Analysis is a fancy word for thinking. And when it comes to investing your money, if you've ever bought a stock, bond or mutual fund, you've performed exactly that analysis. It's not optional: we must analyze in order to act.
And just as in financial markets, when investing in music royalties one must consider both the financial and fundamental aspects of a music royalty investment. Broadly speaking, it's the art of evaluating how a piece of music might generate attractive risk-adjusted returns over the long term.
I believe songs popularized in films have an inherent value-added appeal. Up until recently, major studio films were allocated significant advertising; giving songs featured in such films a unique awareness.
As the success of Simple Minds' "Don't You Forget About Me" can be directly attributed to its inclusion in 1985's The Breakfast Club, music popularized by generational films may have long term appeal that more traditional radio hits do not experience.
Royalty Exchange's Blasick auction, based primarily on the writer's share of public performance royalties on songs from the films Confessions of a Teenage Drama Queen and Magic Mike, is what I consider a "generational" pure play on those young adults now 20-30 years old, otherwise known as Millennials or Generation Y.
What “Clueless” is to Generation X, so is 2004's “Confessions of a Teenage Drama Queen” to the women of Generation Y; a meme-defining memory that innumerable girls bought on DVD as kids, back when DVDs existed.
In thinking about the Blasick auction it is important to note that a large portion of the royalties come from Lindsay Lohan's performance of "Don't Move On", a song that offers long-term potential given the audience's particularly young demographic. Teenage Drama Queen is essentially a nostalgic movie for an audience that is just now becoming old enough to appreciate what nostalgia actually is. This audience demographic is thus at the beginning of a potential many years of nostalgic movie watching and sharing.
In my option, "Don't Move On" is the type of powerful female ballad that could be re-popularized (and recorded on) the 2021 version of American Idol. This classic and powerful anthem can find appeal, particularly as a cover for other artists, long beyond the era of its initial release.
Lindsay Lohan, who popularized the song when she was just 18, remains an instantly recognizable star worldwide. And, among the generation who grew up with her as the child in Disney's The Parent Trap (1998) and Mean Girls (2004) she has what's described as a "cult" following.
Now only 28 years of age, Lohan is an established actress and musician; her two albums and 8 singles were certified platinum and gold, selling nearly 5 million copies worldwide. Despite well-known substance abuse issues, Lohan remains a household name, the type of legitimate talent whose eventual mainstream comeback is easy to imagine. The public is forgiving and tends to have a surprisingly short memory about a star's turbulent years. As such, tabloid scandals rarely wield any lasting negative effects on real star power.
Figuring out the profit margin on a McDonald's hamburger isn't difficult, nor is estimating earnings on the S&P 500's most well-known and widely followed companies.
What makes investing in music royalties a challenge is that one is required to imagine how relevant a song, or in this case, a film in which a song is featured, will be 10, 20 or even 30 years out.
It's not easy, but it is an art. Beyond the financials, this is the critical evaluation every potential music royalty investment requires.
Appearing next week in Royalty Review: How (and why) to diversify.