Music prediction markets: a half-billion dollar business based on guessing what will happen in music...

0:02Hi, everyone. Welcome to The Price of Music, brought to you by Music Ally. If you want a guide to what's going on in the music industry and how it all works, well, here we are, looking at the finances and the stories and stuff that's going on in the pop biz in the last week. He's Stuart Dredge. I'm Joe Sparrow. Hi, Stu. How are you? I'm good. Very good. Wonderful to see you as ever. Now, this week, we wanted to put a whole episode aside, as we do sometimes for one topic. And it's something that's sort of crept up on the music business in the last few months. But it's already this year and near, well, it is a half billion dollar market.

0:39And yet it sort of is and sort of isn't part of the music business. If you haven't guessed it yet, it's prediction markets and particularly prediction markets based on music. If you don't know what that means, we will find out. And we will find out how you can get a slice of that sweet action. This is something we've written about a couple of times, and it's proven very popular, so we decided to chat about it a bit further. And to do that, we're going to flip the usual structure. And Stu, hi, Stu, is going to ask the questions, and I am going to answer them. Stu, fire away, please. I know. I get to relax.

1:11I'm going to say anything sensible, because you have all the knowledge in this thing.

1:14Stuart:I'm sweating bullets, I'll be honest. Well, this is fascinating, because to me, I didn't know anything about prediction markets until a few months ago, and now suddenly they're big. So can we start with the absolute baseline for someone who has no idea what a prediction market is and why it cares. So what are these things generally before we get to music? So they're sort of, well, think of them as apps in which you stake money and predict what's going to happen. Now, it sounds a little bit like gambling. It technically isn't, and we'll talk about that in a minute. But it's a place, generally an app or an online platform, where you trade money on the likelihood of real events happening.

1:49And those real events aren't just sport, as you might expect. They're pop culture, sports, geopolitics, economic data, literally anything. So it's being pitched as trading. But instead of buying stock in Disney or Apple or whatever, you're buying or selling shares in a future outcome. And every market is styled as a simple yes or no question. So it could be, for instance, will Taylor Swift release a new album this month? Yes or no. And you pick one side and you technically trade on it. And those are styled as contracts. You are not gambling. It's a contract. And the price of Will Taylor Swift releasing your album this month will be somewhere between$1 and$0.

2:42So$0 means it definitely doesn't happen, and$1 means it definitely does happen. So for instance, you or I could pose the question in the first place. So we could say, here's an idea, will Taylor Swift release a new album this month? And people can say yes or no on it. And then over time, as people stake their money on yes or no, it starts to deliver through that data a price. And that price might be 65 cents, for example, which means that collectively the market thinks there's a 65 % chance that Taylor Swift will release a new album. And then at a defined point, the end of the month, if Taylor Swift has released a new album and you bought into yes at the time when it was like 65 cents, she does release the album, your 65 cents becomes then worth a dollar.

3:33So you make 35 cents. If you bought in at 65 and she doesn't release an album, you lose that 65 cents. You're technically not losing it because it's not gambling, but it feels the same.

3:44Stuart:Right. And it's one of those things that, yeah, It's not gambling, but it's everything. It smells like gambling, looks like gambling, and feels like gambling. Yes. We'll get into that. I mean, so who are the big platforms in this space? Because I guess who is the Uber of this, or who are the kind of the big players doing this? And how did it actually work? Yeah, so there's two main prediction market apps. It's CalShe and Polymarket. If you're listening to this in the USA, this is old news. They are very, very big in the USA. And the reason for that, frankly, is because gambling has been very heavily restricted historically in the US.

4:24If you're listening in the UK, where gambling is extremely normalized, and probably everybody knows at least one person who has a gambling app on their phone and uses it regularly to bet on football, for instance, the USA is not like that. And Calci and Polymarket are the two biggest trading platforms, and they work in two slight different systems. Polymarket is, we're harking back to the glory days of crypto here. It is a crypto-powered platform. So it's based on the blockchain. You don't use, yeah, I'm afraid so. But it doesn't use traditional bank accounts. You have to switch your money into crypto, which are called stable coins.

