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It’s Time To Create A Global Music Development Bank

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With new lockdowns being instituted, the challenges for the live music, performance and night time economy sectors continue. Staging concerts at any capacity so it is financially viable is still many months away, as industry insiders are now betting on 2022, not 2021. Even with the development of a vaccine, the destabilisation of these sectors is profound and widespread. In the U.K., it is estimated that 170,000 jobs will have been lost in live music alone by the holiday season. In the U.S., the lack of action to pass further stimulus has pushed thousands of independent venues, theatres, art galleries and cinemas to the brink. While some countries, such as France, Germany and New Zealand have provided emergency support to their live music venues and workers, these examples are more the exception than the norm. 

At the same time, more of us are listening to music or consuming other forms of culture relating to music than ever before. If lockdown returns, listening will increase. In the United States, the value of recorded music increased by 5.6% in the first half of 2020. More instruments are being purchased. Music usage in video games is rising. Paying for live streaming concerts has increased, with new companies emerging to blend live music with VR, AR, gaming and high-end production. A number of investment funds are betting on recurring heritage music rights, such as Hipgnosis and Round Hill Music, both listed investment funds, which are spending over $2 billion on rights to songs during the pandemic. 

However, Will Page, former Chief Economist for Spotify & author of the forthcoming book Tarzan Economics, argues in Billboard that we may have reached peak streaming and the amount of publishing revenue for artists and songwriters is set to decrease in 2020 by $3.5 billion due to lost publishing revenue. This is mainly due to restaurant, bar and music venue closures. No live music and no music being played in shops means no rights income for songwriters and publishers.  

The pandemic has exacerbated existing inequalities in the music business. Those that rely on cash-in-hand immediate revenue such as live music performers and their support staff are suffering. While music itself continues to increase in value, those responsible for its creation are not at the front of the money queue. The intermediaries - multinationals and investment funds - are stable. Yet, a third of musicians are close to quitting, according to the Musicians Union in the U.K. 

The ecosystem requires musicians to create music. Nothing musical exists without it. No music on adverts, no live streaming, no innovation without the core product - the music. The pandemic has highlighted that music remains an integral part of society, but it seems to have further disassociated the end product - the finished song - from the process of how the song got there in the first place. And right now, in the eye of the pandemic, it is the time to fix this. We can do that through the creation of a Music Development Bank. 

Heritage music rights - songs made famous over time - have never been more valuable. That is why the Michigan State Teachers Pension Fund, for example, invested in Ariana Grande, Paul McCartney and others, through their stake in Concord. Music could be described as a form of low-risk rent. Once registered, songs pay for 70 years to those who own them. When a song is played, money is earned and ‘rent’ is collected. However, the risk and costs of investing in new music - new artists, new songs, new copyrights - is higher now due to the short-term depreciation of value brought by the effects of the pandemic. Yes, songwriters and publishers are due to see $3.5 billion less in 2020 than they did in 2019 - about 20-35% - but in 2019 those revenues increased by 8.6%.    

A Music Development Bank could be a bridge to ensuring that the sector continues to develop, more rights are created and the ecosystem is better protected, by further solidifying an economic development model that recognises the future value of music and spreads the risk over time, based on such calculations that would seem routine to investors in any other sector. This is how technological advancement is funded and large infrastructure projects, such as roads, hospitals and parks are created. Tax incentive finance could be provided as well - a low-risk advance spread over 10, 15 or 20 years based on the expected value of the asset over time - with the expectation that the asset would be as valuable as expected if built, maintained and invested in. Music rights, venues and the supply chain that facilitates it can be treated the same way. Prior to the pandemic, Goldman Sachs GS estimated the global sector would increase in value from $20 billion to $80 billion, fuelled by streaming. While forecasts have been reduced, growth projections remain. The bank expects “a strong rebound in 2021”.   

A Music Development Bank could provide micro and SME financing for music rights and ecosystem development in markets that lack it. It could provide social impact investment in music and cultural infrastructure, requiring those who access finance to commit to sustainable development, invest in local talent and commit to copyright transparency. Such a bank could prioritise climate negative investing - which could spawn better venues, better festival sites and better cultural infrastructure, especially in developing music markets. It could incorporate music into 20, 30 or 40 year investment plans - suitable for pension funds and sovereign wealth funds - because of the low-risk, consistent yield that music has proven to deliver year in, year out, prior to the pandemic. And music isn’t going away - we need to ensure investment reaches the source of creation. Now is the time to do so.  

The Inter-American Development Bank (IADB) invests in Orange Economy initiatives, developed by now President of Colombia, Ivan Duque, to focus on the wider creative economy as a core pillar of economic development policy. The African Development Bank is investing in the creative industries, mainly in fashion. Most development programs, such as USAID or the European Union’s DEVCO, invest in culture. Teachers pension funds are investing in songs. At a time when music has never been more important as a tool for society, now is the time to rethink how we invest in it.

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