Speaker 1: Welcome to trains.
Speaker 2: I'm Joel Webber and I'm Eric Belchernas.
Speaker 1: Eric, you love music, I love music. Everyone loves music.
Speaker 1: And it turns out there is a music ETF. I
Speaker 1: did not know that.
Speaker 2: Yeah, there's a history to this. Famously, Quincy Jones filed
Speaker 2: for a music ETF I don't know, ten twelve years ago.
Speaker 2: It was going to be called QJ and it really
Speaker 2: just never launched. I think the issue I might have
Speaker 2: got held up in the SEC because you can't really
Speaker 2: advertise using a celebrity like that. But remember we actually
Speaker 2: interviewed them inside ETFs and asked them about the music industry.
Speaker 2: I mean, you'd think it was going to launch anyway.
Speaker 2: It never launched, so there was never really a music ETF.
Speaker 2: Then the k Pop ETF launched, but that's more just
Speaker 2: South Korean stocks and the entertainment industry there, which is
Speaker 2: a whole section of music for sure, but not the
Speaker 2: whole industry. And then boom, we finally got the first
Speaker 2: music ETF launched recently, and it's been a long time coming,
Speaker 2: and it's into a world of thematic investing, which is
Speaker 2: very popular, and that's sort of where we're at with
Speaker 2: this and it's going to be fun to explore because
Speaker 2: I met the person behind it at Exchange and I
Speaker 2: was blown away by some of the stats that I
Speaker 2: didn't realize. I'm into music, but I didn't know a
Speaker 2: lot of the background in this, and I thought it
Speaker 2: was interesting.
Speaker 1: The person behind the ETF David Schulhoff. He's the founder
Speaker 1: and CEO of Music Global Music Industry UTF ticker in
Speaker 1: USQ this time on Trillions the Music ETF. David, Welcome
Speaker 1: to Trillions, Thanks Jill, Thanks Eric. So I want to
Speaker 1: ask where this idea came from for you personally. Eric
Speaker 1: mentioned a little bit of the backstory. It seems so
Speaker 1: obvious music's a thing. There are companies these who are
Speaker 1: big on this, there are record labels, There's been so
Speaker 1: much disruption over the past few decades. Why did it
Speaker 1: take so long to put this into an ETF.
Speaker 3: Well, first, there really weren't a lot of companies until
Speaker 3: the last ten years that could be publicly traded. So
Speaker 3: in the last ten years you saw the evolution of
Speaker 3: tons of K pop companies, companies around the world, in Taiwan,
Speaker 3: in Japan, yet obviously in the US he had Universal
Speaker 3: Music Group, Live Nations Spotify, went public, Sphere, Madison Square Garden.
Speaker 3: So about two years ago, I was going to do
Speaker 3: another publishing company because if you recall, I had a
Speaker 3: company called Evergreen. We owned all the rights to MC hammer, jjkle, Bill.
Speaker 4: Monroe, death Row.
Speaker 3: I was going to do another music publishing company, like
Speaker 3: two years ago. I'm like, wait, Blackstone, KKR, Apollo, Providence
Speaker 3: Equity Partners, everyone's like buying all these rights like twenty times.
Speaker 4: I have no edge anymore.
Speaker 3: Twenty years ago I did because there was no competition,
Speaker 3: and I'm like, what am I going to do next?
Speaker 3: I'm like, wait a second. All these LPs are all
Speaker 3: locked up at all these private equity firms, and they're
Speaker 3: all investing in music. I should be creating a completely
Speaker 3: portable and convenient way for both retail investors and sophisticated
Speaker 3: investors to invest across the music industry. So I designed
Speaker 3: an index and we launched an ETF that would allow
Speaker 3: investors to capture the growth of music worldwide.
Speaker 1: I have so many questions there because it's been amazing
Speaker 1: to watch the series of headlines over the past few
Speaker 1: years as artists basically sell their catalogs, and I even
Speaker 1: saw very recently. I think Kiss just today that the
Speaker 1: headline just moved right. Obviously, Bob Dylan was a big name.
Speaker 1: There's been a ton of artists who have been able
Speaker 1: to capitalize on this. Your industry veteran here, what did
Speaker 1: you witness and how did you have to wrestle with that?
Speaker 3: Yeah, so when I was cutting deals, I was buying
Speaker 3: them for like five to seven times.
Speaker 4: Okay.
Speaker 3: So in the last you know, ten years, Catalogs sold
Speaker 3: at twenty twenty five or has highest thirty time for
Speaker 3: Springs Springsteen sold at thirty and they got a lot
Speaker 3: of private equity money, and Sony did it smart deal.
Speaker 3: They got an outside nancying to put up the money.
Speaker 3: They got a guy named Todd Bowley who owns the
Speaker 3: Dodgers and you know Dick Clark Presents and the rights
Speaker 3: to like the Golden Globes anyway, so he put up
Speaker 3: some capital and look, people love music and they're struck
Speaker 3: by celebrity in an age of like cheap interest rates.