5:05So they're linked exactly to the same price as a dollar. And then you use that crypto wallet to make your trades slash gambling. And because it's offshore and it's crypto, it's not really regulated by anybody. Totally good. And technically, you're not allowed to use it if you are US-based. But it is now launching into that market. Calshi, on the other hand, is that the platform works almost exactly the same, but it's regulated by the US Financial Commodity Futures Trading Commission. So it's legally a bit like the stock market. So it's regulated by them. And so you are like when you buy a stock.

5:54So if you're someone who buys a stock in Apple, you might be doing it for two reasons. You might be doing it because you think, okay, in 30 years, it'll be worth more. And I will have earned a lot of money in that time. It'll be good for me when I retire. That's one form of investing. The other form is I'm going to buy it now. They're going to release a new MacBook next week. Everyone's going to love that new MacBook. The price is going to jump up, and then I'm going to sell it and realize the difference between the price I paid and the price in a week's time. And that's a bit more like gambling.

6:25It's technically not gambling, but it's more like gambling. And that's the prediction market model, which is we think this thing is going to happen in this time frame, and if we're right, we'll make money. So that's regulated by the government agency around financial laws, but it is not regulated by the Gambling Commission because it is not gambling legally.

6:47Stuart:And I sense the amount of times you have to say that so far. This is obviously a point of discussion, which we'll get to, I think, later on. So can we get on to music then? Because obviously on these things, and I think I've seen Polymarket in the press for some big football bets. I've seen it for the, was it the one that was a controversy around people betting on when the US would invade Iran and that sort of thing? Yeah, so I mean, you've seen this. Yeah, exactly. You've seen this in the headlines. Literally, current events, but what are music prediction markets then? What are people kind of doing around music?

7:18Yeah, so if you look at an app, I'm looking at the website here, and there are many different areas in which you can find trades that you can stake your money on. If I go to the music page here, you've got, for instance, who will headline Lollapalooza Chicago 2026? And at the moment, 95 % of people, or 95 % chance, people generally think it's going to be Lord, the artist Lord. Doja Cat, I'm afraid, only has a 4 % likelihood. And so what, and another one here is, will Drake and Kendrick Lamar make a song together before 2030? That is the long game.

7:56Stuart:I see I'd be willing to take a punt on that, I think. I can see that being the next step in their narrative. But what do people think about that? Well, that's the thing, isn't it? That it does sound sort of plausible and sort of not plausible. And at the moment, there's not been a lot of people gambling on that one. Sorry, trading on that one. And it's about 50-50. Okay. So it's kind of telling in itself that people think, well, actually, it sounds like that could be possible. And you and I, having observed the music biz for a long time, would agree on that. It does kind of sound plausible, even though at the moment it doesn't.

8:31And this is the big tempting thing about this. It allows you to trade slash gamble on literally anything you think that you have a little bit of a competitive edge of insight or knowledge on.

8:43Stuart:Okay. So in terms of music, we're talking album releases. Will this release happen? Will this headliner festival happen? Yeah. And also, I've seen some things about betting on streaming numbers or betting on stats. Yeah, exactly. So at the top of the page here that I'm looking at, music charts, who will have a number one song on Spotify USA in June? And that one question alone has seen$669 ,000 staked on it. And at the moment, there's a 12 % chance the market thinks that Drake will, 11 % that Sabrina Carpenter will, 8 % that Olivia Dean will, and so on and so on. And so it's sort of, those are the big ones at the moment.

