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Speaker 1: Welcome to trains.

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Speaker 2: I'm Joel Webber and I'm Eric Belchernas.

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Speaker 1: Eric, you love music, I love music. Everyone loves music.

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Speaker 1: And it turns out there is a music ETF. I

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Speaker 1: did not know that.

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Speaker 2: Yeah, there's a history to this. Famously, Quincy Jones filed

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Speaker 2: for a music ETF I don't know, ten twelve years ago.

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Speaker 2: It was going to be called QJ and it really

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Speaker 2: just never launched. I think the issue I might have

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Speaker 2: got held up in the SEC because you can't really

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Speaker 2: advertise using a celebrity like that. But remember we actually

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Speaker 2: interviewed them inside ETFs and asked them about the music industry.

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Speaker 2: I mean, you'd think it was going to launch anyway.

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Speaker 2: It never launched, so there was never really a music ETF.

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Speaker 2: Then the k Pop ETF launched, but that's more just

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Speaker 2: South Korean stocks and the entertainment industry there, which is

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Speaker 2: a whole section of music for sure, but not the

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Speaker 2: whole industry. And then boom, we finally got the first

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Speaker 2: music ETF launched recently, and it's been a long time coming,

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Speaker 2: and it's into a world of thematic investing, which is

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Speaker 2: very popular, and that's sort of where we're at with

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Speaker 2: this and it's going to be fun to explore because

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Speaker 2: I met the person behind it at Exchange and I

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Speaker 2: was blown away by some of the stats that I

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Speaker 2: didn't realize. I'm into music, but I didn't know a

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Speaker 2: lot of the background in this, and I thought it

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Speaker 2: was interesting.

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Speaker 1: The person behind the ETF David Schulhoff. He's the founder

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Speaker 1: and CEO of Music Global Music Industry UTF ticker in

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Speaker 1: USQ this time on Trillions the Music ETF. David, Welcome

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Speaker 1: to Trillions, Thanks Jill, Thanks Eric. So I want to

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Speaker 1: ask where this idea came from for you personally. Eric

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Speaker 1: mentioned a little bit of the backstory. It seems so

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Speaker 1: obvious music's a thing. There are companies these who are

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Speaker 1: big on this, there are record labels, There's been so

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Speaker 1: much disruption over the past few decades. Why did it

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Speaker 1: take so long to put this into an ETF.

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Speaker 3: Well, first, there really weren't a lot of companies until

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Speaker 3: the last ten years that could be publicly traded. So

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Speaker 3: in the last ten years you saw the evolution of

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Speaker 3: tons of K pop companies, companies around the world, in Taiwan,

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Speaker 3: in Japan, yet obviously in the US he had Universal

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Speaker 3: Music Group, Live Nations Spotify, went public, Sphere, Madison Square Garden.

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Speaker 3: So about two years ago, I was going to do

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Speaker 3: another publishing company because if you recall, I had a

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Speaker 3: company called Evergreen. We owned all the rights to MC hammer, jjkle, Bill.

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Speaker 4: Monroe, death Row.

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Speaker 3: I was going to do another music publishing company, like

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Speaker 3: two years ago. I'm like, wait, Blackstone, KKR, Apollo, Providence

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Speaker 3: Equity Partners, everyone's like buying all these rights like twenty times.

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Speaker 4: I have no edge anymore.

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Speaker 3: Twenty years ago I did because there was no competition,

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Speaker 3: and I'm like, what am I going to do next?

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Speaker 3: I'm like, wait a second. All these LPs are all

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Speaker 3: locked up at all these private equity firms, and they're

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Speaker 3: all investing in music. I should be creating a completely

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Speaker 3: portable and convenient way for both retail investors and sophisticated

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Speaker 3: investors to invest across the music industry. So I designed

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Speaker 3: an index and we launched an ETF that would allow

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Speaker 3: investors to capture the growth of music worldwide.

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Speaker 1: I have so many questions there because it's been amazing

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Speaker 1: to watch the series of headlines over the past few

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Speaker 1: years as artists basically sell their catalogs, and I even

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Speaker 1: saw very recently. I think Kiss just today that the

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Speaker 1: headline just moved right. Obviously, Bob Dylan was a big name.

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Speaker 1: There's been a ton of artists who have been able

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Speaker 1: to capitalize on this. Your industry veteran here, what did

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Speaker 1: you witness and how did you have to wrestle with that?

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Speaker 3: Yeah, so when I was cutting deals, I was buying

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Speaker 3: them for like five to seven times.

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Speaker 4: Okay.

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Speaker 3: So in the last you know, ten years, Catalogs sold

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Speaker 3: at twenty twenty five or has highest thirty time for

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Speaker 3: Springs Springsteen sold at thirty and they got a lot

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Speaker 3: of private equity money, and Sony did it smart deal.

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Speaker 3: They got an outside nancying to put up the money.

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Speaker 3: They got a guy named Todd Bowley who owns the

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Speaker 3: Dodgers and you know Dick Clark Presents and the rights

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Speaker 3: to like the Golden Globes anyway, so he put up

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Speaker 3: some capital and look, people love music and they're struck

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Speaker 3: by celebrity in an age of like cheap interest rates.

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Speaker 3: That's basically what caused this, you know, flood of music

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Speaker 3: publishing deals. And it didn't stop there. It was with

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Speaker 3: Neil Young, it was Tom Petty, and you had all

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Speaker 3: these companies out there, tons of royalty trusts like Hypnosis Reservoir.

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Speaker 1: All the big.

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Speaker 3: Public companies were all buying it, and all the private equities.

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Speaker 3: So I said, look, there's got to be a way

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Speaker 3: for a retail investory to get exposure to this, right,

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Speaker 3: like somebody who was an e trate account, a Robinhood account,

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Speaker 3: or just a family office that doesn't want to have

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Speaker 3: to put their money into a fund. And so this

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Speaker 3: is something that really got created to give exposure to

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Speaker 3: investors across music publishing, across recorded music, across live music,

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Speaker 3: across ticketing, really across the entire spectrum, domestic and globally.

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Speaker 4: That's what this is designed to do.

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Speaker 1: And when did you identify that the ETF was the

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Speaker 1: right way to do this?

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Speaker 3: So about two years ago, I'm in Corsica. Okay, I'm

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Speaker 3: on a beach and I'm thinking about what to do next.

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Speaker 1: By the way, that seems like a whites choice in general.

