Saturday February 17, 2018
May 2013


 Diversification as a Recording Artist: A Lesson in Risk Management

By: Anthony Villiotti

 invest-in-tax-free-bonds-before-rates-start-fallingWhen an investor is building his or her stock portfolio, one common technique used is called ‘diversification.’  Diversification is when an investor invests in stock from many different companies and/or industries to avoid idiosyncratic risk (specific to one company or industry).  The idea behind diversification is the phrase, “don’t put all your eggs in one basket.”

 How does this relate to your new music career?  Well, each album you go on to produce is an investment, right?  Furthermore, you could even say that an album is a portfolio of investments, since we’d look at each song as an investment.  You work all year long – sometimes longer – preparing this album.  You’re investing so much into it.  Your style (in your opinion) is perfect and you reflect this style in each song and you can see it becoming a huge hit!  But…surprise!  The market, for the most part, hates your style, and you end up losing money.  Rough.

 This happens every day in the stock market.  Say your portfolio is made up of mainly technology stocks, and then some event causes the prices of virtually EVERY technology stock to go down.  You’re just out of luck.  What’s the solution?  Diversification!  In the case of releasing albums, your risk is not appealing to a big enough audience and not selling albums.  The best way to manage this risk is to appeal to many different audiences in the same album by diversifying your portfolio.

 As usual, I will refer to a Mariah Carey album – The Emancipation of Mimi.  On this album, she had R&B, ballads, Pop, Hip Hop, and she even had some Rap features.  This album was both a critical and commercial success, and it was largely due to the quality of hits on the CD, and their respective characteristics.  So when you go on to make your next album, or portfolio of investments, try to add in a couple of genres to the mix.  That way, you will open the doors to different audiences, and ultimately more consumers.


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