Speaker 3: That's basically what caused this, you know, flood of music
Speaker 3: publishing deals. And it didn't stop there. It was with
Speaker 3: Neil Young, it was Tom Petty, and you had all
Speaker 3: these companies out there, tons of royalty trusts like Hypnosis Reservoir.
Speaker 1: All the big.
Speaker 3: Public companies were all buying it, and all the private equities.
Speaker 3: So I said, look, there's got to be a way
Speaker 3: for a retail investory to get exposure to this, right,
Speaker 3: like somebody who was an e trate account, a Robinhood account,
Speaker 3: or just a family office that doesn't want to have
Speaker 3: to put their money into a fund. And so this
Speaker 3: is something that really got created to give exposure to
Speaker 3: investors across music publishing, across recorded music, across live music,
Speaker 3: across ticketing, really across the entire spectrum, domestic and globally.
Speaker 4: That's what this is designed to do.
Speaker 1: And when did you identify that the ETF was the
Speaker 1: right way to do this?
Speaker 3: So about two years ago, I'm in Corsica. Okay, I'm
Speaker 3: on a beach and I'm thinking about what to do next.
Speaker 1: By the way, that seems like a whites choice in general.
Speaker 3: Well, I was like looking at the blue ocean and
Speaker 3: I wanted something completely different. I was looking literally, I'm
Speaker 3: like I need blue ocean in my mind. And I
Speaker 3: pulled out a piece of paper and I wrote down
Speaker 3: something that I wanted to invest in. So I wrote
Speaker 3: down all these companies that I would want to own,
Speaker 3: and I'm like.
Speaker 1: Wait, wit was the first one?
Speaker 3: Well, first one was like Universal Music Group, right, the
Speaker 3: biggest music company, and then probably univers Universal and Warners
Speaker 3: and Sony and companies like Madison, Square Garden and Sonos
Speaker 3: and Technology, obviously Live Nation, obviously Spotify. I wanted a
Speaker 3: category killer in streaming. And I'm like, wait a second.
Speaker 3: As I'm writing all these companies down, I'm like, there
Speaker 3: are five verticals here in this fund. You have streaming,
Speaker 3: you have content and distribution, you have live music events
Speaker 3: and ticketing, you have equipment and technology, and you have
Speaker 3: satellite and radio.
Speaker 4: How great is this?
Speaker 3: And I'm like, Okay, now I need to figure out
Speaker 3: what makes these companies eligible into the fund and what
Speaker 3: are the determinant factors. And I put together an index
Speaker 3: which scraped the universe of music companies and we created MUSQ.
Speaker 1: Love that.
Speaker 2: So I want to go into the companies in the
Speaker 2: fund first though, I just want to ask about the
Speaker 2: music industry and the revenue. When I wrote my last book,
Speaker 2: I was trying to compare the mutual fund industry to
Speaker 2: the compact disc and basically how ETFs played the role
Speaker 2: of the MP three. They came along and totally disrupted
Speaker 2: mutual funds which were like.
Speaker 4: The compact disc.
Speaker 2: And I have a chart showing how music revenue got
Speaker 2: cut in half after the MP three, like from Napster.
Speaker 4: For the next seven years.
Speaker 2: Then it started to come up a little bit in
Speaker 2: the past couple at least the chart I had, I
Speaker 2: think I might have ended twenty twenty one or something
Speaker 2: like that. So it's three years old. But when I
Speaker 2: met you, you said the revenues is actually really good.
Speaker 2: And I had thought music might just have to live
Speaker 2: in a new normal of get half the revenue at
Speaker 2: once got because everybody was paying seventeen bucks for a
Speaker 2: CD and only half the songs were good. This new
Speaker 2: normal meant less money. But you say, that's not the case.
Speaker 2: They figured out how to make money. So just as
Speaker 2: go into this sort of macro revenue case for music
Speaker 2: and how much money is there?
Speaker 3: Sure, Eric, So in the mid nineties, the recorded industry
Speaker 3: peaked at about eighteen billion dollars.
Speaker 4: Okay, you are correct.