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Speaker 3: Well, I was like looking at the blue ocean and

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Speaker 3: I wanted something completely different. I was looking literally, I'm

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Speaker 3: like I need blue ocean in my mind. And I

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Speaker 3: pulled out a piece of paper and I wrote down

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Speaker 3: something that I wanted to invest in. So I wrote

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Speaker 3: down all these companies that I would want to own,

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Speaker 3: and I'm like.

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Speaker 1: Wait, wit was the first one?

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Speaker 3: Well, first one was like Universal Music Group, right, the

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Speaker 3: biggest music company, and then probably univers Universal and Warners

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Speaker 3: and Sony and companies like Madison, Square Garden and Sonos

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Speaker 3: and Technology, obviously Live Nation, obviously Spotify. I wanted a

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Speaker 3: category killer in streaming. And I'm like, wait a second.

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Speaker 3: As I'm writing all these companies down, I'm like, there

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Speaker 3: are five verticals here in this fund. You have streaming,

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Speaker 3: you have content and distribution, you have live music events

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Speaker 3: and ticketing, you have equipment and technology, and you have

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Speaker 3: satellite and radio.

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Speaker 4: How great is this?

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Speaker 3: And I'm like, Okay, now I need to figure out

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Speaker 3: what makes these companies eligible into the fund and what

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Speaker 3: are the determinant factors. And I put together an index

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Speaker 3: which scraped the universe of music companies and we created MUSQ.

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Speaker 1: Love that.

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Speaker 2: So I want to go into the companies in the

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Speaker 2: fund first though, I just want to ask about the

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Speaker 2: music industry and the revenue. When I wrote my last book,

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Speaker 2: I was trying to compare the mutual fund industry to

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Speaker 2: the compact disc and basically how ETFs played the role

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Speaker 2: of the MP three. They came along and totally disrupted

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Speaker 2: mutual funds which were like.

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Speaker 4: The compact disc.

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Speaker 2: And I have a chart showing how music revenue got

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Speaker 2: cut in half after the MP three, like from Napster.

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Speaker 4: For the next seven years.

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Speaker 2: Then it started to come up a little bit in

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Speaker 2: the past couple at least the chart I had, I

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Speaker 2: think I might have ended twenty twenty one or something

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Speaker 2: like that. So it's three years old. But when I

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Speaker 2: met you, you said the revenues is actually really good.

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Speaker 2: And I had thought music might just have to live

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Speaker 2: in a new normal of get half the revenue at

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Speaker 2: once got because everybody was paying seventeen bucks for a

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Speaker 2: CD and only half the songs were good. This new

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Speaker 2: normal meant less money. But you say, that's not the case.

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Speaker 2: They figured out how to make money. So just as

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Speaker 2: go into this sort of macro revenue case for music

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Speaker 2: and how much money is there?

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Speaker 3: Sure, Eric, So in the mid nineties, the recorded industry

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Speaker 3: peaked at about eighteen billion dollars.

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Speaker 4: Okay, you are correct.

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Speaker 3: In two thousand and three, two thousand and four, Napster

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Speaker 3: hit and the MP three, and it was like opening

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Speaker 3: Pandora's box. Everyone was stealing and ripping files and through

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Speaker 3: that got was the birth of Spotify and all the

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Speaker 3: streaming companies, and that began to take off. If you

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Speaker 3: read the IFPI report, which was published last week. The

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Speaker 3: ifpis International Phonograph Report, music today is at twenty eight

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Speaker 3: billion dollars recorded music, okay, and it's ten growing at

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Speaker 3: ten to twelve percent, right, so it's twelve billion dollars

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Speaker 3: more than the peak of the industry which Eric alluded

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Speaker 3: to in the mid nineties. Streaming today in the United

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Speaker 3: States is eighty four percent of all music consumption, okay,

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Speaker 3: and it's fifty percent of all music consumption worldwide. Streaming

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Speaker 3: is growing at eleven to thirteen percent according to both

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Speaker 3: of those reports. So what's happening is that we've entered

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Speaker 3: into the digitization of the music industry, and the entire

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Speaker 3: business today is now being streamed. Content and distribution is

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Speaker 3: being streamed. You also have, by the way, vinyl is

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Speaker 3: a growing business, growing at eight to ten percent. And

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Speaker 3: the last statistic, because I could just go on about statistics,

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Speaker 3: consumers today are paying forty percent less than what they

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Speaker 3: paid in the mid nineties, so they're actually used to

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Speaker 3: paying more. So that just goes back to the overall

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Speaker 3: investment thesis here that music today is undervalued and undermonetized

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Speaker 3: and under hyped. Music is cheap compared to what people

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Speaker 3: are used to paying for CDs, for vinyl, for physical goods.

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Speaker 3: And so what's happening is all the streaming companies are

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Speaker 3: now starting to raise rates. Spotify raised rates two quarters ago,

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Speaker 3: they crushed earnings two hundred and thirty six million paid

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Speaker 3: subscribers or subscribers grew by fifteen percent, and recently Spotify

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Speaker 3: announced that they were raising rates a second time by

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Speaker 3: another ten percent. So now you'll pay twelve dollars and

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Speaker 3: that will not stop because that's still fifty percent of

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Speaker 3: what people are paying for Hululu, for Netflix, for Disney,

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Speaker 3: for HBO Go.

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Speaker 4: So music overall is just cheap. Streaming is growing, and.

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Speaker 1: Yet it's hard for these companies make money. Spotify has

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Speaker 1: been a dog for a long time. Audio books, the

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Speaker 1: podcast initiatives all really not music, right, And so I'm

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Speaker 1: curious when you want to talk about what's in the portfolio,

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Speaker 1: but when you think about what you put in the portfolio,

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Speaker 1: Sure you could have a pure play audio company like

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Speaker 1: a Spotify, but you know, an Apple so much more

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Speaker 1: than just music, even though music is part of what

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Speaker 1: they do, right, So how do you think about how

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Speaker 1: you bring those companies into your portfolio?

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Speaker 3: Well, first, Spotify is six hundred million subscribers worldwide, two

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Speaker 3: hundred and thirty six million paid subscribers, and by raising

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Speaker 3: it a dollar, that drops an incremental two and a

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Speaker 3: half billion dollars to like the boys like three billion,

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Speaker 3: you know, yeah, I mean, And it's really an inexpensive

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Speaker 3: way to generate incremental revenue from existing users. And the

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Speaker 3: podcasts and the audiobooks, by the way, are a carrot

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Speaker 3: to get new users. And so look, they are spending

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Speaker 3: a lot of money today. They spend a lot of

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Speaker 3: money with Joe Rogan. They now control all the monetization

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Speaker 3: and distribution with Joe Rogan. The audiobooks business has become

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Speaker 3: incredibly successful, top sellers like Britney Spears and Prince Harry

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Speaker 3: and these are all big titles. Podcasts are a huge

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Speaker 3: part of that business, and so look, they're going to

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Speaker 3: continue to spend money on content as they continue to grow.

