Investments, music and Eurovision: we speak with Marzio F.Schena, CEO of ANote Music, a marketplace for investments in music royalty interest

May 2024. As every year, lovers of European music (and many others who are not so much) are waiting for Eurovision, which takes place this week in the Malmö Arena in Sweden.

After last year's victory of Loreen, who represented Sweden with her song ‘Tattoo’, Malmö will host the European music competition for the third time ever.

Polls for the 68th Eurovision Song Contest place Croatia, with its song ‘Rim Tim Tagi Dim’, as favourite, followed by Switzerland, Ukraine, Italy and the Netherlands.

On this occasion when European countries gather around music, we interviewed Marzio F. Schena, CEO of ANote. The project led by Marzio since 2018, operates as a European market that allows publishers, record labels and artists to share a portion of their music catalog's royalty interest in order to finance their projects, while at the same time offering users a new asset class in which to invest, unlinked from traditional financial markets.

I read that the idea of ANote came to you while watching the Sanremo festival, so I need to know... is it true?

Yes, it's the truth. Francesco Gabbani sang "Occidentalis Karma", a theme that I liked very much. I thought he would win the festival, and indeed he was the winner. So, together with my co-founder, Matteo Cernuschi, we started to reflect... what would have happened if we had invested? A bet on who would win would have ended with the simple victory or defeat at Sanremo, but a possible investment could have generated royalties for a long time, since music rights last seventy years. That's how we started to explore the world of music from an investment point of view. This happened at a time of negative interest rates, making this asset class, uncorrelated to the market and growing, particularly interesting.

When Marzio talks about music rights, he refers to royalties, payments that an intellectual property rights holder (like a musician) receives as compensation for the use of his creations by third parties. For example, a singer earns money every time his music is played on the radio, on streaming platforms, on television...

On ANote, users can buy parts of their favorite artists' music catalogs and earn money generated from the use of that music. And the artist or composer? They receive funding to carry forward their artistic projects: records, festivals, documentaries…

What is the process for a catalog to end up on ANote? What is the due diligence process?

Everything starts when a music catalog is presented to us. For us, this catalog must include tracks of at least three years and must guarantee fairly stable royalties. Once these two requirements are identified, we start our due diligence, which mainly consists of identifying the historical royalties associated with the catalog of tracks: we basically verify that the rights holder (author, publisher, artist, etc.) has the ability to transfer such royalties.

Once this phase is completed, we determine the valuation in collaboration with the rights holder and organize an auction on our platform, where investors can acquire a share of the catalog to receive the future royalties generated by it.

How do you facilitate investors' access to information regarding the financial data of their investments?

We guarantee the highest possible level of transparency on our platform: we provide data and metrics regarding the historical royalties generated by the catalog, the age of the catalog, the categories of historical royalties and more. It is important to consider that a catalog composed of songs released a while ago tends to be more stable over time.

Subsequently, we determine the historical return of a catalog based on the current price. For example, if a catalog generates royalties of one euro per share and the share is traded at ten euros, this implies an annual return of 10%, approximately.

Furthermore, we offer a comprehensive educational approach through the content published within our blogs.

All these metrics and data allow users of the ANote platform to always be updated on how the market is developing, a market that has recorded significant growth in recent times. Only in Italy, the recorded music market grew by 14.2% in the first half of 2023. The most surprising thing? That the 10 best-selling albums during this period in our country were all by Italian artists, according to data from the Italian Music Industry Federation.

We can see a wide range of examples of the growth of recorded music across Europe. UK is the 2nd largest recorded music market in the world, a market that generated 1.32 billion pounds in total revenues. In many other European countries, recorded music market kept growing on an accelerated pace: 6.6% in Germany, 9.4% in France and even double digits growth in Spain (11.1%), Italy (14.2%) or Poland (16.5%).

Midway through last year, ANote Music announced that it had supported the launch of the “Enhanced Strategy in Music Royalties (MRES)” certificate, which would allow institutional investors to invest through ANote's product. Can you explain what this consisted of?

Of course, first of all, we need to clarify that this is not an internal product of ANote, but a product that we have sponsored, in collaboration with our external partners, who have the ability to distribute this type of product. It is a certificate that invests in catalogs on our platform and can actually be subscribed to by professional investors and is already active.

What advice would you give to an investor who wants to invest in music for the first time through ANote?

I must clarify that neither I nor ANote provide any financial, legal or tax advice, and before proceeding with any investment, it is important to consult a qualified financial advisor to assess your financial situation and investment objectives. What I can offer are general recommendations on an approach that can be followed. An approach that consists of understanding the dynamics of the music world and trying to apply them.

So, it is important to understand the royalty payment process, as well as the operation of our platform and all the material that we make available online.

Once this process is completed, it is possible to consider purchasing one or more catalogs on our platform. We have also created a mechanism that allows you to acquire several catalogs at the same time, thus creating a diversified portfolio. This allows you to have exposure to more catalogs rather than betting everything on just one.

Finally, it is simply necessary to wait to receive the proceeds. Once received, it is possible to evaluate why and how to reinvest them or possibly withdraw them.

We started talking about the Sanremo Festival and I would like to conclude by asking you what was your favorite song this year to represent Italy at Eurovision.

I really liked the one by Annalisa, Sincerely. I find it incredible... I thought she would have won!