Speaker 3: In two thousand and three, two thousand and four, Napster
Speaker 3: hit and the MP three, and it was like opening
Speaker 3: Pandora's box. Everyone was stealing and ripping files and through
Speaker 3: that got was the birth of Spotify and all the
Speaker 3: streaming companies, and that began to take off. If you
Speaker 3: read the IFPI report, which was published last week. The
Speaker 3: ifpis International Phonograph Report, music today is at twenty eight
Speaker 3: billion dollars recorded music, okay, and it's ten growing at
Speaker 3: ten to twelve percent, right, so it's twelve billion dollars
Speaker 3: more than the peak of the industry which Eric alluded
Speaker 3: to in the mid nineties. Streaming today in the United
Speaker 3: States is eighty four percent of all music consumption, okay,
Speaker 3: and it's fifty percent of all music consumption worldwide. Streaming
Speaker 3: is growing at eleven to thirteen percent according to both
Speaker 3: of those reports. So what's happening is that we've entered
Speaker 3: into the digitization of the music industry, and the entire
Speaker 3: business today is now being streamed. Content and distribution is
Speaker 3: being streamed. You also have, by the way, vinyl is
Speaker 3: a growing business, growing at eight to ten percent. And
Speaker 3: the last statistic, because I could just go on about statistics,
Speaker 3: consumers today are paying forty percent less than what they
Speaker 3: paid in the mid nineties, so they're actually used to
Speaker 3: paying more. So that just goes back to the overall
Speaker 3: investment thesis here that music today is undervalued and undermonetized
Speaker 3: and under hyped. Music is cheap compared to what people
Speaker 3: are used to paying for CDs, for vinyl, for physical goods.
Speaker 3: And so what's happening is all the streaming companies are
Speaker 3: now starting to raise rates. Spotify raised rates two quarters ago,
Speaker 3: they crushed earnings two hundred and thirty six million paid
Speaker 3: subscribers or subscribers grew by fifteen percent, and recently Spotify
Speaker 3: announced that they were raising rates a second time by
Speaker 3: another ten percent. So now you'll pay twelve dollars and
Speaker 3: that will not stop because that's still fifty percent of
Speaker 3: what people are paying for Hululu, for Netflix, for Disney,
Speaker 3: for HBO Go.
Speaker 4: So music overall is just cheap. Streaming is growing, and.
Speaker 1: Yet it's hard for these companies make money. Spotify has
Speaker 1: been a dog for a long time. Audio books, the
Speaker 1: podcast initiatives all really not music, right, And so I'm
Speaker 1: curious when you want to talk about what's in the portfolio,
Speaker 1: but when you think about what you put in the portfolio,
Speaker 1: Sure you could have a pure play audio company like
Speaker 1: a Spotify, but you know, an Apple so much more
Speaker 1: than just music, even though music is part of what
Speaker 1: they do, right, So how do you think about how
Speaker 1: you bring those companies into your portfolio?
Speaker 3: Well, first, Spotify is six hundred million subscribers worldwide, two
Speaker 3: hundred and thirty six million paid subscribers, and by raising
Speaker 3: it a dollar, that drops an incremental two and a
Speaker 3: half billion dollars to like the boys like three billion,
Speaker 3: you know, yeah, I mean, And it's really an inexpensive
Speaker 3: way to generate incremental revenue from existing users. And the
Speaker 3: podcasts and the audiobooks, by the way, are a carrot
Speaker 3: to get new users. And so look, they are spending
Speaker 3: a lot of money today. They spend a lot of
Speaker 3: money with Joe Rogan. They now control all the monetization
Speaker 3: and distribution with Joe Rogan. The audiobooks business has become
Speaker 3: incredibly successful, top sellers like Britney Spears and Prince Harry
Speaker 3: and these are all big titles. Podcasts are a huge
Speaker 3: part of that business, and so look, they're going to
Speaker 3: continue to spend money on content as they continue to grow.
Speaker 3: But they are a de facto leader and we have
Speaker 3: all the other streaming companies in our fund. Right, So
Speaker 3: we have obviously Apple, Amazon, Google, We have companies like
Speaker 3: Click digital companies like Genie corpor and Cacao. These are
Speaker 3: the two biggest streaming companies in South Korea, so we
Speaker 3: give exposure to streaming as a category around the world.
Speaker 3: We've I think twelve or fourteen streaming companies in our fund.
Speaker 2: Let's talk about portfolio construction here, because you open this
Speaker 2: thematic ETF up And I'll be honest, sometimes when I
Speaker 2: open a ETF's holdings, I like to not know any
Speaker 2: of the companies because I already own the popular companies
Speaker 2: in my S and P five hundred fund, so why
Speaker 2: do I need to own them again? So when I
Speaker 2: see companies I don't have never heard of, I actually
Speaker 2: kind of like that now in your fund, once you
Speaker 2: get past the top five, I've never heard of most
Speaker 2: of these. But the top five Amazon, Google, Apple, Spotify,
Speaker 2: courses in there, and Sony especially the top three, those
Speaker 2: are the magnificent seven stocks. It looks like you market
Speaker 2: cap weighted it, and those companies do many things that
Speaker 2: aren't music. So I guess when you just talk about
Speaker 2: the construction, the filtration process to get in the fund
Speaker 2: and then that weighting decision.
