Why Investing in Niche Genres and Lesser-Known Catalogues

Streaming services account for over 73% of total music consumption globally, reflecting their continued dominance, particularly in Europe. This shift has also fuelled significant growth in niche genres, as fans are now listening to more than 8 different genres on average, with over 700 genres identified in regular music consumption. The expanding diversity of music choices highlights the growing popularity of niche and local genres, as listeners increasingly explore a wider range of musical styles through streaming platforms.

The music industry is dominated by a small group of “superstar” artists who capture a disproportionate share of royalties, leaving niche and lesser-known artists with minimal earnings. This means that their music is often under-promoted, and the artists themselves receive minimal royalties. By identifying and investing early in these emerging artists or genres, there is a chance to capitalize on their future success. 

How to Invest in them

To invest in niche music genres and catalogues, you need to acquire music rights or royalties. Here are ways to do this:

• Direct Purchase of Royalties: You can buy royalty rights directly from songwriters, producers, or music publishers. Platforms like Sonomo or ANote facilitate this by allowing investors to purchase royalty rights to songs, albums, or entire catalogues.
• Music Catalogues: Purchasing an entire catalogue (a collection of songs owned by an artist, record label, or publisher) is another way to secure a steady stream of royalties. This can be particularly lucrative in niche genres, where catalogues may be undervalued but have loyal audiences.
• Publisher Royalties: Investing in music publishing companies, which manage the rights to songs and collect royalties on behalf of songwriters and composers, is another approach. You can get access to the royalties from the catalogues they represent, often including niche genres.

Identify Niche Genres and Lesser-Known Artists

Delving into less-commercial genres like Lo-fi and Musique Concrète, or experimental subgenres like Drone Music and Dark Ambient, offers access to music that thrives on word-of-mouth promotion. Or, possibly some African music genres that more than just rhythm and melody; but cultural expressions with deep-rooted history and growing global appeal.

Blues subgenres like Delta Blues, Malian Blues, Chicago Blues, and Electric Blues also provide opportunities, with audiences deeply invested in the roots of modern music. Even in the constantly evolving music landscape, these genres remain timeless.

If you’re more interested in contemporary, evolving genres, consider Progressive House, Indie Folk or Post-Punk. These styles may not make daily headlines, but they cultivate dedicated listeners who value substance over marketing success.

While mainstream genres dominate streaming platforms, investing in these more specialized genres opens the door to stable, long-term royalty income by tapping into communities.

Using analytics from streaming platforms and social media can help identify which artists and genres are trending upward, even in niche markets. Services like Spotify for Artists, Next Big Sound, or Chartmetric allow you to track streaming growth, fan engagement, and geographic distribution of artists within niche markets.

Ensure that the Catalogue is Registered with a PRO

Before investing in a music catalogue on platforms like ANote Music, verify that the music is registered with a PRO. This ensures that royalties are being properly collected and distributed. Most reputable catalogues on music crowdfunding platforms are already registered with PROs.

Performance Rights Organizations, such as GEMA (Germany), SACEM (France), and PRS for Music (UK), manage the collection and distribution of performance royalties. These royalties are generated when music is publicly performed, such as on radio, in clubs, at live events, or via streaming platforms.

Music crowdfunding platforms depend on PROs to manage and collect the royalties that are later distributed to rights holders or investors. Here’s how the interaction between these entities works:

• Royalty Collection: PROs collect performance royalties from various sources (radio, streaming platforms, live venues) for the music catalogues registered with them. These royalties are the income generated from the commercial use of the music.
• Royalty Distribution: Once PROs collect the royalties, they distribute the payments to the registered rights holders. If an investor has purchased royalty rights via ANote Music, a portion of these royalties is transferred to the investor based on the share they hold in the catalogue.
• Platforms Facilitates Investment and Income Distribution: After royalties are collected and distributed by the PROs, platforms like ANote Music manages the transfer of royalty payments to investors who have bought shares in a catalogue. For example, if you buy 20% of the rights to a niche music catalogue on ANote, you will receive 20% of the royalties collected by the PROs for that catalogue.

Monitor and Maximize Royalty Income

To maximize your return on investment, continually monitor the performance of your music rights. Use tools and platforms to track royalties, streaming numbers, and the usage of the songs you’ve invested in:

• Royalty Statement Analysis: Regularly review royalty statements from PROs or music platforms to understand where income is coming from (e.g., streaming vs. public performance) and identify opportunities to maximize revenue.
• License for Sync Opportunities: Consider actively seeking out licensing opportunities for your music in visual media (e.g., commercials, films, TV shows). Sync royalties tend to offer higher payouts, and niche genres often appeal to filmmakers looking for unique or culturally specific music.

Inefficient Royalty Capture

Artists in niche genres face significant obstacles due to the current structure of the music industry. Inefficient royalty capture, fragmented markets, outdated business models, and the disproportionate focus on superstar artists all contribute to the under-representation of niche music. 

The core issue with traditional music business models stems from their inability to adapt to digital consumption patterns. The music industry has long been plagued by outdated business models that have struggled to adapt to the digital era. Traditional Collective Rights Management Organizations (CRMOs) and legacy music labels have failed to capitalize on emerging trends, leading to inefficiencies in royalty collection and distribution, especially for niche genres and lesser-known catalogues. Overall, the current model involves multiple layers of intermediaries (such as music labels, publishers, and CRMOs) that increase the costs associated with royalty collection, particularly in cross-border licensing. 

These models, established decades ago, were designed for physical media (e.g., CDs and vinyl) and have not evolved to meet the demands of a streaming-dominated world. As a result, CRMOs struggle to capture the full market potential for digital music, especially for niche genres. In 2012, the potential royalty market for digital music in the EU was estimated at €18 billion, but only a fraction of this amount was captured by traditional royalty management systems.

In an increasingly fragmented and digitally-driven music landscape, a potential solution lies in the integration of crowdfunding platforms with online royalty management. Instead of relying on traditional record labels or distributors, artists can raise money directly from their fans, bypassing the intermediaries that have historically controlled the industry. While crowdfunding platforms are effective in securing upfront capital, integrating these platforms with online royalty distribution systems would solve many of the inefficiencies. 

Blockchain technology, combined with digital rights management (DRM) tools, can contribute to manage and distribute royalties transparently and efficiently. When music is sold, streamed, or used in any way, smart contracts can automatically distribute the royalties to the respective stakeholders (artists, producers, co-writers). This system eliminates the need for CRMOs or traditional intermediaries, drastically reducing transaction costs and ensuring that artists are paid fairly.

Final Thoughts

Niche genres are rich in dedicated fanbases, and though they may not dominate mainstream charts, their passionate followings create a steady demand for music. They appeal to loyal, often underserved fan bases that can generate consistent and long-term revenue streams. Additionally, because niche markets are frequently overlooked, the cost of acquiring rights, producing content, or promoting it is generally lower than in mainstream markets. On the other hand, they offer a more open market with fewer investors vying for rights.

By investing in these genres, you can help to preserve and promote cultural diversity in the music industry. Lesser-known genres, such as blues subgenres or traditional regional sounds, often represent the cultural identity of specific regions or subcultures. These genres are essential to maintaining a diverse and inclusive musical ecosystem that reflects the rich cultural tapestry.

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  Key Players in the Music Industry

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  How to Invest in Music Royalties

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  Factors Influencing Royalty Value

FAQ: Investing in Niche Genres Music