9:30Stuart:How much money do you think a number one track on Spotify USA in June would make from royalties? Possibly less than that money being staked on what it's going to be. Well, that's a great point. And that sort of is where the line gets a bit blurred here because you're sort of gambling on trading on data. and you can see in each of these questions the volume that's being traded and you know it's it's that's what i meant by the beginning where i say it sits on top of the music industry this is not really you couldn't go and manipulate very easily that the the streaming numbers on spotify i mean you could try but it would probably cost you more than you would win so it's sort of sitting on top of it so um it's it's hard to to be able to manipulate it but you could start making a lot more money based on music and and there was an interesting interview with um one of the key people from uh calci recently with with the billboard podcast and she said that So far in 2026, the volume, the amount of money in the market that has been staked on music is$400 million, which is huge.

10:45Stuart:Yeah. And this is a completely new thing. I mean, so this is sitting on top of the music business. It's not got any involvement really from rights holders. It doesn't need rights. It doesn't need anything. So what does it mean? how could it change things though for like labels for managers people in industry is there what should they be doing what does it mean for them or are they just kind of seeing it happen in distance and and understanding it but can they get involved what's going on there yeah it's tricky isn't it at the moment it really is sitting on the other side of the fence and is saying right we're we're looking at the music biz and we're us the people here are staking predictions on it and of course, the thing to remember is that Calci and Polymarket and these platforms don't act in the traditional way.

11:35Like if you go and place a bet with a bookmaker, they make the market, right? So they say, we're setting the odds of the likelihood. We'll take your money, we'll hold it and we'll give it to the people who win. That's not what's happening here. What's happening is that anybody can log in, create one of these predictions, and then anybody else can gamble that put their money into it. That money is held and then automatically redistributed to the winners, if you like, when that thing happens. So it's a bit peer-to-peer as opposed to betting against the house. So what does that mean for the music industry?

12:11Well, it means that the music industry is being observed in a new way. And this is one of the things that these platforms argue makes it a good thing. They're saying that if you want to predict what's going to happen in the world, whether that's about wars, financial markets, or who's going to be at number one in a week's time, these prediction markets, because people are staking actual money, you have to say, right, I believe in that to the value of 10 or 20 or$100. So I believe that Olivia Rodrigo is going to have number one, and you put your money in. So these are not just finger in the air estimates, it's what people really believe.

12:54and they're saying that this is a this is the biggest and most accurate collection of polling data of people on every topic including granular things like will drake release an album um and the wishful thinking fan brain drops away and the sort of very um uh sort of the part of the brain that says well actually i've got skin in the game so i don't want to lose here so the pragmatic brain takes over so they're saying that's their argument for it and and you may have seen if you've seen on tv that some news channels in the us like cnn are using this prediction data to sort of back up news stories particularly when it comes to politics okay so

13:41Stuart:i'm trying to think how i mean i guess in a music sense say you had a big artist with an album going up against olivia rodrigo's yeah but everyone on calci thinks olivia would be number one and yours won't, do you then go, well, maybe that's a strong signal we could move the release date? Like, is that the sort of thing? Yeah, absolutely. If people start paying attention to these views. But is it, to what extent is it still a niche? Like, are these mainstream people? Or is it just hardcore crypto gambler people? And is that a reflection of what's going to happen in music? Do they know what they're talking about?

14:11Stuart:It's not, it is mainstream. So, I mean, Polymarket is a little bit probably more geeky because it requires that transition of money to crypto, but that onboarding is made very, very easy. The Calchi one is just plug and play. You put your money into it like you would into an investment app, and you're away.

14:37Well, for instance, put it this way. As a size of its scale in terms of the user base, there was a prediction market predicting the opening song of Bad Bunny's Super Bowl halftime show. And the trade volume, the amount of money that was put into that. And so there was a list of songs. So which one is he going to start with? And you pick the one you think he's going to start with. Not the one you like best or want, but the one you think he's going to start with. And the trading volume was$110 million. So$110 million worth of money was put into that market of people who thought they knew what that first song was to try to win some back.

