ANote Music is the European marketplace for investing in music royalties.
Our innovative platform enables publishers, record labels, managers and artists to offer a portion of their music royalties up for auction to a wide network of music enthusiasts and investors. With this, ANote Music introduces the opportunity to share success with network, music fans and investors.
While organizing the terms and conditions of each offering, ANote Music audits financial and legal information and performs a thorough sanity check. The rights from each catalogue are then offered in an auction system – if the auction is successful, shares are delivered to the bidders, and, from then on, traded under a traditional bid-ask model.
On a continuous basis, the platform gathers the stream of royalty payments from reference royalty distributors, and distributes it to investors according to the shares owned.
Music rights are a type of copyright – a legal term that identifies ownership of specific rights over original creative works like songs and albums, literary works, movies or software. In particular, music rights refer to all legally-binding economic rights vesting, under any laws, music recording artists, songwriters, music composers, publishers and/or other music copyright holders on a song.
Songs, their music and lyrics, are creative works that are protected by copyrights. This is the reason why rights owners are entitled to royalties when their assets are being used.
Music royalties are payments that artists, songwriters, labels, publishers and whoever owns music rights receive in exchange for the right of use of their music and intellectual property.
Basically, royalties are what is being paid out to rights owners whenever their music is sold, distributed, inserted in other media, monetized or consumed in any other way. The music industry depends on distributors and collecting companies to gather the royalties generated when copyrighted songs and recordings are licensed out for another party’s use. On ANote Music, we call these entities “underlying royalty distributors”.
By purchasing shares in catalogues, you are purchasing a royalty interest in the catalogue, entitling you to receive a corresponding percentage of the listed royalties streams.
When a catalogue is listed on ANote Music, the music owner determines what specific royalties will be listed (master royalties, publishing royalties, sync, streaming etc.) – he might be transferring all his royalty streams, or just specific ones. This means that, as an investor, you will have access only to the specific royalty streams that are listed.
If an artist lists on ANote Music royalties from streaming, as an investor you will receive a share of all the royalties generated when the songs are streamed – while, for example, you will not get a share when the songs are performed in public or synchronized with movies as soundtracks.
On ANote Music, buying shares of music catalogues means buying royalty interests, or a percentage of the royalties generated by a catalogue.
When a song is playing in a public place like a bar, restaurant, gym or on the radio, TV, movies, commercials, Spotify, Apple Music, Amazon Prime Music, Youtube, Google Play Music, Pandora, etc. it is generating royalties. When a catalogue is listed on ANote Music, a percentage of these royalties are made available to you.
Investing in music royalties is traditionally part of the business model of record labels and music publishers. Based on their know-how and insights, they are able to secure deals with trending artists and secure partial ownership.
Nowadays, passive investments in music have been hitting headlines, as interest from the financial community has been growing. Investments in music are achievable indirectly: investors can buy into shares of listed record labels, music investment funds and streaming platforms. By contrast, we are presenting the purest and most transparent way to get exposure to the sector by enabling direct investments in shares of songs.
The last 20 years have been tough on everyone in the music industry. Margins and turnover have collapsed, and a huge value gap exists between the compensation received and the value created by content producers. Today, we see a major turning point coming. After a lost decade of negative growth, the music business has been enjoying a decisive rebound in recent years – the main drivers being the digital and streaming channels. And yet there is plenty of room to grow: revenues are still far from the level reached in 1999, and penetration of streaming services has definitely a chance of improving. Furthermore, we spot a growing dislike among young generations for piracy practices, as well as awareness and concern for the value gap and need to support their favourite artists, consuming music in a legal way.
Reasons for selling on ANote Music are various.
Some artists wish to share their success with their own fanbase, others to become financially independent, and labels may need funds to invest in new projects. Other players may want to exploit ANote Music’s network and visibility, or simply cash out.
