Page 20 - DIY Investor Magazine | Issue 37

THE REAL BOOK Apr 2023 20 and the music industry, with Bill Ackman of PSH which is a SONG’s share price remains at a price that we think is an shareholder in Universal. overreaction to legitimate worries...by Alan Ray DIY Investor Magazine · Last year, I got the chance to study at Boston’s Berklee College Sir Lucian talk about an early music service which he signed Universal up to; in 2004, Nokia launched a service called of Music, and combine a ‘real’ job with a very personal project. Comes With Music - an early ‘all you can eat’ platform that All the signs of a post-pandemic mid-life crisis are right there, but to anyone in the same boat, I’d say, patience comes with allowed subscribers to download up to 3000 songs onto their phone. His insight was that allowing people to download 3000 age and if learning new skills later in life takes more time, at songs was not the same thing as forgoing $3000 of revenue least you will have the patience required to do so - and its more effective way in maintaining cognitive function than Wordle. from customers buying each song priced at $0.99. Berklee encourages you to buy a copy of The Real Book - a ring-bound collection of a thousand or so jazz standards; a single page packs in all the information needed to bluff your way through a song. Generations of musicians relied on their dog-eared copy to get them through gigs but, surprisingly, it was only in 2004 that composers of all those songs started to receive royalty payments from the publisher. Music royalties have become an asset class with very specific relevance to the investment trust sector in recent years; the scene setting for the recovery focuses on the consumer and how early digital music led to a collapse in revenues. Understandably, musicians were getting very angry and despondent over the blatant theft of their work, but I wondered how many of them owned a pre-legal version of The Real Book when I attended Pershing Square Holding’s (PSH) investor day. Chair of Universal Music, Sir Lucian Grainge, spoke as freely as his lawyer, who was stage right, would allow about his career ‘MUSIC ROYALTIES HAVE BECOME AN ASSET CLASS WITH VERY SPECIFIC RELEVANCE TO THE INVESTMENT TRUST SECTOR IN RECENT YEARS’ This was a time when people were obsessed by the number of tracks their MP3 player could hold and the music industry still thought people would want to own, rather than rent, their music, even if there was no beautiful piece of art with a vinyl record tucked inside. What Lucien meant was this was a way to monetise listeners who would never spend $0.99 on a track, but might listen to it once or twice, so he signed Universal up, although the service was too clunky and didn’t succeed. When Daniel Ek came knocking a few years later with an early version of Spotify, he signed up Universal’s vast catalogue and invested in the fledgling company. The subsequent recovery in the music industry has been well-documented. ‘THIS WAS WHEN SONG WAS JUST AN IDEA ON THE BACK OF A PROVERBIAL ENVELOPE AND THERE WAS STILL QUITE A DESPONDENT FEELING IN THE MUSIC INDUSTRY’ Sir Lucian explained how data from streaming services allows Universal to better understand local markets and what music people were really listening to. This clearer picture allows Universal to invest in new artists, and to embrace new technology, unphased by TikTok et al, which pay very small amounts of money to use music.