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Here is how to turn music into the latest asset class

blaze

Kenya's Popular rapper Kennedy Ombima, commonly referred to as King Kaka entertains his fans during the Safaricom Blaze Music Extravaganza at Mombasa Sports Club Grounds which featured popular local Artists in this photo taken on 26th November 2017. FILE PHOTO | NMG

Reading a recent Niles Rodgers interview with The Guardian, the legendary Chic guitarist is quoted as saying that the closest thing to a utopian fantasy is Disco. End of story.

But how? The genre “died” some 40 years ago.

Well, not so with Chic and its family of hits (Good times, I want your love, Le Freak) that continue to live on.

Besides, the band continues to tour heavily across the world. Interesting for us, the prolific hit-maker is onto a bigger project these days; Hipgnosis Songs Fund – a London Stock Exchange-listed investment fund backed by song royalties.

Last month, the new closed-end fund acquired rights of over 300 songs covering artists including Justin Bieber, Beyoncé and Rihanna.

The idea is to build a portfolio of songs (from its Sh30 billion IPO proceeds) that generate a long-term income stream. Fancy idea, right?

Today’s purpose is to simply get someone at the Music Publishers Association of Kenya, Kenya Association of Music Producers and Performers Rights Society of Kenya mad enough to push this agenda.

Here are three reasons why. One, this is a fantastic opportunity to create a new uncorrelated asset class; royalties.

They generate attractive yields as they’re evergreen investments and their earning potential span a long time.

Furthermore, as world markets prepare for possible correction, the music industry is widely expected to keep its upward momentum.

In 2017, the industry grew by 8.1 per cent according to the IFPI Global Music Report (2018).

Two; the venture makes business sense now. Music industry is finally reversing losses after 15 years of decline.

Global recorded music achieved its third consecutive year of growth and one of the highest rates of growth since IFPI began tracking the market in 1997.

Global recorded music revenues totalled Sh1.7 trillion powered by streaming, which is now the industry’s single largest revenue source. Digital revenues now account for more than half (54 per cent) of the global recorded music market.

Locally, artistes are piggybacking on a similar trend. They now earn 30 per cent off Skiza earnings, up from 15 per cent just a few years ago. In 2017, Safaricom, which runs the platform, cut a Sh152 million cheque for the industry.

Lastly, the fund offers artistes an exit opportunity to cash-out on all or part of their music intellectual property rights. This is from the basis that not all artistes favour holding their rights forever.

Although payments may not be in the league of the Sh2.3 billion Hipgnosis recently paid The Dream to get a 75 per cent piece of his catalogue, decent valuations would be key for a start.

On this point, Niles summed it best when he said, “Every song has its own profit and loss statement and each song is its own independent business.”

Recent estimates by the Music Copyright Society of Kenya (now defunct) placed Kenya’s entertainment value at Sh200 billion.

Truly, music is on an exciting path. Glad to see old acts trail blazing in a different sphere. Indeed, Niles’ latest project is good food for thought for the local industry.

An ingenious move uniting both fans and artistes. Can we take a chance? Yes, let’s dance, dance, dance.

Mwanyasi