Speaker 3: Yeah, now, thanks for the question. That's probably the most
Speaker 3: frequent question I get asked. So, in terms of portfolio construction,
Speaker 3: all the companies in this fund have to generate more
Speaker 3: than fifty percent of their revenues from music, right or
Speaker 3: they have to be a top five player or control
Speaker 3: more than ten percent global market share in one of
Speaker 3: those five segments. So Spotify clearly controls it generates more
Speaker 3: than fifty percent of the revenue. But after Spotify and
Speaker 3: after ten Cent, you have Apple, Amazon, and Google that
Speaker 3: are the third, fourth, and fifth largest streaming companies in
Speaker 3: the world, So it would not be fair to exclude
Speaker 3: them from the fund. And so but what we've done
Speaker 3: is we've capped their weight at seven percent, and so
Speaker 3: all the companies in this fund are market cap weighted.
Speaker 3: The three big names you highlighted are capped at seven percent.
Speaker 3: So what this winds up being is twenty one percent
Speaker 3: of those three companies and seventy nine percent of companies
Speaker 3: you've really never heard of or maybe only heard a
Speaker 3: few of them, but you have to include them because
Speaker 3: they're a huge part of the streaming economy today in
Speaker 3: the United States, Apple and Spotify really control the streaming market.
Speaker 3: Apple's doing a lot for the music industry. There's tons
Speaker 3: of curation, they're breaking new artists, they're doing just a
Speaker 3: lot for the industry today. Anybody who buys a mobile phone,
Speaker 3: that's like the quick service that they're offered and teed up.
Speaker 3: So they're doing a huge service to music publishers, to songwriters,
Speaker 3: to artists. So they're very much part of the music ecosystem.
Speaker 3: But for the most part, is Eric pointed out, Look,
Speaker 3: we have I think forty two or forty four companies
Speaker 3: in the fun today. These are many of them you
Speaker 3: haven't heard of. Sixty percent of them are international companies
Speaker 3: like Him in Taiwan, Avex in Japan, Believe in France, Ctsaventum,
Speaker 3: which is like the big live music company in Germany.
Speaker 3: And then we've got all the K pop companies, and
Speaker 3: we've got companies in China like Cloud Music, Intense, and
Speaker 3: so we're really giving investors broad exposure. And a lot
Speaker 3: of these companies are hard to trade. You can't just
Speaker 3: get exposure in music today by buying Universal and by
Speaker 3: buying Warner Music Group and maybe some of these streaming companies.
Speaker 3: You really need if you want exposure to music. This
Speaker 3: is what this fund is designed to do.
Speaker 1: What about the private We talked earlier about how big
Speaker 1: money private equity money has started to invest or buy portfolios.
Speaker 1: Does your filtering process filter out the private equity sense,
Speaker 1: I'm sure they do a lot more than music.
Speaker 3: Well, first of all, I got to say, like, we're
Speaker 3: a much better return than private equity. So they're paying
Speaker 3: twenty times, right, that's a five percent yield on a
Speaker 3: cash flow. That's before the private equity firm takes their fees,
Speaker 3: their management fee, their carry, So it's even worse than
Speaker 3: five percent. If you look at our index, we're performing
Speaker 3: substantially higher than that for the quarter. I think we're
Speaker 3: up eleven percent for the quarter. The index is performing
Speaker 3: really well when you put that up against the SMP
Speaker 3: and we have total liquidity.
Speaker 4: Right, you can buy.
Speaker 3: Our ETF, you can sell it the same day. You
Speaker 3: get exposure to all the these publishing companies, you get
Speaker 3: exposure to all the record companies. You don't have to
Speaker 3: have your money locked up.
Speaker 1: So you'd rather not have private equity, right, And.
Speaker 3: That's what I meant to say. Yeah, yeah, no, we'd
Speaker 3: want to not have private equity in the portfolio. The
Speaker 3: returns just aren't good when you're paying like that kind
Speaker 3: of multiple for the big marquee acts, and so I
Speaker 3: just think we're a much better solution for investors who
Speaker 3: want exposure to music. The returns are more enlightening, they're
Speaker 3: more favorable. You have liquidity, and you have total diversification.
Speaker 3: You're not just on music publishing. It's like we're giving
Speaker 3: access to the whole ecosystem of music.
Speaker 2: Let's just talk about the state of music. I was
Speaker 2: talking to Joel about this earlier. This is probably me
Speaker 2: just being like old man on the lawn, but it
Speaker 2: just seems like a lot of the current stuff is
Speaker 2: just not that great, Like it doesn't have much depth.
Speaker 2: There's not much melody.
Speaker 1: Was his opinion, by the way.
Speaker 2: And I get Spotify taking off because you basically catalyzed
Speaker 2: all the old stuff too, which is to me, I
Speaker 2: just feel like the golden age of music is over.
Speaker 3: Yeah, I would have to respectfully cut you off and
Speaker 3: say I think you're wrong.
Speaker 1: Go back to your launcher.
Speaker 3: And everyone's entitled to look. Music is a universal connector,
Speaker 3: so everyone's entitled to it. But I don't know you
Speaker 3: have the CMT Awards on Sunday Night, Zach Bryan, Laney, Wilson,
Speaker 3: Jelly Roll, all amazing country artists performing. You got Billie Eilish.
