Royalties In The Age of Covid-19

A message to our investor community from Royalty Exchange on the Covid-19 situation.
March 19, 2020

Whether you’re actively invested in music royalties, or still considering it, you’re probably wondering what the COVID-19 crisis means for these assets.

Please know above all, our main concern is your health and safety and that of your loved ones. We encourage you to maintain social distancing and follow all the steps recommended to mitigate the spread of this virus.

The team here has shifted to a remote work setting weeks ago to continue bringing you royalty investing opportunities. We don’t anticipate any disruptions. And our phones continue to ring with rightsholders interested in selling a portion of their royalties to investors like you.

As you’ve likely heard, the most immediate impact of the crisis on the music business has been the postponement or cancellation of most live events, from intimate performances at small venues to large festivals like SXSW, Coachella, and more.

This will almost certainly have a negative impact on the touring musicians, support staff, and related businesses throughout the music industry. But royalty revenues are likely to be more resilient.

Touring revenue predominantly consists of ticket sales, sponsorships, and merchandise sales. The Royalty Exchange marketplace does not deal in these types of revenue streams. The assets on our marketplace consist of public performance royalties, mechanical royalties, and sync royalties, for the most part.

Performance royalties are fees paid when music is performed publicly, including over the radio, in a restaurant or bar, or in a live venue. But it also includes when music is streamed by individuals through services like Spotify and Pandora.

[Read more about the different types of royalties in our Music Royalties Guide]

Of all the ways performance royalties earn income, revenue from live performances is one of the smallest. A quick review of all the public performance catalogs we’ve analyzed in the last 12 months shows that live performances only contribute 1% to the entire category.

  • International—38% (a blend of all sources generated outside the U.S.)
  • Streaming—22%
  • TV/Film—20%
  • Radio—11%
  • Streaming Video—4%
  • Satellite Radio—2%
  • Live—1%
  • Other—1%
  • Retail Music Service (Muzak, etc.)—1%

As you can see, the vast majority of public performance royalty income comes from radio play and streaming services like Spotify and Apple Music. And early indications at least suggest that streaming is on an uptick as a result of the social distancing taking place.

It’s important to remember that music royalties are long-term investments. Their value lies in the ability to generate income, not on the price investors are willing to pay for them (unlike most stocks).

All things considered, we feel royalties remain an attractive hedge against market volatility. But also know that your investment in music royalties is doing much more than just provide a return. In many cases, it may be the investment that keeps an artist in business to create new music in weeks and months ahead.

Royalties don’t get canceled. They endure.

- The Royalty Exchange Team

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