The music industry has had a dismal decade. When you look at the following chart, you begin to realize that the best days to be in the music business might have been in the 1990s.
With the sale of Warner Music Group in 2011, there hasn’t been a stock you could buy to give you financial access to the major music labels. Most people would not have bet long on record companies anyway. But, with signs of growth in the music industry, there might be more investing interest.
The gains are all digital
Hasn’t technology made it easier to create and distribute music? That’s correct, but the big businesses behind music have been slow to adapt. Much like anyone who pines for the salad days, it appears that Big Music hasn’t gotten over its romance with the 90s. That is, until now.
Reports have indicated that the music industry grew around 0.03% last year due to digital revenue. Now, that’s not much, but in an industry where speculation had been where the bottom might be, it is possible that the bottom might have already come and gone.
Many believe that the future of music is in the streaming model. But, as it stands today, it is hard to predict revenue growth with this strategy when you look at Pandora Media Inc (NYSE:P). This company has struggled to survive. Although it is taking business from broadcast radio, it hasn’t been able to recoup its costs by inserting occasional advertisements between songs. But, the company was able to finally eke out a profit in the most recent quarter off of rising revenue, so keep an eye on this stock.
Record labels
It’s becoming more apparent that music creators don’t need a record label to survive in the internet age. It’s possible for musicians to eschew labels and go on their own by simply selling their music through outlets like Apple Inc. (NASDAQ:AAPL)‘s iTunes. Why use a label when the distribution model has changed so significantly?
There isn’t as much of a need to go that route. Unless you want to have your music quickly reach a massive audience, you don’t need to take money from the labels in exchange for giving up a degree of control. Today, you have options, in this respect, if you are a musician.
Live music
This is especially true if you are a road-ready live act. Companies like Live Nation Entertainment, Inc. (NYSE:LYV) are ready and willing to support you, if this is the avenue of profits you would like to pursue. The average price of a concert ticket has risen 40% in the past ten years, as music sales revenues have gone down. Live music is an entertainment option that people will continue to buy as something unique that gets them out of their houses. For this reason, Live Nation Entertainment, Inc. (NYSE:LYV) seems like a great investment in the future of music.
The company is continually looking for investments in concert festivals, which is a growing segment of the concert industry. Music fans are becoming more diverse in their music selections and listening preferences. As a result, festivals give concertgoers tremendous value for a ticket because a variety of music is usually offered at these events.
There’s always… Apple
While iTunes growth in music download sales may taper, streaming music revenue could dampen the effect of that. Being able to sell both a streaming music service and iTunes downloads to consumers will allow Apple Inc. (NASDAQ:AAPL) to work both sides of the rent vs. own music debate.
Conclusion
The music industry is a more exciting space to be in than it has been since the 90s. New services to deliver tunes that people like are available. This is true in both recorded and live music. The only question now is how you want to invest in the newly growing future of music.
The article How To Invest In The Newly Growing Music Industry originally appeared on Fool.com and is written by Daniel Cawrey.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