Speaker 3: Today you've got just so many amazing talented writers. You
Speaker 3: know what I think is interesting, Eric, which I will
Speaker 3: kind of at a high level agree with you. The
Speaker 3: days of vinyl when you put on a record and
Speaker 3: you kind of embraced the whole album, like you listen
Speaker 3: to every song. And I think digitization today has made
Speaker 3: it easy for artists to promote singles and maybe they've
Speaker 3: found a quick way. That's why, by the way, a
Speaker 3: lot of the emerging artists are very unhappy right now
Speaker 3: when Universal pulled their catalog from TikTok, because TikTok is
Speaker 3: the most powerful marketing tool in the music industry today.
Speaker 3: But a lot's going on today right so people can
Speaker 3: generate music very quickly. AI is obviously a topic that's
Speaker 3: you know, hotly debated today. Artists can create fakes too
Speaker 3: from music, so there's a lot of concern around the
Speaker 3: quality of music, even whether it's authentic. Today you have
Speaker 3: no federal copyright protection in your voice, which is really interesting.
Speaker 3: Think about that you have protections for name, image, and likeness,
Speaker 3: but you can't protect your voice. And what's happening with
Speaker 3: AI is it's causing deep fakes. And so in Tennessee
Speaker 3: a couple of weeks ago they passed the Elvis Act,
Speaker 3: which makes it a crime to lift somebody's voice.
Speaker 4: And profit from it. It's a good name for an app, yeah,
Speaker 4: I'd say.
Speaker 1: So would you say there's an AI player that gets
Speaker 1: into the music business, are you going to run from
Speaker 1: it or filter it out? No, So we have included
Speaker 1: or filter it out, so we're neutral.
Speaker 3: We actually have all the companies that are actually delivering
Speaker 3: the tools to artists to create AI. So if you
Speaker 3: look at our technology holdings, focus right Dolby Roland Yamaha,
Speaker 3: a lot of them are creating tools, audio tools, recording studios,
Speaker 3: giving artist tools to sample new music to create new songs.
Speaker 4: But you know, the deeper.
Speaker 3: Issue today that needs to get resolved right now, it's
Speaker 3: only handled at a state level, is really like, how
Speaker 3: do you protect artists from deep fakes from getting ripped off?
Speaker 3: You know, the estates of Bob Marley and Frank Sinatra
Speaker 3: are concerned. They joined in this artist coalition, this advocacy
Speaker 3: group a lot of interesting stuff today. But just to
Speaker 3: go back to Eric's point, look, music today is something
Speaker 3: like one hundred to one hundred and fifty thousand songs
Speaker 3: being uploaded today. I do think quality is something that
Speaker 3: needs to be looked at. There's a lot of like
Speaker 3: streaming fraud on some of these services. And yeah, it
Speaker 3: was just a lot more difficult back in the day
Speaker 3: to create a record, right you have to go into
Speaker 3: the studio and do it. Now you can rip it
Speaker 3: and create it from your bedroom, from your desk, And
Speaker 3: so that's what's going on today.
Speaker 1: Well, well, Eric's out in his front line with the
Speaker 1: lawn chair. We got a record player recently, and so
Speaker 1: I started buying vinyl and we have an eight year
Speaker 1: old and I actually, I think he really enjoys interacting
Speaker 1: with the record player. It's tactile, whereas before, you know,
Speaker 1: I'm playing music on my phone and I'm dictating the playlist,
Speaker 1: like he can go flip from side A to side
Speaker 1: be he's conscious of albums again. Like, I've just really
Speaker 1: enjoyed having something that's so tactile in our lives again.
Speaker 1: So I wanted to bring it back to vinyl and
Speaker 1: with the vinyl exposure in your portfolio.
Speaker 3: Yeah, so, well, we have all the companies that distribute
Speaker 3: music obviously through vinyl, so all the record companies. Vinyl
Speaker 3: is just another medium, right, so we tackle it on
Speaker 3: many levels. We have companies that manufacture vinyl players like
Speaker 3: the ones I mentioned. They manufact you can buy them
Speaker 3: on Amazon. I think Yamaha is a vinyl player, and
Speaker 3: Focus right does. And then obviously at the record company
Speaker 3: label they license their content on vinyl. But vinyl's growing
Speaker 3: at ten percent, okay, according to the IFPI report and
Speaker 3: the RIAA report. And by the way, it's a really
Speaker 3: promising statistic because it just shows like opportunity for the
Speaker 3: super fan. The swifties are devouring phono records, and then
Speaker 3: it's a great windfall for just heritage artists. Right for
Speaker 3: fans like Eric, you or myself, we're probably stuck in
Speaker 3: days of Steely Dan and Pink Floyd and we want to,
Speaker 3: you know, listen to these albums and maybe you know,
Speaker 3: speak for yourself, Okay, I'll speak of myself.
