Options such as self managed superannuation fund (SMSF), stocks and bonds easily come to mind when making provisions for future needs is concerned. You have probably not thought about the possibility of investing music royalties. But you can actually have your own share in these royalties, even if you are not a musician. The information on how you can go about doing so is presented in this pieces.
What is music royalty?
A music royalty is a proportion of the money made from the sale of a song or from the use of the same on radio and other broadcasting media that is paid to the recording artist, songwriter and/or producer of the song. For example, Coldplay get to receive a certain percentage of money made from the sales and public use of all the songs they have written. Hundreds of million dollars are paid in music royalties every year. Royalties are not paid only on music, but also for other types of intellectual property as well as for extraction of non-renewable resources such as oil and gas.
Types of Music Royalties
There are different types of music royalties you can invest in, the most popular of which are:
Mechanical royalties – These are the types of royalties that are generated from reproduction copyright. The recording artist, songwriter and publisher are entitled to a percentage of every unit of song sold, even when such is bundled with other songs.
Public performance royalties – These are royalties required when music is performed in the public via media such as radio and television. They are required when a song is played in a public event such as a live gig.
Mechanical synchronization royalties – Songs are sometimes used in TV shows, movies, video games and adverts, amongst others. Mechanical synchronization royalties are per-unit payments made to recording artists, songwriter and/or producers for these purposes.
There are several other kinds of music royalties, including those paid for streaming, print music, and ringtones.
Investing in music royalties
There are times when those entitled to royalties or their heirs may decide to sell off some of the royalties under their control. This may be because of the need to raise capital for an urgent project, for which money cannot be raised from other sources. You can take advantage of such situations to grab your own share of royalty money.
Thankfully, there are websites that make it possible to invest in music royalties. The Royalty Exchange, SongVest and Lyric Financial are some of the available platforms that can be used by those looking to invest. Songwriters and producers can use these auction sites to sell rights to a portion of their royalty income. The seller and winning bidder are charged a percentage in fees for completed deals.
It is important to note at this point that you want to ensure investing in music royalties is right for your financial goals. Royalties are not very liquid and it may take many years to recoup your investment. The choice of song you invest in will determine the returns you can expect, so make sure you get your choice right.