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Speaker 3: But they are a de facto leader and we have

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Speaker 3: all the other streaming companies in our fund. Right, So

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Speaker 3: we have obviously Apple, Amazon, Google, We have companies like

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Speaker 3: Click digital companies like Genie corpor and Cacao. These are

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Speaker 3: the two biggest streaming companies in South Korea, so we

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Speaker 3: give exposure to streaming as a category around the world.

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Speaker 3: We've I think twelve or fourteen streaming companies in our fund.

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Speaker 2: Let's talk about portfolio construction here, because you open this

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Speaker 2: thematic ETF up And I'll be honest, sometimes when I

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Speaker 2: open a ETF's holdings, I like to not know any

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Speaker 2: of the companies because I already own the popular companies

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Speaker 2: in my S and P five hundred fund, so why

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Speaker 2: do I need to own them again? So when I

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Speaker 2: see companies I don't have never heard of, I actually

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Speaker 2: kind of like that now in your fund, once you

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Speaker 2: get past the top five, I've never heard of most

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Speaker 2: of these. But the top five Amazon, Google, Apple, Spotify,

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Speaker 2: courses in there, and Sony especially the top three, those

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Speaker 2: are the magnificent seven stocks. It looks like you market

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Speaker 2: cap weighted it, and those companies do many things that

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Speaker 2: aren't music. So I guess when you just talk about

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Speaker 2: the construction, the filtration process to get in the fund

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Speaker 2: and then that weighting decision.

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Speaker 3: Yeah, now, thanks for the question. That's probably the most

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Speaker 3: frequent question I get asked. So, in terms of portfolio construction,

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Speaker 3: all the companies in this fund have to generate more

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Speaker 3: than fifty percent of their revenues from music, right or

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Speaker 3: they have to be a top five player or control

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Speaker 3: more than ten percent global market share in one of

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Speaker 3: those five segments. So Spotify clearly controls it generates more

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Speaker 3: than fifty percent of the revenue. But after Spotify and

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Speaker 3: after ten Cent, you have Apple, Amazon, and Google that

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Speaker 3: are the third, fourth, and fifth largest streaming companies in

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Speaker 3: the world, So it would not be fair to exclude

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Speaker 3: them from the fund. And so but what we've done

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Speaker 3: is we've capped their weight at seven percent, and so

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Speaker 3: all the companies in this fund are market cap weighted.

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Speaker 3: The three big names you highlighted are capped at seven percent.

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Speaker 3: So what this winds up being is twenty one percent

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Speaker 3: of those three companies and seventy nine percent of companies

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Speaker 3: you've really never heard of or maybe only heard a

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Speaker 3: few of them, but you have to include them because

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Speaker 3: they're a huge part of the streaming economy today in

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Speaker 3: the United States, Apple and Spotify really control the streaming market.

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Speaker 3: Apple's doing a lot for the music industry. There's tons

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Speaker 3: of curation, they're breaking new artists, they're doing just a

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Speaker 3: lot for the industry today. Anybody who buys a mobile phone,

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Speaker 3: that's like the quick service that they're offered and teed up.

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Speaker 3: So they're doing a huge service to music publishers, to songwriters,

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Speaker 3: to artists. So they're very much part of the music ecosystem.

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Speaker 3: But for the most part, is Eric pointed out, Look,

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Speaker 3: we have I think forty two or forty four companies

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Speaker 3: in the fun today. These are many of them you

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Speaker 3: haven't heard of. Sixty percent of them are international companies

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Speaker 3: like Him in Taiwan, Avex in Japan, Believe in France, Ctsaventum,

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Speaker 3: which is like the big live music company in Germany.

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Speaker 3: And then we've got all the K pop companies, and

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Speaker 3: we've got companies in China like Cloud Music, Intense, and

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Speaker 3: so we're really giving investors broad exposure. And a lot

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Speaker 3: of these companies are hard to trade. You can't just

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Speaker 3: get exposure in music today by buying Universal and by

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Speaker 3: buying Warner Music Group and maybe some of these streaming companies.

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Speaker 3: You really need if you want exposure to music. This

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Speaker 3: is what this fund is designed to do.

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Speaker 1: What about the private We talked earlier about how big

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Speaker 1: money private equity money has started to invest or buy portfolios.

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Speaker 1: Does your filtering process filter out the private equity sense,

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Speaker 1: I'm sure they do a lot more than music.

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Speaker 3: Well, first of all, I got to say, like, we're

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Speaker 3: a much better return than private equity. So they're paying

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Speaker 3: twenty times, right, that's a five percent yield on a

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Speaker 3: cash flow. That's before the private equity firm takes their fees,

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Speaker 3: their management fee, their carry, So it's even worse than

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Speaker 3: five percent. If you look at our index, we're performing

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Speaker 3: substantially higher than that for the quarter. I think we're

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Speaker 3: up eleven percent for the quarter. The index is performing

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Speaker 3: really well when you put that up against the SMP

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Speaker 3: and we have total liquidity.

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Speaker 4: Right, you can buy.

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Speaker 3: Our ETF, you can sell it the same day. You

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Speaker 3: get exposure to all the these publishing companies, you get

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Speaker 3: exposure to all the record companies. You don't have to

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Speaker 3: have your money locked up.

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Speaker 1: So you'd rather not have private equity, right, And.

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Speaker 3: That's what I meant to say. Yeah, yeah, no, we'd

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Speaker 3: want to not have private equity in the portfolio. The

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Speaker 3: returns just aren't good when you're paying like that kind

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Speaker 3: of multiple for the big marquee acts, and so I

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Speaker 3: just think we're a much better solution for investors who

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Speaker 3: want exposure to music. The returns are more enlightening, they're

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Speaker 3: more favorable. You have liquidity, and you have total diversification.

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Speaker 3: You're not just on music publishing. It's like we're giving

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Speaker 3: access to the whole ecosystem of music.

