Invested Credit

Compact DiscsHaving looked already at how it is that a personal can weigh the costs and financial benefits of learning to play music, it has become somewhat clear how the music industry is able to perpetuate itself with such profitability. While we might not be personally interested in the pursuit of music itself, we might feel as though the actual industry presents an investment opportunity for a personal saver. As such, this article is going to look at the different opportunities for investors to benefit from the music industry, how it is that they produce these returns, and at what risk.

The first, and probably the most obvious way for an investor to profit from the music industry is through a record label itself. These companies earn an income similarly to a bank, in that they effectively lend money to a portfolio of musicians, using the royalties associated with the songs they produce as collateral. From there, the label stands to earn a great deal of profit based on their ability to promote both the live and recorded performances of the songs that they own. These royalties are then passed onto shareholders, and leveraged into further investments in music.

That being said, because of the way in which the probability of a musician being wildly successful is extremely small, a great deal of these returns are further consumed by searching for and promoting a new sensational asset. Regardless, investors have been made wealthy by investing in the assets of companies such as Warner Brothers, and privately in Virgin Media, because of their ability to leverage their sheer scale towards continually introducing the market to new and exciting performers. Read the rest of this entry »