15:16So yes, the positive way of looking at this was if you are an artist, if you're working with an artist and you're trying to pick a release date, you could look at what releases people think with their sort of monetized prediction is going to happen in the rest of the year and you could sort of find a gap between that. You could even put your own poll prediction up there and say, hey, when do you think my artist is going to release that album?

15:41Stuart:Well, I was going to say, anyone can publish your question. So you could say, I don't know, say you're Bad Buddy's manager. You could say, what song will it be the first one on his tour set list and use that as market research? But I'll get on to some of the implications of that later that I've got. I've worried about that. Okay, so you could, it's basically you could see how people are perceiving the industry and what's going to happen, and you could do that. But does this mean, so people like us, people who are listening to this, so strong fans who have lots of knowledge or people in the industry who understand chart metric data and all those kind of sources can the likes of us legally use this to make money by putting our knowledge to use of these markets?

16:22Stuart:Is this what we're going to start to see happening? People who know stuff about music will go in there? Yeah, that's where it gets complicated. So insider trading is illegal but you can see how You can make a very, very small jump from saying, I'm going to do some market research to see when my album should go out, to what if I know when the album's going out, and I put a big stake on that month and make some money back. And this is what's happened with the military stuff, hasn't it? People are saying, well, hang on, who knew they were going to bomb Iran on this day, apart from these narrow group of people within the White House?

16:59Stuart:So who's betting on this? Exactly. So especially with the crypto-oriented ones, There is a sort of natural layer of anonymity in there to a certain extent. You have to set up a proper account that is sort of registered to you, but the crypto can come from anywhere and can move out quickly to anywhere. So yes, there were some sort of scandals where, I'm trying to think of the many countries that USA has invaded recently. Was it Venezuela? And someone, it turns out, in the military won a lot of money because they predicted it was going to happen, but they knew it was going to happen and they won hundreds of thousands of dollars.

17:40And I think in that case, I don't think they found out who it was but in terms of when Iran was invaded, somebody in the military was subsequently identified and they are now in serious trouble because that kind of insider trading is strictly illegal. That's national security as well, isn't it? That's national security. That's a double wagging.

18:00Stuart:Let's bring this to music though. So, okay, for example, there were probably four or five people at Universal Music Group who know if Taylor Swift is releasing a new album this year or not. There were probably four or five people at Apple who knew what the first song would be in the set list for the halftime Super Bowl show. There are probably, you know, there are people, and people at Spotify will know their stats. And these are all big public companies as well. So not just companies, but they're big companies who are regulated. So is there a risk here? I mean, could we see the risk of insider trading?

18:35Stuart:And what does that mean for those labels and companies if they're trying to keep secrets and keep release plans? Yeah, I mean, Kalshi is being very careful to say insider trading is strictly not allowed on their platform and it is strictly illegal in pretty much all markets. And they do work to an extent to weed those people out and stop them from doing it. and that is true but also in your example there if you knew if you know there's like you say there's there are trade secrets and there's a small number of people who know when these big things are going to happen so if you for instance knew when taylor swift's new album was coming out and if you had a couple of beers too many one night and that came out in conversation and someone heard that and then you know like there's where is the line between insider trading and loose lips and going up staking money on that in the past you might have tried to sell it to a journalist and get a few hundred dollars for your information now you could go on polymarket or couch and try and make a lot more money exactly and and that is that that's not inside of trading is it because you're not working for the company you just had a drunk person in a bar no so but so the but the drunk person in the bar could get into trouble and it's sort of it it it's very complicated so So those kind of things that used to be quite clear, like a lot of things in modern technology, are now much more complicated.