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Speaker 2: Let's just talk about the state of music. I was

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Speaker 2: talking to Joel about this earlier. This is probably me

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Speaker 2: just being like old man on the lawn, but it

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Speaker 2: just seems like a lot of the current stuff is

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Speaker 2: just not that great, Like it doesn't have much depth.

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Speaker 2: There's not much melody.

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Speaker 1: Was his opinion, by the way.

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Speaker 2: And I get Spotify taking off because you basically catalyzed

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Speaker 2: all the old stuff too, which is to me, I

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Speaker 2: just feel like the golden age of music is over.

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Speaker 3: Yeah, I would have to respectfully cut you off and

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Speaker 3: say I think you're wrong.

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Speaker 1: Go back to your launcher.

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Speaker 3: And everyone's entitled to look. Music is a universal connector,

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Speaker 3: so everyone's entitled to it. But I don't know you

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Speaker 3: have the CMT Awards on Sunday Night, Zach Bryan, Laney, Wilson,

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Speaker 3: Jelly Roll, all amazing country artists performing. You got Billie Eilish.

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Speaker 3: Today you've got just so many amazing talented writers. You

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Speaker 3: know what I think is interesting, Eric, which I will

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Speaker 3: kind of at a high level agree with you. The

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Speaker 3: days of vinyl when you put on a record and

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Speaker 3: you kind of embraced the whole album, like you listen

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Speaker 3: to every song. And I think digitization today has made

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Speaker 3: it easy for artists to promote singles and maybe they've

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Speaker 3: found a quick way. That's why, by the way, a

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Speaker 3: lot of the emerging artists are very unhappy right now

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Speaker 3: when Universal pulled their catalog from TikTok, because TikTok is

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Speaker 3: the most powerful marketing tool in the music industry today.

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Speaker 3: But a lot's going on today right so people can

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Speaker 3: generate music very quickly. AI is obviously a topic that's

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Speaker 3: you know, hotly debated today. Artists can create fakes too

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Speaker 3: from music, so there's a lot of concern around the

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Speaker 3: quality of music, even whether it's authentic. Today you have

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Speaker 3: no federal copyright protection in your voice, which is really interesting.

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Speaker 3: Think about that you have protections for name, image, and likeness,

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Speaker 3: but you can't protect your voice. And what's happening with

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Speaker 3: AI is it's causing deep fakes. And so in Tennessee

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Speaker 3: a couple of weeks ago they passed the Elvis Act,

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Speaker 3: which makes it a crime to lift somebody's voice.

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Speaker 4: And profit from it. It's a good name for an app, yeah,

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Speaker 4: I'd say.

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Speaker 1: So would you say there's an AI player that gets

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Speaker 1: into the music business, are you going to run from

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Speaker 1: it or filter it out? No, So we have included

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Speaker 1: or filter it out, so we're neutral.

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Speaker 3: We actually have all the companies that are actually delivering

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Speaker 3: the tools to artists to create AI. So if you

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Speaker 3: look at our technology holdings, focus right Dolby Roland Yamaha,

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Speaker 3: a lot of them are creating tools, audio tools, recording studios,

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Speaker 3: giving artist tools to sample new music to create new songs.

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Speaker 4: But you know, the deeper.

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Speaker 3: Issue today that needs to get resolved right now, it's

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Speaker 3: only handled at a state level, is really like, how

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Speaker 3: do you protect artists from deep fakes from getting ripped off?

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Speaker 3: You know, the estates of Bob Marley and Frank Sinatra

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Speaker 3: are concerned. They joined in this artist coalition, this advocacy

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Speaker 3: group a lot of interesting stuff today. But just to

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Speaker 3: go back to Eric's point, look, music today is something

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Speaker 3: like one hundred to one hundred and fifty thousand songs

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Speaker 3: being uploaded today. I do think quality is something that

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Speaker 3: needs to be looked at. There's a lot of like

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Speaker 3: streaming fraud on some of these services. And yeah, it

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Speaker 3: was just a lot more difficult back in the day

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Speaker 3: to create a record, right you have to go into

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Speaker 3: the studio and do it. Now you can rip it

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Speaker 3: and create it from your bedroom, from your desk, And

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Speaker 3: so that's what's going on today.

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Speaker 1: Well, well, Eric's out in his front line with the

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Speaker 1: lawn chair. We got a record player recently, and so

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Speaker 1: I started buying vinyl and we have an eight year

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Speaker 1: old and I actually, I think he really enjoys interacting

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Speaker 1: with the record player. It's tactile, whereas before, you know,

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Speaker 1: I'm playing music on my phone and I'm dictating the playlist,

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Speaker 1: like he can go flip from side A to side

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Speaker 1: be he's conscious of albums again. Like, I've just really

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Speaker 1: enjoyed having something that's so tactile in our lives again.

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Speaker 1: So I wanted to bring it back to vinyl and

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Speaker 1: with the vinyl exposure in your portfolio.

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Speaker 3: Yeah, so, well, we have all the companies that distribute

386
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Speaker 3: music obviously through vinyl, so all the record companies. Vinyl

387
00:19:18,760 --> 00:19:20,919
Speaker 3: is just another medium, right, so we tackle it on

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Speaker 3: many levels. We have companies that manufacture vinyl players like

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Speaker 3: the ones I mentioned. They manufact you can buy them

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Speaker 3: on Amazon. I think Yamaha is a vinyl player, and

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Speaker 3: Focus right does. And then obviously at the record company

392
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Speaker 3: label they license their content on vinyl. But vinyl's growing

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Speaker 3: at ten percent, okay, according to the IFPI report and

394
00:19:38,840 --> 00:19:41,920
Speaker 3: the RIAA report. And by the way, it's a really

395
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Speaker 3: promising statistic because it just shows like opportunity for the

396
00:19:45,000 --> 00:19:48,840
Speaker 3: super fan. The swifties are devouring phono records, and then

397
00:19:48,840 --> 00:19:51,679
Speaker 3: it's a great windfall for just heritage artists. Right for

398
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Speaker 3: fans like Eric, you or myself, we're probably stuck in

399
00:19:54,200 --> 00:19:57,199
Speaker 3: days of Steely Dan and Pink Floyd and we want to,

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Speaker 3: you know, listen to these albums and maybe you know,

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Speaker 3: speak for yourself, Okay, I'll speak of myself.

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Speaker 2: Well, I'll say there's really good I think I should.

