchain technology are reshaping the music industry, addressing challenges around authenticity, transparency, and royalty payments for artists and songwriters.
Deep dives
Background and Motivation for Music ETF Creation
The founder and CEO of the Music Global Music Industry ETF, David Scholhoff, noticed a lack of public music companies that could be traded about 10 years ago. Recognizing the evolving landscape of the music industry with the emergence of various companies globally, he shifted his focus from a publishing company to creating a portable way for investors to access the music industry. This led to the design of an index and the launch of the first music ETF, aiming to capture the growth of the music sector.
Boom in Music Industry Deals and Revenue Statistics
There has been a significant increase in music catalog sales in recent years, highlighted by deals involving artists like Springsteen and Neil Young. Companies like Hypnosis and Reservoir, along with private equity firms, have been actively investing in music rights. The music industry revenue has seen substantial growth, surpassing the peak of $18 billion in the mid-90s to $28 billion today, with streaming becoming a dominant force representing 84% of music consumption in the US.
Portfolio Construction and Genre Exposure
The Music Industry ETF includes companies that generate over 50% of their revenue from music or hold a significant market share in one of five music segments. Market cap weighting ensures fair representation, with large companies like Amazon, Apple, and Google capped at 7%. The fund provides exposure to various genres and components of the music industry, including digital streaming, live events, ticketing, and equipment technology.
Challenges and Future Prospects in the Music Industry
The music industry is navigating challenges related to quality, authenticity, and the impact of AI technology. Concerns exist around deep fakes, streaming fraud, and the authenticity of music creation. However, advancements in AI and blockchain are poised to enhance transparency and improve royalty payments for artists and songwriters. The industry remains dynamic, with opportunities for growth driven by streaming, live events, and increasing fan engagement.
The music industry took a huge revenue hit when the MP3 came out about twenty years ago but has since found ways to make money. And now there’s an ETF for that too.
On this episode of Trillions, we speak with David Schulhof, founder and CEO of the MUSQ Global Music Industry ETF, about the stocks in the ETFs as well as the growth of the music industry which includes songs, platforms, concerts and the Taylor Swift economy. We also discuss his career in the music industry and whether music has gotten better or worse.