For every piece of music, there are many different licenses that could be required in order to set up a single use. Among the main types we have mechanical, public performance, synchronization and print music royalties.
To make it easy to understand, here at ANote Music we like to compare this with having shares in a company. When someone owns shares of a company, they will earn money through dividends that get distributed. For the Music Industry this is not so different. Instead of ‘owning shares’, you would own Music Rights, and instead of earning money through dividends, you’d generate income through Music Royalties.
Music Royalties are payments that Artists, Songwriters, Labels and Publishers (and, generally, whoever owns a part of a music recording) get paid for the right of use of their assets and intellectual property.
On ANote Music platform we offer shares of music rights which generate royalties over time. We focus on established catalogue, which proved a solid track record in the previous, at least, 3 to 5 years.
For Catalogue Owners (Creators, Record Labels, Publishers etc.) an auction is the process of selling Royalty rights of their catalogues to Investors.
On the ANote Music platform, during an auction, Investors may submit bids to purchase shares of the listed catalogue (auction phase).
At the end of the auction phase, if the amount raised is matching the requirement of the seller, a primary market transaction occurs between purchasing Investors and the original Catalogue Owners, and the shares of the catalogue are transferred to the Investors’ portfolio. If the Investors wish to increase their position, or sell their shares, they may do so on the Exchange (ANote Music’s Secondary Market).
When dealing with orders in the Primary Market, we employ the “Dutch Auction Model”.
For each auction, after all the bids are submitted and the auction period expires, our systems gathers all standing bids and orders them by price.
The final price is set as the minimum allowing all the shares to be allocated.
In other words, the shares are assigned to bidders from the top order down, until all available shares are assigned. However, the price that each bidder pays is based on the lowest price of all the allotted bidders, or essentially the last successful bid. Therefore, even if you bid €500 for 100 shares, if the last successful bid is €450, you will only have to pay €450 for your 100 shares.
ANote Music uses a proprietary blockchain to register a hash of all orders passed on the platform.
A blockchain can be understood as a ledger recording immutably transactions. This way, all orders submitted are forever written.
The ledger can be publicly queried so that any user can make sure his order was understood by the platform, and that the state is correct.
Of course, ANote Music being sole holder of the ledger, the blockchain would not be useful if not public. This is why, we periodically publish the current state of our blockchain to a public chain. This cost effective operation allows us to seal our own chain, preventing any modification. This way, we can ensure our customers the highest level of transparency and auditability.
While the Primary Market (Auction phase) is about exchanging funds and catalogues between the original Owners and Investors, ANote Music’s Marketplace (Music Exchange) is where Investors can trade catalogues they already own (transactions between Investors).
Any Investor may buy and sell shares of a catalogue on the specific catalogue page.
At any moment, a new market price is determined and a transaction is recorded whenever bid and ask price match.
On ANote Music we offer different kinds of investment lengths. They can range from a term of investment of 10 years, or, even they could be for the lifetime of the Music right itself.
In the first case, the shares of rights offered on ANote Music entitle the Investors to receive the economic benefit of owning a Music right: Royalties, which in practice are pure cash flows. At the end of the investment term, the shares of rights expire, and the Investor stops receiving Royalties from the Music right. By the same token, the original right Owners get back the full ownership (and Royalties) of their Music rights.
In the second case, we are offering a full ownership of a Music right which, for instance, also gives access to decision power on how to manage the Music rights and how to exploit them. The length of this investment is limited to 70 years after the death of the last author of the song included in a catalogue. After this period, the songs return to the public domain and are not protected by copyrights anymore.
In order to assess the value of a catalogue source, the stability and consistency of the earnings over the years should be considered. Clearly, music trends and habits of music consumers have an impact on how a certain right will keep generating Royalties over the years.
The popularity of the Artists and the Songs’ Writers included in the catalogue surely plays an important role, yet, it’s not the sole indicator, since a couple of Hits do not necessarily make one’s repertoire valuable. In order to have a taste of how songs are trending, it is necessary to understand the geographic reach of the songs, as well as the number of plays on streaming platforms or traditional radio channels.
Music rights need to be actively managed and promoted. This is exactly what Record Labels and Publishers do. However, investing in Music rights via ANote Music gives access to a passive investment. Passive in what sense? The original right Owner always keeps a majority stake of the rights and continues managing them, keeping them active and performing. In addition, in the case of the 10 years investment, he will get back full ownership after the effective date of the investment term. Therefore, it is in his best interest to keep the catalogue performing well.
Royalty collection is currently done by a national Collective Management Organization (CMO) such as SIAE, SACEM, GEMA, SGAE, etc, depending on the country. Their job is to collect money from the different content providers, on behalf of Songwriters and Publishers.
CMOs are those organizations who collect Royalties from bars, restaurants, shops, events, radio and TV channels, and, nowadays, even from online sources as well. The key concept is that every time a song is played, it is generating a tiny flow of Royalties.
When a legitimate right Owner sets up and concludes an auction on ANote Music, we take care of communicating with the CMO and other relevant Royalty distributors. We thus ensure to receive the rightful share of Royalties, in order to transfer flows to the Investors who purchased the rights.
Two kinds of assets are exchanged on ANote Music: Music rights and the funds loaded on the platform to purchase these Music rights.
We register all the transactions on the Blockchain in order to track them over time and verify the correctness of the transactions.
We rely on an established e-money institution, regulated by the CSSF – the Financial Sector Supervisory Commission of Luxembourg – for money management purposes. When a user registers and completes all the KYC procedures, we open a personal e-wallet linked to the user’s account, so that he can start operating on the platform.
We take care of receiving the Royalties from the Collective Management Organizations on behalf of the Investors. Once we receive the Royalties, we transfer them directly to the accounts of the Investors on the ANote Music platform. From that point and on, the Investors are free to withdraw their funds from the wallet into their bank accounts or to reinvest the new liquidity into new catalogues.
You are able to withdraw funds at any moment, according to liquidity constraints (we allow withdrawal of funds that are not being invested or committed in limit orders). In case you decide to withdraw all your belongings, you first need to disinvest your portfolio and remove all standing orders. The actual withdrawal simply consists of issuing a transfer of funds from your ANote Music account to your bank account.