403
00:20:06,200 --> 00:20:09,480
Speaker 2: There's definitely good music being made. It's just not mainstream

404
00:20:09,520 --> 00:20:11,880
Speaker 2: in my opinion. The mainstream stuff to me, I don't

405
00:20:11,920 --> 00:20:15,680
Speaker 2: get whereas back in the sixties, seventies, eighties, and nineties

406
00:20:16,160 --> 00:20:18,240
Speaker 2: it fell to me the stuff that was mainstream was

407
00:20:18,280 --> 00:20:19,920
Speaker 2: also really good.

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Speaker 1: Can we I just have this episode to old man balchiness.

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Speaker 2: Yeah, that's fair. I'm sure I'm not alone, but I

410
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Speaker 2: will say the country thing is interesting. I have found

411
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Speaker 2: some country more intriguing lately to me than regular rock,

412
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Speaker 2: and so there's a couple of artists I do like,

413
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Speaker 2: and I find that maybe that depth I'm looking for

414
00:20:42,080 --> 00:20:44,960
Speaker 2: has moved over to the country genre. Is that growing

415
00:20:45,440 --> 00:20:47,080
Speaker 2: in terms of like share?

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Speaker 1: The genre thing is super interesting because you've got what

417
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Speaker 1: Eric observes about country, but classical music that has a

418
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Speaker 1: whole loyal fandom. Hip hop obviously gigantic. So do you

419
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Speaker 1: think about exposure to genres when you're building a portfolio?

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Speaker 3: Yeah, So, first of all, you mentioned country. Country is

421
00:21:04,960 --> 00:21:08,760
Speaker 3: actually the most profitable component of music today. So for

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Speaker 3: a couple of reasons, more people by vinyl on and

423
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Speaker 3: albums on country number one. As performance country songs are

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Speaker 3: on the radio longer than hip hop, longer than pop,

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Speaker 3: so they actually generate performance revenue longer. And I think

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Speaker 3: today there's just amazing music there. They're writing full albums.

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Speaker 3: Morgan Wall and Chris Stapleton, Zach Bryan, Laney Wilson, these

428
00:21:30,280 --> 00:21:33,480
Speaker 3: are all amazing artists and they're all you know, they're

429
00:21:33,480 --> 00:21:35,639
Speaker 3: all writing full albums and people listening to them, and

430
00:21:35,680 --> 00:21:39,000
Speaker 3: they have amazing tour. Springsteen just appeared with Zach Bryan

431
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Speaker 3: at Barkley's the other day. They've got huge audiences and

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Speaker 3: unlike the other art forms setting aside, like Taylor Swift,

433
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Speaker 3: who's just a phenomenon, and Beyonce's a phenomenon.

434
00:21:54,600 --> 00:21:56,879
Speaker 2: There's a guy on my team who works out of London.

435
00:21:56,920 --> 00:22:00,680
Speaker 2: He wants to create an ETF SWFT. I'm so obsessed

436
00:22:00,720 --> 00:22:02,600
Speaker 2: with Taylor Swift. He thinks you could make a whole

437
00:22:02,600 --> 00:22:07,000
Speaker 2: ETF just around stuff. She likes stuff. She's like her

438
00:22:07,000 --> 00:22:10,280
Speaker 2: supply chain. And this brings me to the sort of

439
00:22:10,600 --> 00:22:13,400
Speaker 2: Taylor Swift is saving the economy articles that we saw

440
00:22:13,440 --> 00:22:16,800
Speaker 2: about a year ago, let's go over the actual numbers.

441
00:22:16,880 --> 00:22:19,640
Speaker 2: What I read was entertainment is four percent of GDP,

442
00:22:20,200 --> 00:22:23,760
Speaker 2: and I guess music is one percent of that four percent,

443
00:22:24,240 --> 00:22:26,879
Speaker 2: and then Taylor Swift would be a percentage of the

444
00:22:26,880 --> 00:22:30,000
Speaker 2: one percent. I guess can you sort of put Taylor

445
00:22:30,040 --> 00:22:34,800
Speaker 2: Swift's contribution to a music and then be the overall

446
00:22:34,840 --> 00:22:36,119
Speaker 2: GDP into perspective.

447
00:22:36,520 --> 00:22:39,159
Speaker 3: Yeah, well, first of all, the according to the Luminate report,

448
00:22:39,640 --> 00:22:45,200
Speaker 3: you had four trillion streams last year. Okay, Taylor Swift

449
00:22:45,280 --> 00:22:48,119
Speaker 3: was five percent of all those streams. So give you

450
00:22:48,160 --> 00:22:51,679
Speaker 3: context on Spotify what she's generating in terms of like

451
00:22:51,800 --> 00:22:54,720
Speaker 3: audience and revenue. On top of what you just said,

452
00:22:54,960 --> 00:22:58,160
Speaker 3: there's the Taylor Swift effect, which is much higher than

453
00:22:58,240 --> 00:23:02,320
Speaker 3: a few percent to economy right to hotels, to airfare

454
00:23:02,440 --> 00:23:06,720
Speaker 3: to ticket So look, she created a cultural phenomenon. I

455
00:23:06,760 --> 00:23:08,800
Speaker 3: don't dislike the idea, by the way of creating an

456
00:23:08,800 --> 00:23:11,680
Speaker 3: ETF around Taylor Swift because you could include a lot

457
00:23:11,680 --> 00:23:15,320
Speaker 3: of different What she's done is incredible. She's by the way,

458
00:23:15,359 --> 00:23:17,040
Speaker 3: she started off as a country artist. I used to

459
00:23:17,080 --> 00:23:19,600
Speaker 3: publish her because Liz Rose was one of my writers,

460
00:23:19,600 --> 00:23:22,480
Speaker 3: and Liz Rose tear drops on my guitar with Taylor,

461
00:23:22,520 --> 00:23:25,320
Speaker 3: and so we used to actually publish Taylor's first album.

462
00:23:25,400 --> 00:23:27,560
Speaker 3: So I met her when she was fourteen, when I

463
00:23:27,160 --> 00:23:31,640
Speaker 3: had my company, Evergreen and Integrated Copyright Group in Nashville.

464
00:23:32,000 --> 00:23:34,480
Speaker 3: But what she's done is incredible. But she's not alone.

465
00:23:34,520 --> 00:23:36,159
Speaker 3: There's a lot of talented people out there. I love

466
00:23:36,200 --> 00:23:39,320
Speaker 3: what Beyonce's doing in Country by the Way, and she's

467
00:23:39,359 --> 00:23:42,280
Speaker 3: got the roots. She's from Houston. I love what she's doing.

