ANote Music is a European Marketplace for buying and selling songs which aims to connect investors with owners of music rights. We asked the team to detail the project and the underlying innovative platform.
by: Charles-Louis Machuron
photo: ANote Music
featured: Marzio Flavio Schena, Grégoire Mathonet and Matteo Cernuschi
What is your startup about?
ANote Music is the bridge between the financial markets and the music industry. We give the power to investors and music fans to invest in songs, and help artists to move forward. Essentially, it is a new, radical way to unlock the music industry and the conventional investment opportunities, merging Blockchain technology with trading mechanisms and music IP. We, basically, restructured how music is funded and we created a liquid, transparent and integrated market for Music Rights.
How did you come up with the idea?
Our idea definitely wasn’t developed in one sitting. It wasn’t a blast that popped on the spot or a spontaneous “impromptu speaking” by-product. It was actually a quite long process of thinking, observing and revising in order to get to ANote Music as we know it today.
We first noticed the similarity between IP music rights and stocks. Both generate income (royalties vs dividends), and they are both subject to increase (or decrease) in prices based on expectations of future revenue generation.
“Music Rights are negotiated behind closed doors, mainly in private transactions between industry players. We claim that the once opaque and, often, inefficient process, is now ready to be opened up to the public, changing for good the way music rights are being managed.”
We audited the Music Industry, and even if it is growing again, mainly thanks to streaming revenues, it still remains a very capital intensive industry. Continuous investments are necessary for an artist’s career to thrive, but the traditional financial markets lack the know-how for providing funds. Compared to most other sectors, where money from the capital markets provided a bonanza for achieving growth through decades, the music industry is in a suboptimal situation. During our market validation process, we confirmed that an injection of liquidity would be highly appreciated by all the Industry players.
Artists, publishers and record labels receive their legitimate royalties deferred and diluted over the years. This is inherent to the specific nature of how royalties are generated and collected (music is performed, consumed and listened to, while collecting companies gather revenues from distributors, and redistribute the cash flows to artists at a later stage). The resulting time lag between performance and revenue collection means that financial independence and reinvestment opportunities are seriously limited for all the players in the music industry.
Music Rights are negotiated behind closed doors, mainly in private transactions between industry players. We claim that the once opaque and, often, inefficient process, is now ready to be opened up to the public, changing for good the way music rights are being managed.
“So why don’t we create a Stock Exchange for music?” The question came consequently.
“We decided to keep track of the ownership chain of the rights and transactions with our Blockchain, in order to add an additional layer of security and guarantee complete transparency.”
What are your products/services?
We created a marketplace and trading platform that runs on a private Blockchain we developed internally.
After performing legal and financial sanity checks, we give the chance to Right Owners to offer their future royalty earnings on our platform and collect bids for it. They have the possibility to either sell only a part of their rights, or to hand over only the royalty flows for a determined number of years. If the auction is successful (meaning that the original target is met) we create Smart Royalty Contracts. Then investors receive Shares of Rights (“SOR”) in their ANote Portfolios and the right owners receive the funds they are entitled to.
Once rights are listed on ANote Music, they become available on our secondary market (like on a traditional stock exchange model) and investors have the possibility to exchange the SOR freely, without commissions.
To close the money circle, ANote Music takes care of receiving the royalties from the national collecting companies and redistribute them to the investors according to their SOR. We decided to keep track of the ownership chain of the rights and transactions with our Blockchain, in order to add an additional layer of security and guarantee complete transparency.
What is your business model?
We have two main revenue sources: we collect a “listing fee” from the Rights Owners once their rights are listed on ANote Music for the first time and we charge a small “distribution fee” on the investors when we distribute the royalties to their portfolios.
“We know that the topic of investing in music is very appealing to the milleniales, especially compared to traditional investment products, and we expect ANote Music to shorten the gap between them and the world of investments.”
Who are your clients?
Being a marketplace, we have clients on two sides: the sell-side and the buy-side.
The first one is represented by the Music Right Owners willing to receive a cash advance today in exchange for their future royalties. This side deals with Artists, Composers, Songwriters, Publishers, Record Labels, Managers, heirs of Artists, etc.
Users on the buy-side are investors willing to get exposure to an alternative asset class, which is income generating, offers competitive returns and is uncorrelated with the capital markets. After studying thoroughly market researches and running surveys, we decided to target also the millenials, since we are a part of it as well. We know that the topic of investing in music is very appealing to them, especially compared to traditional investment products, and we expect ANote Music to shorten the gap between the millenials and the world of investments. So basically this side involves every Investment company, HNW Individual who aims to diversify his investment portfolio, Smaller Investor or Music Lover in general.
What are the next steps in your development?
We have already finished the prototype of the platform and we are now moving on four fronts: looking for seed capital; presenting the platform to Right Owners in order to obtain their commitment and start working with them as soon as ANote Music is financed and fully operational; developing the brand and explaining the value to buy-side Investors; and building up our blog, so that we give more insights about ANote Music itself, and all our actions and accomplishments along the way.