Music: The World’s Worst Investment… And How You Can Get In On It!

Since the golden age of payola, investment bankers have laughed at music as the world’s dumbest investment. But while Wall Street gurus such as Lehman Brothers and Bernie Madoff guided their moneyed gentry into investments like AIG, General Motors, Worldcom, Adelphia and Enron, all under the watchful eye of the SEC, music companies were busy generating billions upon billions of dollars by selling products of tangible, objective value. Music! By the way, has anyone seen my check from the government for our loans to GM and AIG? I’m sure they owe each of us at least a Camaro and a health insurance policy by now.

Which would you rather have today, a thousand shares of Enron stock or the copyright to Stairway to Heaven? Pan Am stock certificates are now framed novelties while u2’s “360 Tour” sold $736.1 million, according to the Hollywood Reporter. 

When Nike wanted to use The Beatles’ “Revolution” for a tv campaign, they didn’t just rip it and go on the air. They first paid a reported $7 million for limited rights to use the song in their advertising. 

Perhaps the rumors of music’s demise have been slightly exaggerated.

There is good reason why music is considered a lousy investment, though. Most music projects fail!   Most of them don’t generate anywhere near the cash flow that the icons do.  Why? Because what makes an artist wildly popular in the marketplace and what causes their music to break through starts with a great song and artist, but is birthed and maintained by a lot of hard work that goes on out of the public eye.

It is this combination of talent, management, business affairs, accounting, investment, great recording, productization, marketing (new and old), publicity, promotion, booking, staging, travel logistics, merchandising and distribution that boost a great artist to where we can “discover” them. No "killer app" has yet been developed that can do this.

But even with a million dollar investment in the launch of the artist, success is not guaranteed. It has to be a great song and a brilliant artist! Lots of bad singers with money have tried it and it just doesn’t work that way.  It has to be an artist with a soul and a particular point of view that people want to hear.

Some estimates say hundreds of thousands of artists take a shot at it every year.  And it’s painful to watch them, because I know that without the whole support mechanism in place, their chances are almost nil.

But for those who understand this and for those investors and labels who discover the right act with the right music at the right time, everyone involved can still make a good living at it, despite the rampant piracy. Why? Because even though the piracy clearly hurts, a solid, long-lasting music career is made-up of many revenue streams. Those who understand how to build these revenues through touring, merchandise, endorsements, sponsorships and licensing will continue to prosper. And judging from our recent economic past, great artists will most likely weather the economic storm better than pc manufacturers, auto makers, insurance companies and certain "green Job" companies who manufacture air ware at taxpayers' expense. 

© 2011 Moore Hits Productions LLC