468
00:23:42,400 --> 00:23:44,639
Speaker 3: The covers of Joe Lene are incredible.

469
00:23:44,960 --> 00:23:46,320
Speaker 1: I think it's amazing.

470
00:23:46,480 --> 00:23:48,840
Speaker 3: Yeah, so really interesting, It's like but yeah, to answer

471
00:23:48,880 --> 00:23:52,200
Speaker 3: your question, Joel, country's big, and we own every facet

472
00:23:52,200 --> 00:23:55,960
Speaker 3: of it in this fund, through concerts, through ticketing, through merch,

473
00:23:56,119 --> 00:23:58,320
Speaker 3: through recorded music, through publishing.

474
00:24:01,040 --> 00:24:04,760
Speaker 1: Okay, so I want to ask about the ticker. What

475
00:24:05,000 --> 00:24:09,639
Speaker 1: other options did you consider other than MUSQ, which music

476
00:24:10,040 --> 00:24:14,680
Speaker 1: I love. But were you faced with any difficulties acquiring the.

477
00:24:14,640 --> 00:24:18,239
Speaker 3: Ticker face with no difficulties. I was honestly shocked it

478
00:24:18,280 --> 00:24:20,639
Speaker 3: wasn't taken. When I saw it was available, I quickly

479
00:24:20,680 --> 00:24:23,040
Speaker 3: jumped on it. I just spoke directly.

480
00:24:23,080 --> 00:24:23,200
Speaker 2: You know.

481
00:24:23,240 --> 00:24:24,680
Speaker 4: We're nominated for Ticker.

482
00:24:24,359 --> 00:24:27,720
Speaker 3: Of the yearly April seventeenth at the ETF dot Com Awarts.

483
00:24:27,760 --> 00:24:29,400
Speaker 3: Thank you will see what happens. But I do think

484
00:24:29,440 --> 00:24:32,000
Speaker 3: people recognize it speaks to who we are, It speaks

485
00:24:32,000 --> 00:24:34,440
Speaker 3: to the soul of this fund, and I was pretty

486
00:24:34,440 --> 00:24:36,399
Speaker 3: psyched that I'm getting a lot of traffic from Elon

487
00:24:36,480 --> 00:24:39,000
Speaker 3: Musk on my Twitter feeds in the.

488
00:24:39,040 --> 00:24:42,760
Speaker 1: US bodes well for a certain savvy online.

489
00:24:42,480 --> 00:24:44,399
Speaker 3: You know, that wasn't the reason I did it, But

490
00:24:44,440 --> 00:24:47,280
Speaker 3: I'm not upset with any accidental traffic on folks that

491
00:24:47,320 --> 00:24:49,360
Speaker 3: are interested in what we're doing. And I do get

492
00:24:49,359 --> 00:24:52,119
Speaker 3: a lot of people that text me, email me, you know,

493
00:24:52,240 --> 00:24:55,280
Speaker 3: are you associated with Grimes and Elon? But that's not

494
00:24:55,359 --> 00:24:56,960
Speaker 3: the reason. It just speaks to the heart of who

495
00:24:56,960 --> 00:25:00,160
Speaker 3: we are, and it's a ticker that people know and

496
00:25:00,160 --> 00:25:03,200
Speaker 3: and look, my goal is to really make this as

497
00:25:03,359 --> 00:25:06,800
Speaker 3: exciting and big as people love me. This is really

498
00:25:06,840 --> 00:25:08,840
Speaker 3: a fund for not only for investors, but it's also

499
00:25:08,880 --> 00:25:09,840
Speaker 3: for melomaniacs.

500
00:25:09,880 --> 00:25:12,080
Speaker 4: Okay when you're I sense it.

501
00:25:12,160 --> 00:25:15,000
Speaker 3: Everybody in this room, you know, from Magnus to Eric

502
00:25:15,040 --> 00:25:18,480
Speaker 3: and Joel is a melomaniac. And you know, I wanted

503
00:25:18,480 --> 00:25:21,800
Speaker 3: to really create a connection, an emotional connection between music

504
00:25:21,880 --> 00:25:25,159
Speaker 3: and an opportunity to invest in it and make it accessible.

505
00:25:25,200 --> 00:25:26,439
Speaker 3: And that's what this is designed to do.

506
00:25:26,560 --> 00:25:28,080
Speaker 1: And how do you feel about performance? So far?

507
00:25:28,720 --> 00:25:31,439
Speaker 3: Really happy with performance? I mean, look, we have some

508
00:25:31,600 --> 00:25:34,240
Speaker 3: very big names in our fund that are performing extremely well.

509
00:25:34,480 --> 00:25:36,960
Speaker 3: Spotify is up one hundred and thirty percent for twelve months,

510
00:25:37,000 --> 00:25:39,840
Speaker 3: seventy percent for the year. Sphere is up fifty percent,

511
00:25:39,920 --> 00:25:43,200
Speaker 3: Live Nation is up forty percent. And then all these

512
00:25:43,240 --> 00:25:45,959
Speaker 3: companies are all passing down. All the record companies are

513
00:25:46,000 --> 00:25:48,520
Speaker 3: all delivering. Look at the quarters that they just delivered.

514
00:25:48,600 --> 00:25:51,639
Speaker 3: Warner Music Group was up eighteen percent, a Universal Music

515
00:25:51,640 --> 00:25:54,320
Speaker 3: Group with fifteen percent. Sony was up. And there's a

516
00:25:54,320 --> 00:25:57,639
Speaker 3: reason for this because seventy percent of all of the

517
00:25:57,720 --> 00:25:59,800
Speaker 3: revenues from all the streaming companies get paid to the

518
00:25:59,840 --> 00:26:03,399
Speaker 3: life labels, right, that's the contracts between the publishers and

519
00:26:03,440 --> 00:26:05,600
Speaker 3: the label, seventy percent of the So as the streaming

520
00:26:05,680 --> 00:26:08,480
Speaker 3: numbers go up for all the reasons we identified before,

521
00:26:08,560 --> 00:26:11,120
Speaker 3: seventy percent of those revenues get passed down, and that's

522
00:26:11,160 --> 00:26:13,880
Speaker 3: just more money to artists and writers. And so we're

523
00:26:13,920 --> 00:26:16,760
Speaker 3: really happy with performance of this fund. We're capturing all

524
00:26:16,760 --> 00:26:20,159
Speaker 3: the growth and innovation around the music industry, and I

525
00:26:20,200 --> 00:26:23,360
Speaker 3: think things are only getting better between streaming and content

526
00:26:23,440 --> 00:26:26,720
Speaker 3: and live music. Look at the numbers that Live Nation

527
00:26:26,920 --> 00:26:30,879
Speaker 3: just reported. Revenues are up twenty five percent. Between concerts

528
00:26:30,880 --> 00:26:33,960
Speaker 3: and ticketing and sponsorship. The average ticket for a Taylor

529
00:26:34,000 --> 00:26:36,680
Speaker 3: Swift concert was thirteen hundred dollars. The average ticket price

530
00:26:36,720 --> 00:26:40,280
Speaker 3: for a Morgan Wallin concert is seven hundred dollars.