Speaker 2: Well, I'll say there's really good I think I should.
Speaker 2: There's definitely good music being made. It's just not mainstream
Speaker 2: in my opinion. The mainstream stuff to me, I don't
Speaker 2: get whereas back in the sixties, seventies, eighties, and nineties
Speaker 2: it fell to me the stuff that was mainstream was
Speaker 2: also really good.
Speaker 1: Can we I just have this episode to old man balchiness.
Speaker 2: Yeah, that's fair. I'm sure I'm not alone, but I
Speaker 2: will say the country thing is interesting. I have found
Speaker 2: some country more intriguing lately to me than regular rock,
Speaker 2: and so there's a couple of artists I do like,
Speaker 2: and I find that maybe that depth I'm looking for
Speaker 2: has moved over to the country genre. Is that growing
Speaker 2: in terms of like share?
Speaker 1: The genre thing is super interesting because you've got what
Speaker 1: Eric observes about country, but classical music that has a
Speaker 1: whole loyal fandom. Hip hop obviously gigantic. So do you
Speaker 1: think about exposure to genres when you're building a portfolio?
Speaker 3: Yeah, So, first of all, you mentioned country. Country is
Speaker 3: actually the most profitable component of music today. So for
Speaker 3: a couple of reasons, more people by vinyl on and
Speaker 3: albums on country number one. As performance country songs are
Speaker 3: on the radio longer than hip hop, longer than pop,
Speaker 3: so they actually generate performance revenue longer. And I think
Speaker 3: today there's just amazing music there. They're writing full albums.
Speaker 3: Morgan Wall and Chris Stapleton, Zach Bryan, Laney Wilson, these
Speaker 3: are all amazing artists and they're all you know, they're
Speaker 3: all writing full albums and people listening to them, and
Speaker 3: they have amazing tour. Springsteen just appeared with Zach Bryan
Speaker 3: at Barkley's the other day. They've got huge audiences and
Speaker 3: unlike the other art forms setting aside, like Taylor Swift,
Speaker 3: who's just a phenomenon, and Beyonce's a phenomenon.
Speaker 2: There's a guy on my team who works out of London.
Speaker 2: He wants to create an ETF SWFT. I'm so obsessed
Speaker 2: with Taylor Swift. He thinks you could make a whole
Speaker 2: ETF just around stuff. She likes stuff. She's like her
Speaker 2: supply chain. And this brings me to the sort of
Speaker 2: Taylor Swift is saving the economy articles that we saw
Speaker 2: about a year ago, let's go over the actual numbers.
Speaker 2: What I read was entertainment is four percent of GDP,
Speaker 2: and I guess music is one percent of that four percent,
Speaker 2: and then Taylor Swift would be a percentage of the
Speaker 2: one percent. I guess can you sort of put Taylor
Speaker 2: Swift's contribution to a music and then be the overall
Speaker 2: GDP into perspective.
Speaker 3: Yeah, well, first of all, the according to the Luminate report,
Speaker 3: you had four trillion streams last year. Okay, Taylor Swift
Speaker 3: was five percent of all those streams. So give you
Speaker 3: context on Spotify what she's generating in terms of like
Speaker 3: audience and revenue. On top of what you just said,
Speaker 3: there's the Taylor Swift effect, which is much higher than
Speaker 3: a few percent to economy right to hotels, to airfare
Speaker 3: to ticket So look, she created a cultural phenomenon. I
Speaker 3: don't dislike the idea, by the way of creating an
Speaker 3: ETF around Taylor Swift because you could include a lot
Speaker 3: of different What she's done is incredible. She's by the way,
Speaker 3: she started off as a country artist. I used to
Speaker 3: publish her because Liz Rose was one of my writers,
Speaker 3: and Liz Rose tear drops on my guitar with Taylor,
Speaker 3: and so we used to actually publish Taylor's first album.
Speaker 3: So I met her when she was fourteen, when I
Speaker 3: had my company, Evergreen and Integrated Copyright Group in Nashville.
Speaker 3: But what she's done is incredible. But she's not alone.
Speaker 3: There's a lot of talented people out there. I love
Speaker 3: what Beyonce's doing in Country by the Way, and she's
Speaker 3: got the roots. She's from Houston. I love what she's doing.
Speaker 3: The covers of Joe Lene are incredible.
Speaker 1: I think it's amazing.
Speaker 3: Yeah, so really interesting, It's like but yeah, to answer
Speaker 3: your question, Joel, country's big, and we own every facet
Speaker 3: of it in this fund, through concerts, through ticketing, through merch,
Speaker 3: through recorded music, through publishing.
Speaker 1: Okay, so I want to ask about the ticker. What
Speaker 1: other options did you consider other than MUSQ, which music
Speaker 1: I love. But were you faced with any difficulties acquiring the.
