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Investment trust insider on music companies

Investment Trust Insider on Perpetual Income and Growth

Investment trust insider on music companies – James Carthew: Music rights shakeup could seriously turn up the revenues for SONG

The managers of Hipgnosis Songs fund (SONG) are likely to be in an upbeat mood and no wonder. The £150m fundraise earlier this month was oversubscribed, and the strategy now has a market capitalisation of about £1.5bn and a portfolio worth almost $2.5bn (£1.8bn).

The company’s results for the 12 months ended 31 March 2021 were strong, with an 11.3% uplift to the dollar net asset value (NAV), a total return of 15.7% and a 5% increase announced for the dividend. Sterling strength has been holding back returns to UK-based shareholders this year, but this seems to be easing.

Now, to cap it all, the UK government is making encouraging noises about reforming the way streaming revenues are divvied up and SONG could be a major beneficiary of this.

The music industry went through a difficult patch in the 2000s as physical sales of CDs started to fall away and piracy was rife, led by sites like Napster. The big music publishing companies worked hard to stamp this out, but the real change came with the success of sites such as Spotify and Tencent Music.

I have talked before about the tailwind this gives to SONG’s revenues. Spotify subscriptions surged last year, building on what were already strong growth numbers since the service was launched. To give you an idea, when I first wrote about SONG in 2019, Spotify had only broken through 100m premium users in the first quarter of that year. By Q1 2020 the figure was 130m and in Q1 2021 it was 158m.

In addition,…  read more here

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