531
00:26:40,359 --> 00:26:41,199
Speaker 4: Yeah, Jesus is.

532
00:26:41,240 --> 00:26:43,600
Speaker 1: Right, you have kids one hundred dollars.

533
00:26:43,520 --> 00:26:45,880
Speaker 3: And then if you have kids, okay, you got four

534
00:26:46,560 --> 00:26:48,359
Speaker 3: or three d the right.

535
00:26:48,400 --> 00:26:50,400
Speaker 4: Yeah, by a way. So Taylor became a billionaire.

536
00:26:50,480 --> 00:26:52,440
Speaker 3: We saw that a couple of days ago, and that's

537
00:26:52,480 --> 00:26:55,360
Speaker 3: really kind of what's connecting it, you know. And Sphere

538
00:26:55,400 --> 00:26:57,480
Speaker 3: is obviously another great stock and a top holding in

539
00:26:57,520 --> 00:26:59,480
Speaker 3: our fund. And look at what's happening there, I mean,

540
00:27:00,160 --> 00:27:02,080
Speaker 3: or expensive tickets, but look what you're seeing. Look at

541
00:27:02,119 --> 00:27:03,080
Speaker 3: how you're experiencing that.

542
00:27:03,760 --> 00:27:06,399
Speaker 1: Yeah, in Vegas, that is a sphere.

543
00:27:06,480 --> 00:27:06,960
Speaker 4: It's a sphere.

544
00:27:06,960 --> 00:27:08,640
Speaker 3: And now you're gonna go see Ded and Co there

545
00:27:08,680 --> 00:27:11,840
Speaker 3: with John Mayer. It's gonna be awesome. You two is incredible.

546
00:27:11,920 --> 00:27:15,600
Speaker 3: And it's a bad experience is you can't recreate the

547
00:27:15,680 --> 00:27:17,719
Speaker 3: live experience. That's why people are always going to pay

548
00:27:17,800 --> 00:27:20,080
Speaker 3: up to go out. That's why live music is always

549
00:27:20,160 --> 00:27:21,960
Speaker 3: going to be big, and that's why people are going

550
00:27:22,040 --> 00:27:22,840
Speaker 3: to pay for music.

551
00:27:23,720 --> 00:27:26,119
Speaker 2: And let me ask you a question about that. The

552
00:27:26,160 --> 00:27:28,960
Speaker 2: way an artist gets paid now, has it shifted from

553
00:27:29,040 --> 00:27:33,040
Speaker 2: like was predominantly from the CDs, and now it's more

554
00:27:33,160 --> 00:27:35,520
Speaker 2: because of touring or is it the same as it

555
00:27:35,520 --> 00:27:36,200
Speaker 2: ever was now?

556
00:27:36,760 --> 00:27:40,600
Speaker 3: Yeah, So look back in the day, the hard format

557
00:27:40,720 --> 00:27:43,840
Speaker 3: was the primary out with the primary sale, so you

558
00:27:44,160 --> 00:27:48,000
Speaker 3: had was a royalty tied to a cassette or a

559
00:27:48,000 --> 00:27:51,679
Speaker 3: CD sale, right, and then everything kind of got digitized,

560
00:27:51,680 --> 00:27:54,240
Speaker 3: and now it's through streaming and digital downloads. Touring is

561
00:27:54,280 --> 00:27:57,600
Speaker 3: something completely separate. There artists who deals with concert promoters,

562
00:27:57,680 --> 00:27:59,879
Speaker 3: they get advances and then the concert promoters booked them

563
00:27:59,920 --> 00:28:03,400
Speaker 3: in venues, and so those are two different revenue sources.

564
00:28:03,440 --> 00:28:06,399
Speaker 3: So an artist is signed to a record company, right,

565
00:28:06,440 --> 00:28:08,639
Speaker 3: and there are many ways that the artists can collect

566
00:28:08,680 --> 00:28:11,520
Speaker 3: revenues today. You have performance revenue, which is when the

567
00:28:11,560 --> 00:28:15,240
Speaker 3: songs get played on radio. You have royalty revenue when

568
00:28:15,240 --> 00:28:17,639
Speaker 3: the songs get streamed or get sold on CDs or

569
00:28:17,640 --> 00:28:21,520
Speaker 3: on cassettes. You have synchronization revenue, which is when the

570
00:28:21,560 --> 00:28:24,720
Speaker 3: songs get used in movies and TV shows and commercials.

571
00:28:24,840 --> 00:28:25,000
Speaker 4: Right.

572
00:28:25,040 --> 00:28:27,320
Speaker 3: And then you have mechanical sales, which are tied to

573
00:28:27,359 --> 00:28:29,840
Speaker 3: the publishing So if you're the writer, right, all the

574
00:28:30,200 --> 00:28:33,399
Speaker 3: anytime a song is streamed, they pay royalties out to

575
00:28:33,440 --> 00:28:36,760
Speaker 3: the publisher, and so artists if they're not the writer,

576
00:28:36,920 --> 00:28:41,480
Speaker 3: they're just getting record royalties. If the artist is the writer, right,

577
00:28:41,560 --> 00:28:43,960
Speaker 3: and also the artists they're getting both of those royalties.