Speaker 3: Ticker face with no difficulties. I was honestly shocked it
Speaker 3: wasn't taken. When I saw it was available, I quickly
Speaker 3: jumped on it. I just spoke directly.
Speaker 2: You know.
Speaker 4: We're nominated for Ticker.
Speaker 3: Of the yearly April seventeenth at the ETF dot Com Awarts.
Speaker 3: Thank you will see what happens. But I do think
Speaker 3: people recognize it speaks to who we are, It speaks
Speaker 3: to the soul of this fund, and I was pretty
Speaker 3: psyched that I'm getting a lot of traffic from Elon
Speaker 3: Musk on my Twitter feeds in the.
Speaker 1: US bodes well for a certain savvy online.
Speaker 3: You know, that wasn't the reason I did it, But
Speaker 3: I'm not upset with any accidental traffic on folks that
Speaker 3: are interested in what we're doing. And I do get
Speaker 3: a lot of people that text me, email me, you know,
Speaker 3: are you associated with Grimes and Elon? But that's not
Speaker 3: the reason. It just speaks to the heart of who
Speaker 3: we are, and it's a ticker that people know and
Speaker 3: and look, my goal is to really make this as
Speaker 3: exciting and big as people love me. This is really
Speaker 3: a fund for not only for investors, but it's also
Speaker 3: for melomaniacs.
Speaker 4: Okay when you're I sense it.
Speaker 3: Everybody in this room, you know, from Magnus to Eric
Speaker 3: and Joel is a melomaniac. And you know, I wanted
Speaker 3: to really create a connection, an emotional connection between music
Speaker 3: and an opportunity to invest in it and make it accessible.
Speaker 3: And that's what this is designed to do.
Speaker 1: And how do you feel about performance? So far?
Speaker 3: Really happy with performance? I mean, look, we have some
Speaker 3: very big names in our fund that are performing extremely well.
Speaker 3: Spotify is up one hundred and thirty percent for twelve months,
Speaker 3: seventy percent for the year. Sphere is up fifty percent,
Speaker 3: Live Nation is up forty percent. And then all these
Speaker 3: companies are all passing down. All the record companies are
Speaker 3: all delivering. Look at the quarters that they just delivered.
Speaker 3: Warner Music Group was up eighteen percent, a Universal Music
Speaker 3: Group with fifteen percent. Sony was up. And there's a
Speaker 3: reason for this because seventy percent of all of the
Speaker 3: revenues from all the streaming companies get paid to the
Speaker 3: life labels, right, that's the contracts between the publishers and
Speaker 3: the label, seventy percent of the So as the streaming
Speaker 3: numbers go up for all the reasons we identified before,
Speaker 3: seventy percent of those revenues get passed down, and that's
Speaker 3: just more money to artists and writers. And so we're
Speaker 3: really happy with performance of this fund. We're capturing all
Speaker 3: the growth and innovation around the music industry, and I
Speaker 3: think things are only getting better between streaming and content
Speaker 3: and live music. Look at the numbers that Live Nation
Speaker 3: just reported. Revenues are up twenty five percent. Between concerts
Speaker 3: and ticketing and sponsorship. The average ticket for a Taylor
Speaker 3: Swift concert was thirteen hundred dollars. The average ticket price
Speaker 3: for a Morgan Wallin concert is seven hundred dollars.
Speaker 4: Yeah, Jesus is.
Speaker 1: Right, you have kids one hundred dollars.
Speaker 3: And then if you have kids, okay, you got four
Speaker 3: or three d the right.
Speaker 4: Yeah, by a way. So Taylor became a billionaire.
Speaker 3: We saw that a couple of days ago, and that's
Speaker 3: really kind of what's connecting it, you know. And Sphere
Speaker 3: is obviously another great stock and a top holding in
Speaker 3: our fund. And look at what's happening there, I mean,
Speaker 3: or expensive tickets, but look what you're seeing. Look at
Speaker 3: how you're experiencing that.
Speaker 1: Yeah, in Vegas, that is a sphere.
Speaker 4: It's a sphere.
Speaker 3: And now you're gonna go see Ded and Co there
Speaker 3: with John Mayer. It's gonna be awesome. You two is incredible.
Speaker 3: And it's a bad experience is you can't recreate the
Speaker 3: live experience. That's why people are always going to pay
Speaker 3: up to go out. That's why live music is always
Speaker 3: going to be big, and that's why people are going
Speaker 3: to pay for music.
Speaker 2: And let me ask you a question about that. The
Speaker 2: way an artist gets paid now, has it shifted from
Speaker 2: like was predominantly from the CDs, and now it's more
Speaker 2: because of touring or is it the same as it
Speaker 2: ever was now?
Speaker 3: Yeah, So look back in the day, the hard format
Speaker 3: was the primary out with the primary sale, so you
Speaker 3: had was a royalty tied to a cassette or a
Speaker 3: CD sale, right, and then everything kind of got digitized,
Speaker 3: and now it's through streaming and digital downloads. Touring is
Speaker 3: something completely separate. There artists who deals with concert promoters,
Speaker 3: they get advances and then the concert promoters booked them
Speaker 3: in venues, and so those are two different revenue sources.
