How to Invest in Music Industry Stocks in 2022
The music industry has gone through a wide range of changes over recent years due to the rise of social media and technology. This has created unique opportunities for some technology businesses that are looking to gain a foothold in the industry.
With global music revenues growing at the fastest rate in more than a decade, it’s clear why many investors are looking to add music industry stocks to their portfolios. However, music shares cover a wide range of companies such as record labels, streaming platforms and radio.
In this ‘How to Invest in Music Industry Stocks’ article, we cover some of the top listed music shares and how to invest in them with competitive commissions.
Table of Contents
Why Invest in Music Industry Stocks?
According to research from the BBC, global music revenues surged by 18.5% to $25.9 billion in 2021. This is the highest level since records began. Most of the growth was driven by streaming platforms which, as of 2021, amounted to 523 million paid subscribers.
More than 65% of total music revenues comes from streaming with the rest from CDs, vinyl and cassettes and royalty and licencing payments for films and adverts. It’s important to take this into account when trying to identify the best music industry stocks to invest in.
A List of Top Music Shares
Below is a list of a few music shares to watch this year and to research further to see if they are suitable for your investing portfolio. The list of music shares is huge as even players such as Amazon and Apple provide music streaming services.
- Spotify (SPOT) - A Global Leader in Online Music Streaming
- Tencent Music Entertainment (TME) - The Leader in Music Streaming in China
- Warner Music Group (WMG) - A Legacy Record Label with a High-Profile Artist Catalogue
Before we look at this range of different music industry stocks, it’s important to remember that investments will go up and down in value. Be sure to exercise proper risk management when building your portfolio and try to diversify into different sectors as possible to keep a good balance of securities.
Analysis of Music Stocks to Invest in
As mentioned above, the music industry is diverse. There are record labels, streaming platforms, concert providers, royalty and licencing catalogues, radio, music equipment, etc. As most of the realised growth comes from streaming, this is a good place to start when building a portfolio of music industry stocks to invest in.
Let’s have a look at the music shares listed above in more detail.
Spotify (SPOT) - A Global Leader in Online Music Streaming
Spotify is a Swedish audio streaming company providing users access to millions of digital songs and podcasts. It is by far the largest music streaming service provider with more than 420 million active monthly users. However, the company’s first earnings report for 2022, showed that it added 1 million fewer subscribers than analysts projected.
The slowdown in subscribers has been felt across the technology sector and in other companies such as Netflix. This has been attributed to a variety of factors such as soaring inflation and the highest living costs around the world causing people to cut back on subscriptions.
This period of time also coincided with an artist boycott of Spotify in reaction to the messaging from a podcast on Spotify called the Joe Rogan Experience. The Russia-Ukraine conflict also saw Spotify lose 1.5 million subscribers in the quarter.
However, CEO Daniel Ek stated that Spotify’s core business will have steady and consistent trends over the next five to ten years. But, investors will need to navigate the threat of subscription-based models not just in audio streaming but across the technology sector.
Source: Admirals MetaTrader 5, SPOT, Weekly - Data range: from 22 Jul 2018 to 30 Apr 2022, performed on 30 Apr 2022 at 10:30 am GMT. Please note: Past performance is not a reliable indicator of future results.
The long term share price of Spotify does show how investors were bullish over the pandemic period but unwinded their positions from a record high in 2021. This profit-taking also coincided with multiple economic and geopolitical factors that influenced the sell-off.
With the stock price trading around record lows, investors will be keen to see the price stabilise around these levels. If it can do so, then a return to growth in the global economy could see Spotify stage a rally from these levels.
Tencent Music Entertainment (TME) - The Leader in Music Streaming in China
Tencent Music is China’s leading online music and audio platform. Its apps include QQ Music, Kugou, WeSing and Kuwo. Overall, Tencent Music’s user numbers include more than 790 million active users and 76.2 million paying subscribers as of Q4 2021.
This means that Tencent Music currently controls around three-quarters of the entire Chinese music streaming market. On top of audio streaming services, the company’s apps also provide access to karaoke and live streaming concerts.
Tencent Music went public and listed its shares on the US stock market in 2018 through an ADR (associated deposit receipt). Around 46% of class A ordinary shares are owned by Spotify. The company attracts institutional investors as it is not just a streaming company but rather an entertainment company with multiple revenue streams.
Source: Admirals MetaTrader 5, TME, Weekly - Data range: from 9 Dec 2018 to 30 Apr 2022, performed on 30 Apr 2022 at 10:30 pm GMT. Please note: Past performance is not a reliable indicator of future results.
Since Tencent Music’s IPO (initial public offering), the best period for the stock was between March 2020 and March 2021. Since creating a record high during the pandemic the stock has declined significantly.
Not only has this been attributed to the wider economic and geopolitical issues at the time but also because of changing Chinese regulations for live streaming of events and a general crackdown from the Chinese government on tech companies. This has caused the company to transition away from social entertainment.
However, as investors adjusted their portfolios accordingly, the declining share price hasn’t changed the fundamentals of Tencent Music. It still has a monopoly on the Chinese music market as its closest rival NetEase Cloud Music is significantly smaller and only focuses on nice music groups.
Warner Music Group (WMG) - A Legacy Record Label with a High-Profile Artist Catalogue
Warner Music Group went public on 3 June 2020. The company is considered to be a legacy record label as the group includes record labels such as Atlantic, Parlophone, Roadrunner Records, Warner Records and Warner Classics, among others.
This means that Warner Music has one of the biggest music catalogues around. Its artists include Ed Sheeran, David Guetta, Linkin Park, Led Zepplin, Prince, Madonna and many others. Warner Music makes most of its revenues from recorded music as well as licencing of artists' music.
Source: Admirals MetaTrader 5, WMG, Weekly - Data range: from 31 May 2020 to 30 Apr 2022, performed on 30 Apr 2022 at 10:30 pm GMT. Please note: Past performance is not a reliable indicator of future results.
Warner Music’s share price experienced good growth from its IPO in 2020. However, the stock reached a peak in October 2021 and has been on the decline since. This is in line with most other stocks in the same sector which have all felt the pressure of economic and geopolitical tensions at the start of 2022.
However, analysts surveyed by TipRanks still remain bullish on the stock with an average price rating of $47.33. While Warner Music is only the third-largest recording company in the world after Universal Music Group and Sony Music Entertainment, it has a strong catalogue and list of artists that could support long-term growth.
How to Invest in Music Industry Stocks
By opening an account, you can access the world’s most popular stock trading platform MetaTrader 5 for desktop, web and mobile, as well as a range of useful analysis tools such as the Technical Insight Lookup indicator in the Premium Analytics section.
Below is a step by step process on how to start investing from the MetaTrader 5 web platform.
- Login to your Admirals account to access the Trader’s Room. Here, you can manage different accounts, deposits and withdrawals and more.
- Click on the Trade icon next to your account name to open the MetaTrader 5 web platform.
- Type in the name of the stock at the bottom of the MarketWatch window and then drag the name onto the chart to view live stock price information.
- Click on New Order at the top of the window to open a trading ticket. Input your entry, stop loss and take profit levels and number of shares to purchase.
Source: Admirals MetaTrader 5, 30 April 2022
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