ANote Music aims to help artists, record labels and publishers to achieve flexible arrangements when dealing with music royalties. In fact, music right owners always remain totally in charge of the terms and conditions of each listing. They decide what royalty streams are being transferred, the percentage, the term, and the minimum amount to be raised.
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 immutably recording transactions, meaning that all orders submitted are forever recorded.
The ledger can be publicly queried so that any user can make sure their order was understood by the platform, and that the state is correct.
We periodically publish the current state of our blockchain to a public chain to achieve a cost effective operation that allows us to seal our own chain, thus preventing any modification. This way, we can ensure our customers the highest level of transparency and auditability.
When you issue a regular bank transfer, let’s say, on the online platform of your bank, or directly on a payment terminal, the bank that issued your card identifies you. In such cases you also identify your bank (directly, with HTTPS that you can verify on a website, indirectly, as the only entity capable of letting you know precisely the balance of your account). But the real flaw comes in the fact that the bank is technically capable of generating and processing transactions without you involved. Isn’t this already happening with your account’s annual fees?
As an end user selecting a bank over another, you MUST have some blind trust in the bank not to debit your account and then hide their actions; actually we wouldn’t be able to tell if that were to happen to us. Any transaction requires trust between parties. It’s been a long time bank have our de facto trust, but it’s much harder for smaller businesses. Blockchain allows us to create trustful transactions without the need for huge two-way audits beforehand.
So what’s blockchain anyways?
To keep it short, we can stick to the fact that it is a series of blocks, linked together, containing information every (well, most) of the players involved agree upon. The algorithm allowing to reach this consensus is out of scope here, but even if we see it as a blackbox, we might be interested in its inputs/outputs: a bunch of data, whatever it is, is submitted by an actor to be added to the chain, after review by all the peers, it is cryptographically linked to the previous end of the chain, making it unchangeable. At first, this technique was solely used to exchange money on the chain, recording direct transactions between actors.
As the time passed, engineers found other ways to exploit this feature, nowadays known as smart contracts: smart contracts are entities on the chain, such as physical actors, to which one can send messages to alter their state. As such, they represent a distributed database that no one can alter – but everyone can read.
Today, in Europe, one of the most prominent problems of the blockchain remains GDPR: this new EU regulation forbids all companies to use personal data in unattended ways, and furthermore to distribute it to unadvertised partners. As such, storing any personal information on a blockchain which is not completely held within the company bearing the GDPR rights would probably not comply, forcing to use some legal tricks,or restrain the use case, as a purely private blockchain rarely makes sense. Also, blockchain is actually still quite slow. While the consensus algorithm we referred to is strongly secure, and allows to build immutable chains, it takes time to reach this consensus, and often much more time than what a user would deem acceptable. That’s why, in private environments where trust can be assumed (which is not always the case!), blockchains should still remain an exception.
ANote Music does not particularly act differently from your bank to generate transactions.
ANote Music uses the services of a certified money-institution regulated by the CSSF – the Financial Sector Supervisory Commission of Luxembourg – that can be instructed to create transactions. The difference lies in the fact that it may not yet be perceived as trustworthy as major banks by its end users. To make operations auditable from day one, ANote Music chose to use the blockchain technology. Any transaction request will be written immutably in a smart contract maintaining the list of all submitted state-modifying commands, such as a bid order or a request for money withdrawal. When a user issues such a transaction, ANote Music signs the request, registers it in an anonymized form in the blockchain, and executes it straight away, in order not to have the user wait. If any state of the platform has to be proven, would it be users balances or the holders of a song’s shares, one can easily “unfold” the blockchain to recover the desired transaction.
Obviously, the blockchain is only immutable if we are not the only ones to operate it.That is why, every major new listing gives the right to operate a node of our blockchain, reinforcing trust for all actors of the ecosystem. Some partners are also invited to operate nodes of our private blockchain. Finally, even without other actors validating the protocol, ANote self restrains from any modification possibility by committing the current state of its internal blockchain every couple of blocks to the main ethereum public chain. The whole world is your validator!