Investing Money in Music – Is It a new Trend?

By Mitch Rice

Crowdfunding services increasingly offer users to invest small amounts in organizing concerts.  Projects that are offered to citizens for free or on a profit basis to collectively finance through crowdfunding sites are becoming more and more diverse. You can invest in a large number of small and medium-sized businesses: from starting a coffee shop to building a hospital.

Recently, this segment of crowdfunding has been actively developing. This is not surprising: market participants surveyed note that the profitability of investments in concerts can reach 20-30% per annum – this is a fairly high figure even for venture capital investments.

International Experience

There are two types of concert co-financing in the international market. The first involves investing in organizing a concert in exchange for a ticket for it, the second – lending to a promoter to make a profit. In the latter case, funding is carried out within the framework of crowdfunding – this is a type of crowdfunding, which implies that many investors lend money to the same entrepreneur for a certain project at a certain percentage.

Funding of the first type is available on such crowdfunding platforms. On these services, the user can leave an application for organizing a concert of his favorite band in his city and pre-deposit the amount of money corresponding to the estimated cost of the ticket – it is calculated by the platform itself or by a promoter who collects funds through the service. As soon as the number of such applications reaches the level that allows a concert to be held, the platform contacts the musician’s management and offers to perform in the specified city. If he agrees, a concert date is set, if not, the money is returned to the investors. Thus, there is no profit for the user of the service in this scheme.

Comparison With Other Investment Methods

When we talk about investing money in different concerts and music a lot of people might be confused, thinking it is not the best way to put your money into something valuable. If we compare music investment with other financial instruments, the opinion could be well-appraised. In the modern world, a lot of people prefer instruments from Forex to crypto and NFTs. Trading with a Forex broker or any kind of dealing center is a form of investment as well – you are making money from changing currency rates and it’s worth mentioning that numerous people are successful in it.

Another popular form of trading is crypto. Compared to Forex this field is still in the development process, but with the emergence of new digital coins more and more people engage in cryptocurrencies. They buy and sell cryptos at certain prices and this is a really popular activity.

Talking about cryptos we should also say a few words about NFTs. In 2021, the trend of having special ownerships is popular. People pay a lot of money for artworks and they see this as an investment. In total, these methods might be convenient and more profitable at some point compared to investing money in music, but everything comes to personal preferences.

Fundraising Platforms

It’s worth noting that the platforms we have mentioned above rarely run fundraising campaigns for top-class shows. They are mainly used to bring indie bands or aspiring musicians with a small fan base to cities. There are, however, exceptions – through the British SongKick fundraising you are going to fund the shows of such “heavyweights” as Adele and U2. Fan-contributed tickets through these platforms often start at $10. There is no expert assessment of the volume of this market yet. It is only known that the SongKick service, according to its own data, raised a total of $42 million.

The second type of financing for concerts – lending to promoters – is carried out through crowd-lending platforms. These services, lending to small and medium-sized businesses, often act as intermediaries between the promoter, who collects funds for the organization of the concert, and numerous lenders who are ready to allocate small amounts for these purposes. The percentage at which a promoter is credited depends on many parameters, including the level of popularity of the musician, the size of the concert hall, and the amount of the loan. In this case, tickets for concerts will have to be bought at your own expense.

The profitability of transactions reaches 6-14% per annum, depending on the loan amount. Of these, from 0 to 4% will go to site commissions. The number of loans issued through these services to promoters is unknown.

Is It Worth Investing?

It is worth carefully studying the characteristics of music investment in order to clearly understand whether a refund is guaranteed and what are the maximum losses of the investor if, for example, the concert does not take place. Much also depends on the concerts themselves. Small concerts of little-known performers that are held at the wrong time are likely to have higher collection risks.

As the history of this business shows, even experienced producers sometimes make mistakes in the money collected by certain performers. Accordingly, deviations are possible in one direction or the other: you can both earn good and lose a lot.

Data and information are provided for informational purposes only, and are not intended for investment or other purposes.