Musicow CEO Jung Hyun-kyung / Courtesy of Musicow

Music copyright royalties have long been considered exclusive to artists. But entrepreneur Jung Hyun-kyung recognized their potential as a new financial investment product, offering an attractive option for investors seeking portfolio diversification.

This led her to found Musicow, the world's first royalty-sharing platform, in 2016, transforming music intellectual property (IP) into a tradable financial asset and pioneering an innovative cultural finance market. The company provides a fractional investment service, allowing copyright royalties to be divided and traded like stocks.

Now, with this new type of financial product, the Korean startup is seeking to enter the United States, the world's largest music market and financial market.

To this end, the company established a U.S. subsidiary in March 2022 and recently formed a strategic partnership with Roc Nation, the global entertainment company owned by hip-hop mogul Jay-Z, gearing up for its U.S. service launch.

“Partnering with a company like Roc Nation is challenging, but at the same time, it has the potential to be incredibly impactful,” Jung said in an interview with The Korea Times. “The reason Roc Nation accepted our proposal is that what we aim to achieve aligns with contributing to the music ecosystem. For the music industry to thrive, financial resources are essential. What we have done is create a new industry model where money is directly linked to IP.”

In the past, Jung said, the music industry was primarily about producing music and making great albums.

But at some point, as music merged with information technology (IT), the key question became who controls distribution. Companies specializing in this are called distribution service providers (DSPs), and a few major DSPs have effectively monopolized the market. As a result, many creators have become subordinate to them, relying on these DSPs to provide funding.

“Now, with the convergence of finance and music IP, the industry is at a turning point with the emergence of the platform capable of supplying capital to the music sector in a more structured and scalable way,” Jung said. “We have defined this new business domain as an equity service provider (ESP). We believe it is time for the music industry to shift toward the ESP model. Roc Nation has also recognized the potential of the ESP industry and joined us in this vision.”

Musicow's platform allows music copyright royalties to be traded like stocks. Courtesy of Musicow

She said the goal is to build a sustainable cultural ecosystem that benefits both creators and investors.

“Investors and fans alike can experience a new music consumption culture where the more they listen to their favorite songs, the more they earn,” she said. "At the same time, artists can secure new funding opportunities through fair valuation, enabling them to create higher-quality and more diverse music IP.”

Jung cited a recent research report by the Korea Institute of Intellectual Property, which analyzed the economic value of music revenue securities — a market pioneered by her firm.

According to the report, if all currently issued domestic music copyrights were securitized, the market value could reach 15 trillion won ($10.4 billion). It also estimated that if this capital were injected into the music industry, it could lead to the creation of approximately 620,000 new songs and generate around 100,000 jobs.

Additionally, Jung describes music copyright royalties as an attractive and stable asset that generates consistent cash flow.

With advancements in IT and the expansion of streaming platforms, royalty streams have become more stable, and their lifespan has extended. The global rise of K-pop has further fueled the growth of the music copyright market.

“Unlike gold, which is considered a safe-haven asset but does not generate cash flow, music copyrights provide steady monthly earnings. Artists receive royalties regularly, and fractional owners of a song also get their share. Since these royalties are distributed consistently, music copyrights function as a reliable income-generating asset with low volatility,” she said.

“While stocks are influenced by factors like interest rates, commodity prices and inflation, music consumption remains steady regardless of economic conditions. This makes music copyrights an independent asset, which is particularly valuable during downturns when portfolio diversification and stability are crucial.”

Preparing to enter institutional framework

Musicow CEO Jung Hyun-kyung delivers a lecture on the characteristics of music copyright assets at COMEUP 2022, Korea's largest startup event, at Dongdaemun Design Plaza, Nov. 10, 2022. Courtesy of Musicow

Musicow is one of the pioneers of fractional investment businesses in Korea.

Fractional investing is a contemporary investment approach that enables investors to combine their funds and collectively invest in high-value assets, such as real estate, stocks, bonds, artwork and livestock.

After its launch, the service has been well received in the market, leading to a rapid increase in its cumulative membership from 10,000 in 2018 to 915,000 in 2021. The platform now has 1.23 million members as of February.

In 2022, the firm was designated as an innovative financial service by the Financial Services Commission (FSC) and has since been operating under the financial regulatory sandbox, which temporarily eases regulations to facilitate the development of innovative services.

The company is receiving renewed attention after the FSC announced plans to institutionalize fractional investment on Feb. 3.

The financial regulator said that fractional investment issuance platforms, currently operating under the regulatory sandbox, would be formally institutionalized through amendments to the enforcement decree and enforcement rules of the Capital Markets Act.

It also announced that a small license for the investment brokerage business would be introduced to regulate these platforms. The revised regulations are set to take effect on June 16.

Regarding upcoming changes, Jung said the company is not yet at a stage where it can officially disclose concrete plans.

“Musicow's designation under the regulatory sandbox remains valid until September 2027. This means that even after the revised regulations take effect, we can continue operating under the current framework until the designation period expires,” she said.

“Once the institutionalization process is complete, we will comprehensively review our service operation strategy. Our top priority is protecting our customers' rights, and we will work closely with financial authorities to ensure we provide a stable and trustworthy service.”