Despite increasing competition for music royalties, returns on assets acquired through Royalty Exchange in the second half of 2020 remained steady, averaging 10.63% across all asset types and investing formats.
These results are based on an analysis of 358 transactions that Royalty Exchange administers with a full 12 months of actual returns available for review in the second half of 2020.
But this average doesn't tell the whole story, because it blends returns for both permanent (Life of Rights) and temporary sales (10-Year Term). Breaking returns down by asset type shows that both offer more than acceptable rates of return, with permanent assets continuing to outperform temporary assets.
12-Month Return On Investment
Life of Rights
These results also reflect a slight increase over our previous six-month analysis, with the overall average return increasing slightly from 10.25% in the first half of the year. The average returns for 10 Year assets also increased slightly, from 7.95%, and remained largely flat for Life of Rights asset, from 13.81%.
Manual vs Automated Offers
But what really stands out is the return potential of assets acquired through Standing Orders. This is our automated investing feature that allows investors to place orders for catalogs that meet their specific criteria, which our system then matches as appropriate catalogs become available.
The average return for Life of Rights assets acquired through Standing Orders is 17.6%. Here's the full comparison of manual vs Standing Order returns...
12-Month Return On Investment (Manual vs Standing Orders)
Life of Rights
Returns By Copyright
Finally, we examined returns by copyright—Composition vs Sound Recording. We found royalties generated from the sound recording copyright are still producing higher returns than royalties generated by the composition copyright. This is not surprising as the industry shifts more towards streaming, which benefits the sound recording at a greater magnitude than the composition.
However, there were also far fewer sound recording assets to analyze, which may have also affected the results.
12-Month Return On Investment (Composition vs Sound Recording)
Composition (304 deals)
Sound Recording (39 deals)
Taken together, this analysis suggests that music royalties remain an attractive alternative investment for investors seeking yield. While increased demand has caused greater competition for these assets, the return potential has held steady over the last 12 months.
We'll examine returns again mid-year.