Speaker 3: So an artist is signed to a record company, right,
Speaker 3: and there are many ways that the artists can collect
Speaker 3: revenues today. You have performance revenue, which is when the
Speaker 3: songs get played on radio. You have royalty revenue when
Speaker 3: the songs get streamed or get sold on CDs or
Speaker 3: on cassettes. You have synchronization revenue, which is when the
Speaker 3: songs get used in movies and TV shows and commercials.
Speaker 4: Right.
Speaker 3: And then you have mechanical sales, which are tied to
Speaker 3: the publishing So if you're the writer, right, all the
Speaker 3: anytime a song is streamed, they pay royalties out to
Speaker 3: the publisher, and so artists if they're not the writer,
Speaker 3: they're just getting record royalties. If the artist is the writer, right,
Speaker 3: and also the artists they're getting both of those royalties.
Speaker 3: So multiple revenue streams in the music industry. And today
Speaker 3: just with the digitization to music, you're just getting exposure
Speaker 3: to music consumption and there's so many touch points today,
Speaker 3: so you're getting really that's why you got tons of
Speaker 3: blanket agreements now too. You have guilds like the National
Speaker 3: Music Publisher Association of America. You have the RI DOUBLEA
Speaker 3: that protect rights for artists, for songwriters, and they're entering
Speaker 3: into these blanket agreements with Spotify's and streaming companies to
Speaker 3: make sure that they're scraping the universe of royalties because anytime,
Speaker 3: and that's what's going to be so exciting with like
Speaker 3: AI and blockchain. AI and blockchain is going to put
Speaker 3: artists and songwriters on a direct payment rail whenever song
Speaker 3: is used. It's going to simplify the process because today
Speaker 3: you have these big performing rights organizations like ASCAT, BMI
Speaker 3: and c SEC that are entering into blanket agreements with
Speaker 3: the venues with the restaurants, right and so, but they
Speaker 3: collect the money, they hang on to the money for
Speaker 3: nine months, then they pay out the artists. That's really antiquated.
Speaker 3: It really shouldn't be that way today. With blockchain, there
Speaker 3: should be a direct payment rail one pay for one play,
Speaker 3: And that's kind of where things are going too, so
Speaker 3: eventually they'll be there. Already is a lot more transparency
Speaker 3: for artists and writers and to see how many streams
Speaker 3: they have, how much income they've generated. That's kind of
Speaker 3: where the whole industry is headed.
Speaker 1: Is there anything that you you don't have exposure to
Speaker 1: that you wish you could have exposure to?
Speaker 4: Yeah, obviously Navidia.
Speaker 3: I wish we could include Navidia as an AI stock. Really,
Speaker 3: i'd have to rewrite the rules of the fund.
Speaker 1: I mean more, if there's something that is private and
Speaker 1: not accessible for you to be able to put it
Speaker 1: in EF, what would that be.
Speaker 3: Look, there's some really cool music companies out there, private companies.
Speaker 4: I don't know, song vest or you know.
Speaker 3: Look, I like this company. I like this company that
Speaker 3: just went public, Jukebox. They're just specifically selling off fractional
Speaker 3: shares of songs, right, I really like what they're doing.
Speaker 3: So they're they're buying out portfolios from private equity firms
Speaker 3: and the securitizing them so you can own pieces of songs.
Speaker 3: I love that bowiesque. It's kind of Bowiees. They've done again.
Speaker 3: They're democratizing music. It just shows you how big music is.
Speaker 3: There are tons of ways to sell music to customers today,
Speaker 3: and so in a perfect world, i'd like to be everywhere.
Speaker 3: I want to give investors exposure to all the exciting
Speaker 3: new technologies that are out there. But we had to
Speaker 3: design something very specific, and we're really focused on public
Speaker 3: music companies.
Speaker 1: All right, final question, favorite ETF ticker other than your own?
Speaker 4: I really love I love Chat h A T.
Speaker 3: I think that's awesome, and I like good Luck Yeah
Speaker 3: yeah yeah, I like Block and Chat. I think those
Speaker 3: speak directly to those ETFs.
Speaker 1: Okay, David Joelhoff, thanks so much for joining us on Trillions.
Speaker 1: Thank you guys, thanks for listening to Trillions. Until next time.
Speaker 1: You can find us on the Bloomberg terminal, Bloomberg dot com,
Speaker 1: Apple Podcasts, Spotify, or wherever else you'd like to listen.
Speaker 1: We'd love to hear from you, or on Twitter. I'm
Speaker 1: at Joel Webbers Show. He's at Eric Paulchness. This episode
Speaker 1: of Trillions was produced by Magnus Hendrickson, Bye
Speaker 2: S