19:59So as another example, so yes, you could, if you wanted to, through somebody else or in an anonymized way, understand the data that you've got from inside your company. If it's about a big artist, someone else you could get to establish a question, you could get trading happening on it, you could make a lot of money because you know the right answer. That is illegal. it's um um not allowed by the platform but it feels quite hard to police and it also feels like when there's so many i mean there's hundreds of thousands of questions like that on these markets at the moment how do you police all that sounds like a quick way of making quite a lot of dirty money to me um but then think about this it's sort of the reverse way of of it working like that like if you knew your artist was going to release you're planning to release that album in january 2027 and then you saw in the prediction markets that people were kind of saying it's going to come out in december 2026 first of all would you move the album to release it in december when people think it's going to happen because that also might mean that they they want it they're invested in it they might go and buy the album and stream it and that's what's in their head because it feels right to them and you just pitched it wrong by a month so do you move it back and then if you do move it back you go and stake some money on it well I'm thinking

21:21Stuart:if I was Drake which I thought I often have could I swallow my pride give Kendrick a call say hey the price on Kaoshi of us doing a collaboration has now gone down to 20 0.2 so why don't we both stick two million dollars on record it and put it out next week and we'll make more from that bet than we will so we'll make more from that trade than we will from the record. I mean, this is like, I don't know. As an artist, seeing people make predictions of what you're going to do would make me want to either confound them or go, well, I can make some money here. Yeah, that's right. And there's the arguments.

22:02I mean, this is very complex, right? The arguments for this is that if you take the morally dubious stuff out of the equation for a second, you could say that this is a way for super fans who, like, they look at the social media of their favorite artists, they read all the forums and watch all the TikToks, they know the tour schedules. If this was the kind of thing you were into as an artist, you could say, well, you know, we're giving our super fans a chance to monetize that fandom. You could say, well, I know a bit better than anybody else what's going to happen. I'm going to make better predictions.

22:40That feels a bit morally greasy to me. but if you're a super fan of artists xyz you probably know what they're more likely to do than someone who doesn't and you could win a few uh predictions that way it's weird isn't it because

22:54Stuart:i think to me that the gray area here is like safer sport like i think there was a story this morning about someone bet a million dollars on polymarket that spain would beat cape verde yeah and lost it all and someone else bet like but for much less on on spain not winning and won millions of dollars. But that was a football match where there was no shenanigans. They couldn't, no one knew before the match what the outcome would be. So it is more of a prediction of something that no one, whereas all these music things, a lot of them, some people will know what's going to happen. And it just feels like it's very hard to not have some kind of room for shenanigans.

23:35Stuart:And also, traditionally, people have bet on sport because it's hard to predict. And that's also part of the reason when it has been allowed and regulated. That's why, because it's a game of quasi-chance, right? You would believe that Spain are going to beat Cape Verde, but there's a chance that they won't. And you can look at all the data, but it would be very hard to predict that Cape Verde would draw with Spain in the World Cup last week. And that is part of the complexity here, which is if your career in the music industry is reading Chartmetric data, and if those of you listening out there haven't used Chartmetric, it's an amazing resource that pulls in all the streaming data from all the different platforms and social media data, and you can see how well a song is performing or an artist at any given time.

24:25And marketers rely on it very strongly for looking for release dates, looking for where fan groups are and all that kind of stuff. If you can read that data really well, all of a sudden you could cross-reference that on one of these markets and say, oh, I've spotted a window where people think this, but actually I'm pretty sure it's going to be this because past data has proven it. Which is essentially what people in the financial industry do. They do that with stocks and massive data sets and try and get marginal gains of 2 % or 3 % to make a lot of money when they stake a lot of money. Is that the music industry?

25:01Well, maybe it is now, you know? maybe if I was if I was universal and let's take in let's take the pure illegal stuff out of the equation so I might know when an album's coming out but I can't stake on that because it is illegal but I'm also I've also got teams of people who are really good at reading chart metric data and predicting when artists for other labels for instance might do something so I could as someone working at Universal start staking money on the release schedules of artists for Warner to try and like, so let's say traditionally, if an artist on Warner releases an album the same week as your artist, they're going to take some of that streaming money away from your artist because they're taking it instead.