How to Invest in Music & Entertainment Stocks
A practical step-by-step guide to investing in shares.
Investors, tech enthusiasts and music aficionados, it is time to invest in artists.
Why?
First: Artistry is the core of life and will always be.
Entertainment provides an escape from everyday problems.
Music creates new pathways and improves neuronal plasticity.
Art in society serves as a vessel for cultural and emotional expression, social critique, affirming identity, and contributing to intellectual and emotional well-being.
Second: Since entertainment is a societal pillar, you might diversify your investment by supporting its longevity.
Before getting into music investment options, let’s carefully examine the key players in the industry.
TL;DR Before investing, consider stock trends, market presence, income streams, annual reports, and dividends for the designated company. Once you’ve purchased shares, stay informed about industry news by setting up Google Alerts.
Entertainment Leaders
The wisest strategy is to support reputable companies that have demonstrated consistent growth.
- Spotify Technology S.A is a leader in the audio entertainment industry,
- Live Nation Entertainment, a major player in live entertainment; owner of TicketMaster.
- Warner Music Group Corp, leading global record labels
- Sony Group Corporation is a key player in the entertainment industry.
- Universal Music Group (UMG) global powerhouse advocating diversity and the interests of the artists.
These big dogs are likely to stay in the game, long-term.
What to look at
Before purchasing shares, there are a few elements to weigh.
Let’s take Universal Music Group (NV; Nasdaq) as a business case:
1. Stock Trends
Use charts and indicators to identify patterns for the past 1 to 5 years.
If the growth is gradual (regardless of seasonal dropdowns), we can consider the organisation as a reliable investment.
Universal Music Group (UMG)’s stock has reached a pinnacle on the 18th of December. ended its trading day today with its highest share price YTD: 26.29EUR, its largest public valuation for two years (source: Google Finance).
2. Market Presence
Second, assess the market share of the company.
The information can be found on Statista.
It gives an idea of how big the pie is.
In addition, find the ‘investors’ page of the company group.
Why?
Because you are looking for intel about how many businesses they run and where (=economically stable countries?)
We own and operate a broad array of businesses engaged in recorded music, music publishing, merchandising, and audiovisual content in more than 60 countries.- Source: Investors page from Universal Music
3. Income Streams
Diversity minimizes risk.
In this instance:
UMG’s revenue streams include recorded music, music publishing, and merchandising.
As a result, the company’s success will not depend on a single string but rather rely on different business units run across the industry.
4. Annual reports
Annual and quarterly presentations are usually available online.
e.g.: UMG RESULTS presentations.
Information you are looking for:
- revenue growth
- market consumption.
- YoY health and progress
These numbers reflect the heartbeat of the company.
5. Dividends
Certain stock markets provide opportunities to earn dividends*.
Dividends provide a consistent and regular distribution of earnings to investors on a monthly, quarterly, or annual basis, providing a steady income stream.
Often associated with slower — yet more stable growth, it is advisable to check the Dividend History to assess the potential income.
Example: Warner Music Group (WMG; Nasdaq) dividend potential
1 share = 35.55$ (subject to change)
Annual Dividend = $0.68
1 year = $0.68 x share.
Let’s say the initial investment is 350$ (10 shares).
At the end of one year, you will earn $6.8.
It might not seem much BUT — whilst your initial investment is likely to continue growing — you will additionally benefit from a passive income.
Points to consider
Operating Profit
Highlighting challenges with operational costs.
Example with Spotify which is not yet profitable.
Industry Uncertainties
The entertainment industry is dynamic, with risks associated with changing consumer preferences, piracy, and technological disruptions.
Something to carefully monitor.
Market Price Fluctuations:
The market price of UMG shares experienced volatility over the past years, influenced by factors beyond the company’s control.
Investors should be prepared for price fluctuations and market uncertainties.
Monitor the industry news
Create alerts with Google to stay informed.
Example of industry-related news this month:
- Audiobooks are now ready for listening on Spotify
- Warner Music CEO, Robert Kyncl laying out his plans for 2024
- Universal Music Group to Lay Off ‘Hundreds’ in First Quarter
The publications inform and serve as narratives, reflecting the heartbeat of the industry.
It exposes the business’ health to the public eye.
You can leverage this data to make informed investment decisions.
It guides you to manage stocks according to market fluctuations.
How to invest? (referral link)
I like to keep things simple and manage my transactions in the same place.
For the last decade, I’ve exclusively relied on Revolut*, from moving between countries to buying shares. I’ve never been deceived.
The main reasons why I buy stocks via the Revolut app:
- it’s free to open an account and without monthly fees;
- commission-free trades* within your monthly allowance. *Other fees may apply
- Offers a portfolio of 2000+ stocks to invest in.
BONUS: The analytics interface makes it easy to understand your earnings and stock market updates.
Let me know which companies you admire, and if you are planning to invest in their growth.
Disclaimer
Deciding to buy stock shares depends on your specific financial objectives and risk tolerance.
Take into account factors like the company’s financial health, industry trends, and upcoming events influencing stock performance.
Seeking guidance from a financial advisor for personalized advice based on your unique circumstances is advisable.
Investing in the music industry requires a long-term outlook to navigate short-term market fluctuations and capitalize on industry growth trends.