578
00:28:43,960 --> 00:28:46,840
Speaker 3: So multiple revenue streams in the music industry. And today

579
00:28:47,160 --> 00:28:50,760
Speaker 3: just with the digitization to music, you're just getting exposure

580
00:28:50,800 --> 00:28:54,000
Speaker 3: to music consumption and there's so many touch points today,

581
00:28:54,000 --> 00:28:55,960
Speaker 3: so you're getting really that's why you got tons of

582
00:28:55,960 --> 00:28:59,240
Speaker 3: blanket agreements now too. You have guilds like the National

583
00:28:59,320 --> 00:29:02,360
Speaker 3: Music Publisher Association of America. You have the RI DOUBLEA

584
00:29:02,440 --> 00:29:06,000
Speaker 3: that protect rights for artists, for songwriters, and they're entering

585
00:29:06,000 --> 00:29:09,120
Speaker 3: into these blanket agreements with Spotify's and streaming companies to

586
00:29:09,120 --> 00:29:13,040
Speaker 3: make sure that they're scraping the universe of royalties because anytime,

587
00:29:13,600 --> 00:29:16,160
Speaker 3: and that's what's going to be so exciting with like

588
00:29:16,240 --> 00:29:18,600
Speaker 3: AI and blockchain. AI and blockchain is going to put

589
00:29:18,680 --> 00:29:22,480
Speaker 3: artists and songwriters on a direct payment rail whenever song

590
00:29:22,560 --> 00:29:24,760
Speaker 3: is used. It's going to simplify the process because today

591
00:29:24,800 --> 00:29:27,880
Speaker 3: you have these big performing rights organizations like ASCAT, BMI

592
00:29:27,920 --> 00:29:30,680
Speaker 3: and c SEC that are entering into blanket agreements with

593
00:29:30,760 --> 00:29:33,760
Speaker 3: the venues with the restaurants, right and so, but they

594
00:29:34,000 --> 00:29:35,760
Speaker 3: collect the money, they hang on to the money for

595
00:29:35,920 --> 00:29:39,000
Speaker 3: nine months, then they pay out the artists. That's really antiquated.

596
00:29:39,040 --> 00:29:42,000
Speaker 3: It really shouldn't be that way today. With blockchain, there

597
00:29:42,040 --> 00:29:45,080
Speaker 3: should be a direct payment rail one pay for one play,

598
00:29:45,160 --> 00:29:47,160
Speaker 3: And that's kind of where things are going too, so

599
00:29:47,200 --> 00:29:50,160
Speaker 3: eventually they'll be there. Already is a lot more transparency

600
00:29:50,200 --> 00:29:53,080
Speaker 3: for artists and writers and to see how many streams

601
00:29:53,080 --> 00:29:56,360
Speaker 3: they have, how much income they've generated. That's kind of

602
00:29:56,360 --> 00:29:57,760
Speaker 3: where the whole industry is headed.

603
00:29:58,280 --> 00:30:01,480
Speaker 1: Is there anything that you you don't have exposure to

604
00:30:01,840 --> 00:30:05,120
Speaker 1: that you wish you could have exposure to?

605
00:30:05,280 --> 00:30:06,480
Speaker 4: Yeah, obviously Navidia.

606
00:30:07,120 --> 00:30:10,640
Speaker 3: I wish we could include Navidia as an AI stock. Really,

607
00:30:10,640 --> 00:30:12,360
Speaker 3: i'd have to rewrite the rules of the fund.

608
00:30:12,640 --> 00:30:15,600
Speaker 1: I mean more, if there's something that is private and

609
00:30:15,680 --> 00:30:18,320
Speaker 1: not accessible for you to be able to put it

610
00:30:18,320 --> 00:30:19,440
Speaker 1: in EF, what would that be.

611
00:30:19,680 --> 00:30:24,680
Speaker 3: Look, there's some really cool music companies out there, private companies.

612
00:30:24,760 --> 00:30:28,920
Speaker 4: I don't know, song vest or you know.

613
00:30:28,920 --> 00:30:31,400
Speaker 3: Look, I like this company. I like this company that

614
00:30:31,520 --> 00:30:35,280
Speaker 3: just went public, Jukebox. They're just specifically selling off fractional

615
00:30:35,320 --> 00:30:38,320
Speaker 3: shares of songs, right, I really like what they're doing.

616
00:30:38,360 --> 00:30:41,040
Speaker 3: So they're they're buying out portfolios from private equity firms

617
00:30:41,160 --> 00:30:43,959
Speaker 3: and the securitizing them so you can own pieces of songs.

618
00:30:44,000 --> 00:30:47,160
Speaker 3: I love that bowiesque. It's kind of Bowiees. They've done again.

619
00:30:47,200 --> 00:30:50,000
Speaker 3: They're democratizing music. It just shows you how big music is.

620
00:30:50,240 --> 00:30:53,680
Speaker 3: There are tons of ways to sell music to customers today,

621
00:30:53,680 --> 00:30:56,680
Speaker 3: and so in a perfect world, i'd like to be everywhere.

622
00:30:56,720 --> 00:30:59,120
Speaker 3: I want to give investors exposure to all the exciting

623
00:30:59,400 --> 00:31:01,320
Speaker 3: new technologies that are out there. But we had to

624
00:31:01,360 --> 00:31:04,280
Speaker 3: design something very specific, and we're really focused on public

625
00:31:04,360 --> 00:31:05,080
Speaker 3: music companies.

626
00:31:05,760 --> 00:31:10,800
Speaker 1: All right, final question, favorite ETF ticker other than your own?

627
00:31:15,200 --> 00:31:19,000
Speaker 4: I really love I love Chat h A T.

628
00:31:19,120 --> 00:31:22,880
Speaker 3: I think that's awesome, and I like good Luck Yeah

629
00:31:22,960 --> 00:31:24,960
Speaker 3: yeah yeah, I like Block and Chat. I think those

630
00:31:24,960 --> 00:31:27,000
Speaker 3: speak directly to those ETFs.

631
00:31:27,000 --> 00:31:29,960
Speaker 1: Okay, David Joelhoff, thanks so much for joining us on Trillions.

632
00:31:30,280 --> 00:31:39,360
Speaker 1: Thank you guys, thanks for listening to Trillions. Until next time.

633
00:31:39,520 --> 00:31:42,680
Speaker 1: You can find us on the Bloomberg terminal, Bloomberg dot com,

634
00:31:42,800 --> 00:31:46,680
Speaker 1: Apple Podcasts, Spotify, or wherever else you'd like to listen.

635
00:31:47,240 --> 00:31:49,960
Speaker 1: We'd love to hear from you, or on Twitter. I'm

636
00:31:50,000 --> 00:31:55,000
Speaker 1: at Joel Webbers Show. He's at Eric Paulchness. This episode

637
00:31:55,040 --> 00:31:58,280
Speaker 1: of Trillions was produced by Magnus Hendrickson, Bye

638
00:32:02,360 --> 00:32:02,400
Speaker 2: S