The UK stock market is full of weird and wonderful companies in all sectors of the economy. We love our portfolios to hold firms within large, competitive sectors such as energy, financials and retail, to name but a few. But within the FTSE 250, there lies a unique opportunity within the media sector to investigate one of the best shares for me to buy today. It’s the first public company of its kind, and it’s leading a mission to turn one of our favourite pastimes into an asset class: music royalties.
What is Hipgnosis?
Hipgnosis Songs Fund (LSE: SONG) is a fund listed on the FTSE 250 that owns song copyright, collecting royalties when these songs are played. Its portfolio consists of tracks, past and present, that have proven records of consistent royalty income. So far, its illustrious collection includes artists such as Fleetwood Mac/Lindsay Buckingham, Dua Lipa, Mark Ronson, 50 Cent, and many more. It also owns the rights to 36 of the 156 songs in Spotify’s tracks with over one billion streams.
The merits of investing in music royalties
There are several reasons why I believe this is one of the best shares to buy at the moment. Music royalties often provide a consistent level of income over the long term, especially if the songs cement their place in popular culture. How often do we hear the timeless classics of Go Your Own Way, Don’t Stop Believin’, and All I Want For Christmas Is You, decades after their release? Hipgnosis is also latching onto modern successes that will project revenue streams into the future; for instance, Ed Sheeran’s catalogue makes up a significant proportion of its portfolio. With the rise of streaming services, music has become accessible to a worldwide audience, and CEO Merck Mercuriadis aims to expand into South American markets by collaborating with artists from Hispanic and Latino backgrounds. (Some say we’ll never get the catchy chorus of Despacito out of our heads…)
Modern music services also tend not to be tied to the overall economic environment; that is to say this sector has a low economic beta. Artists’ content is played over many types of media (phones, TV, radio, and concerts) so investors are well diversified in case of a downturn. For instance, though the pandemic put the brakes on live performing for 18 months, masses of people turned to streaming services when confined to their homes. This diversification element is important for those who fear any further curbs on artists’ performance revenues.
You wouldn’t steal a song
One drawback worth considering is the threat of piracy that forever looms over digital artistic expression, stealing content and profits from official content providers. But the rise of streaming services has cut down on this illegal, virus-spreading activity as consumers are happy to pay small monthly amounts for the world’s music, rather than limiting one-off purchases like CD and vinyl. Â
For these reasons, I believe that Hipgnosis shares are some of the best for me to buy right now.