Clouty, the start-up that wants to make the music industry a speculative market

Positioned “at the crossroads of the worlds of finance and music”, Clouty wants to offer investors the opportunity to bet on music genres, artists and even songs.

Vinyl records, autographed sheet music, rockstar costumes: there is no shortage of collectibles in the musical universe. Many are those who do not hesitate to put the price at specialized auctions, either out of passion or in the hope of seeing the price of these often unique pieces rise over the years.

But what about being able to negotiate, that is, bet up or down, about music genres, artists or even individual tracks? This is the somewhat crazy challenge that the start-up has set itself dirty, headquartered in Chicago. Last July, it created its first index, the “music index“, aiming to replicate the weekly financial performance of the 500 most streamed songs on the various listening platforms.

A successful first step, as the “Musiq Index” is already resumed at Bloomberg terminalsand therefore accessible to hundreds of thousands of professional clients of the world’s largest financial news agency.

A “to unlock” asset class

David Umeh, the founder of Clouty, highlights the world of possibilities his company can open up. “Music is an asset class that hides before our eyes and that has not yet been unlocked“, he told the Financial Times recently. The eccentric businessman had already appeared in the Washington Post in 2016when it launched a marijuana-based juice delivery service in Washington DC, circumventing capital city law.



“Music is an asset class lurking before our eyes that has yet to be unlocked.”

david umeh

Founder of Clouty

aware of the new financial issues of the music industry, which saw its economic model shaken by the rise of streaming and then the pandemic, the 30-year-old now wants to offer investors access to that juicy growth.

However, there is no shortage of options for those who want to invest their money in the sector. Found in US markets Spotify

for streaming, LiveNation

for concerts, his bone

for hi-fi equipment… The top three record labels are also listed: Sony Music Entertainment, part of the eponymous conglomerate

listed on the Tokyo Stock Exchange since 1958; Warner Music Group

, listed on the New York Stock Exchange in 2020; and Universal Music Group

whose successful IPO on the Amsterdam Stock Exchange in 2021 valued it at almost 54 billion euros.

The success of Hipgnosis in sight

Other more specialized players are also hitting the markets hard, such asHypnosis

which describes itself as “the first British investment firm to offer investors a direct exposure to music and intellectual property rights music”.

200

Million dollars

Justin Bieber sold his entire catalog to Hypgnosis earlier this week for $200 million.

Backed by private equity giant Black stone

and listed in London under the ticker “MUSIC“(“song” in English), the fund is constantly buying songs or even entire music catalogues. To name a few, Shakirathey Red Hot Chili Peppers, Blondes or Neil Young are all artists whose royalties are now collected by Hipgnosis and its shareholders. Most recent, Justin bieber sold him the entire catalog earlier in the week for $200 million.

But Clouty wants to go even further. In addition to its “Musiq Index”, the start-up seeks trade a fund that replicates its indexlike trackers that follow the performance of bitcoin, gold or other commodities.

When the index was released, David Umeh made no secret of his ambitions. “By creating a financial index that allows the entire world to track the performance of the underlying marketa tool that has been available for decades for other assets, we are opening the door to a number of exciting opportunities.”

tear down the walls

Among them, Clouty would like to release indexes based on music genres or artists, as well as futures on these same indices, or futures contracts allowing traders to bet on them up or down. Its main asset, highlights the company, would be its correlation with the evolution of other asset classes, such as equities.



“By creating a financial index to track the performance of the underlying market, we are opening the door to a range of exciting opportunities.”

david umeh

Founder of Clouty

However, several obstacles can slow down the startup’s still incipient projects. Notably the complexity of the futures marketwho it can take years to gain depth and liquidity. Market makers will have to heed the call, which has not yet it was not always the case for futures linked to unusual assetseven when created by Chicago Mercantile Exchange (CME), the world’s largest futures market.

David Umeh, he is a firm believer in his project. He is already seeking to assemble institutional investors to finance his ambitions. But before that, Clouty will have to show your credentials to regulatory authorities, demonstrating the operation of its indices, which remains opaque.

The summary

  • dirty want to create tracks and futures contracts allowing you to trade music genres, artists and songs.
  • The Chicago-based start-up launched its “music index“, already resumed in Bloomberg terminals.
  • However, the music industry is already very represented on stock exchanges.
  • Regulatory hurdles and the complexity of futures markets can also brake startup ambitions.

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