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Music stocks to watch in 2021

Music stocks are the shares of companies that generate their revenues by releasing new songs, organising live concerts and events, and providing music streaming services. This article will mainly focus on companies that offer music streaming services, so read on to discover some of the top music stocks to watch in 2021, based on revenue, number of users and subscribers, and general market sentiment.

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How is the music industry performing?

The entertainment and music industries are currently considered to be some of the most profitable sectors, and it is no coincidence that some of the largest technology companies in the world are keeping a close eye on the music business. Revenues generated by music streaming services grew by 20% in 2019, reaching a total of $9bn. This figure represents nearly 80% of all music revenues.

This impressive growth is the result of technology becoming more readily available and physical products, such as CDs, becoming progressively obsolete. In fact, only 5% of total music revenues are generated by physical products. In 2019, streaming service paid subscriptions grew by 30%, generating over $60m in revenues, compared with $45m in 2018.

How to invest in the music industry

Investing in music stocks can be an effective way to diversify your portfolio. There are multiple ways of investing in music and entertainment shares, such as share trading​. This is where an investor purchases a stock and pays the full amount upfront, taking ownership of the asset.

However, shorter-term traders​ may want to speculate on the share’s fluctuating price movements, rather than using a traditional buy and hold approach. This is where derivative products are useful. Follow the below steps to get started:

  1. Register for an account. You will automatically get access to a demo account, where you can trade risk-free with virtual funds.
  2. Decide on a trading strategy. You could go long if you think that the stock price will increase, or short if you think that it will fall.
  3. Learn about risk-management in trading. We offer a number of order types to help protect your capital, such as stop-losses.
  4. When you are ready, place your order. You should monitor your positions for any slippage or gapping on the stock price chart.

Music and entertainment stocks to watch

Spotify (SPOT)

Launched in 2008 by a Swedish start-up company, Spotify is a music service that offers on-demand streaming of a large selection of tracks from various record companies and independent labels. In 2019, it reached over 240m users and around 130m paid subscribers. Available in both free and paid versions, Spotify is widespread in most European countries, the Americas, Australia, New Zealand and some Asian countries.

Spotify has developed an effective business model, with revenues being largely generated by advertising. In its free version, music is interrupted by commercials at regular intervals as users are listening. The paid version, on the other hand, offers unlimited and uninterrupted music streaming.

By creating strategic alliances with important groups, such as Netflix and Tinder, Spotify debuted on the stock market in 2018, while making the decision to diversify its streaming offer and to include journalistic contents, by partnering with various publishers. The launch of Spotify stock was met with great interest by the market and its first session closed with a 12.9% rise.

Apple Music (APPL)

Apple Music, an important part of the Apple corporate giant, is always looking for new revenue sources. Their strategy of offering a diverse mix of products and services is proving to be an increasingly winning approach, since it reduces the negative impact caused by periodic decline in the sales of its most popular products, such as the iPhone, iPad, MacBook. At the same time, given the need for smartphones and tablets to stream music, the popularity of Apple Music also helps the company sell its key music-related products, such as AirPods and HomePods.

According to the Financial Times, Apple Music exceeded 60m subscribers in 2019. In terms of revenue, the Apple Music division generated approximately $7bn. Apple Music is currently second only to Spotify in terms of registered users and subscribers.

YouTube (GOOG)

YouTube Music is a music streaming service that belongs to its parent company, Google. It provides a customised interface for music streaming services that let users browse music videos based on genres, playlists and recommendations. This service also offers a premium tier, which provides ad-free play, audio-only background play and song downloads for offline play. These membership benefits are also offered to Google Play Music subscribers.

As of November 2018, YouTube Music (as well as YouTube Premium) expanded to seven new countries, including Chile, Colombia, Japan, Peru, Portugal, Switzerland and Ukraine. YouTube Music currently has around 20m registered customers and revenues of around $500m.

Tencent Music Entertainment (TME)

Tencent Music, which as the name suggests, is owned by Tencent, is a spinoff that offers three streaming services: QQ Music, Kugou Music and Kuwo Music. These three platforms dominate approximately 75% of the Chinese music streaming market. Tencent Music offers a wide range of options, from karaoke apps to concert streaming services.

In China, the platform has an audience of nearly 1bn monthly users. Tencent’s services have approximately 700m subscribers and an annual revenue of $170m. Read more about our Tencent stock forecast.

NetEase Cloud Music (NTES)

Developed by Chinese company NetEase, NetEase Cloud Music is a “freemium” music streaming service, which means that it provides both free basic features and functionalities and paying premium services. This streaming service was launched in 2013. Four years later, in 2017, the platform had already hit 300m users and offered a substantial music database, consisting of over 10m songs.

The NetEase Cloud Music streaming service is one of the three big names in the Chinese music streaming market, competing with similar services offered by Tencent and Alibaba’s Xiami.

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Amazon Music (AMZN)

Like Apple, Amazon has also entered the world of music streaming to increase its revenues and to help sell its products, such as Echo smart speakers. Amazon Music offers different music streaming levels, such as Amazon Music Unlimited, Amazon Music Prime and Amazon Music HD. The latter platform was launched in January 2019 and offers over 50m songs in high definition.

As of January 2020, Amazon Music reached nearly 60m subscribers with $5.4bn in revenue.

Alibaba Xiami (9988)

Created in 2007, Alibaba’s music service was initially known as EMUMO, which stands for “Earn Music & Money”. In 2013, the app was acquired by Alibaba and renamed Xiami. The service currently has nearly 100m active users, making it the smallest of the top five Chinese music apps.

Given the large number of people in China who use at least some of Alibaba’s proprietary services everyday (from Alipay to Taobao), it wouldn’t be surprising if the number of Xiami’s active users continues to grow in the coming months or years.

Trade on music stocks with CMC Markets

We offer over 9,000 stocks and ETFs to trade on in the share market, including all of the above mentioned music and entertainment stocks. Simply register for a live account to get started on our Next Generation trading platform.

We also offer mobile trading for ease of trading on the go. Learn more about our mobile app.

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