Welcome to another awesome installment of our “Unconventional Investment Series” here on Earn More and Save. Today, we’re going to get up close and personal with the music royalty biz. Did you know that some songs from the 1960s and 1970s still earn generous yearly royalties… to this very day? Some even average up to $10,000 a year!
Get this – now, there are ways to get a piece of that music royalty action yourself. You can buy shares of a song, much like buying and selling shares of a stock, using online auction websites. Sites such as The Royalty Exchange and SongVest exist, and they’re trading platforms that allow users to score a piece of the music royalty pie.
If you’re looking for a way to diversify your investment portfolio – which you should if you’re serious about future-proofing your assets – then this would be a great (and fun!) avenue to try.
How Royalty Marketplaces Work
To understand how royalty marketplaces work, you must first grasp the idea of royalties. When you purchase a royalty interest in a song, you’re essentially buying the right to receive a string of future royalty payouts for some predetermined period. It’s essentially partial ownership of a song, and the more shares you buy, the more royalties you’ll earn.
Online royalty marketplaces such as SongVest and The Royalty Exchange (TRE) were created to provide buyers and sellers secure online platforms upon which to do their business. SongVest deals exclusively with music royalties, whereas TRE is an auction site for royalties of all kinds (think trademarks, pharmaceuticals, movies, patents, and more).
People who own royalties can choose to sell any percentage of their current royalty stream to the public. Music royalties can be sold as complete catalog packages or simply as rights to a particular song. Once you amass a collection of music royalties, when you decide to sell, the ability to break your holdings up into smaller portions will protect your investment immensely.
As a buyer, you can view at least 2 or 3 years of royalty history before you place a bid – a great way to protect your investment as well. Whether you’re buying or selling, complete control over your portfolio and extra transparency are both huge benefits of exchanging royalties in an online marketplace setting.
Many songs allow you to receive royalties until the copyright ends, and the time period is generally around 95 years from the date the original artist passed away. This makes music royalties a great long-term investment to round out your portfolio – and it’ll earn you major bragging rights in the process.
Cautions and Considerations
For both royalty marketplaces mentioned, all transactions are managed and reviewed by financial and legal professionals. This is to ensure the sales take place completely within the scope of the law, as well as to ensure that all royalty payments will be issued when agreed upon.
Although these sites offer this protection and claim to perform initial checks of both the royalties and ownership of the items up for sale, be wary and do your homework anyway. Don’t rely solely on the due diligence of the websites. Try investing in a series of different music royalties if you want to play it safe and spread your money around. If you decide to invest a hefty sum in one song that your gut tells you may be a winner, learn everything you can about the song’s history, owner, etc. before you place a bid.
Remember, as with all investments, you are choosing to take the plunge at your own risk. No investment is ever guaranteed to make you rich, but the more you learn about the investment before you buy, the better your chances of snagging a winning tune.