Like any other form of investment, it's all about being smart with your money because a fool and his money are soon parted. This means you definitely have to understand how the music business works and dedicate your time to being an intelligent investor rather than being naive about the music industry. In a nutshell, the following represents the main important sources of revenue in the music business:
- Music Publishing (publishing checks)
- Ownership of Music Copyrights (masters)
- Live Shows and Touring (concert ticket sales)
Starting your own music publishing company
The idea of setting up a music publishing company will allow you to manage the rights of songwriters and therefore make money when you license their music to third parties on their behalf. Although this may sound easy just remember in reality it's not as simple as it sounds because it's usually hit songs that generate the most money on a regular basis.
That means your primary concern should be centered around the agenda of convincing undiscovered talents into signing a publishing deal with you before a major publishing company gets them Chances are most of these new talents are more likely to sign a publishing deal with Sony/ATV, Warner/Chapell Music, and Universal Music Publishing Group, before they even consider your music publishing company.
Starting your own record label
Owning a record label lets you sign artists and make money off them. How this works is through a legally binding agreement where you invest money into their career and in return, you share profits from any work created such as albums, singles, and mixtapes.
Record deals are not only limited to music since you also have got 360 deals whereas with a record label you can make money off other derivatives which bring income to the artist. For instance merchandise, clothing lines, TV Shows, Movies, and so forth.
Buying shares of companies in the music business
Before you think of investing your hard-earned money into any company just remember, good investors, put their money only in companies that they understand. Some of the companies involved directly or indirectly in the music business include Amazon, Apple, Google, Spotify, Sony, Vivendi, Warner Music Group, Tidal, and many more.
If you buy the shares of the above-mentioned companies you would invest in the music business because these multinational companies derive some of their revenue from music. However, companies like Amazon and Apple are much more diversified compared to Spotify. Because even though they sell music and offer streaming services they also earn revenue from other sources besides music.
