Secret #6: It’s All About The Process
By Gary Young, EVP and co-founder, Royalty Exchange
If you’re serious about raising a lot of money from your back catalog… you MUST run a process for selling it.
If you don’t run your own process, you’re going to be in somebody else’s process and that’s no good.
It’s about control.
A good process for selling a catalog has two main things:
Rules for bidding.
It seems really basic, I know, but you’d be shocked at how few creatives and their teams follow any process for selling a catalog. And a well-run process is the difference between a great deal and a really crappy one. I’ve seen it time and time again.
Here’s how catalogs are traditionally sold:
You tell your lawyer or business manager that you want to sell your catalog. They open up their Rolodex and send an email to the same 5 or 6 buyers that they know.
They say: “My client is exploring a catalog sale. Here’s what they’ve written. Are you interested?”
One or two of those buyers get back to them in a week or two and say “We’re interested.”
While they’re waiting for the buyers to get back to them, they gather up your statements and put together an informational packet about your catalog.
They send it out to those buyers. The buyers look at it and go over your catalog with a fine-toothed comb. Might take the buyers a few weeks to do their analysis because they’re probably looking at other deals too.
Then maybe one of the 2 buyers gets back to them and says “We want to go deeper. Here are our questions.”
Then your lawyer scrambles to answer their questions. Hopefully, your people have done this enough where they can get the buyer answers within a week. But of course, your folks are working on other things too so maybe it takes two weeks.
Then there is another set of questions and even more back and forth. If your lawyer answers those questions to the potential buyer’s satisfaction… the next step is a letter of intent.
A letter of intent basically says: “We intend to buy your catalog for this price under these conditions.” All good letters of intent have an exclusivity clause which says that once you sign… you can’t talk to anybody else.
So then they have you locked down. And that might seem OK to you but there is one BIG problem here. The letter of intent binds you but it doesn’t bind the buyer.
So they can twiddle their thumbs and keep you waiting for months while they take their sweet time “doing their due diligence.”
And you’re trapped. Then the tough questions start rolling in.
And if this buyer, who you’re married to for 90 days or more, finds anything they don’t like… then the price they agreed to pay starts dropping.
These buyers know they have you cornered and they can do whatever they want with you. And you can’t do a damn thing about it.
Time passes. You get frustrated.
Of course, at the beginning of the process, everybody said it would take “just a few weeks” or a “month or two.” But now you’re in month 4 of this process and they’re using time as a weapon against you.
I’ve seen big buyers sign letters of intent for $6 million dollars. Then the buyers dump the poor songwriter into a woodcutter of diligence questions, and by the end of the buyer’s process… you’re grateful to sell your catalog for $2m bucks just to be done with it. A 66% reduction from the price they lured you in with.
But it’s the natural consequence of letting somebody else run their process on you.
You have to run your own process or else you’re going to get steamrolled into doing a BAD DEAL.
Here’s how you should think about your process.
Step 1: Figure out how much money you want to raise to accomplish your goals.
Step 2: Get a valuation of your catalog. Adjust your goals if necessary.
Step 3: Identify the most valuable parts of your catalog that will get you to your goals.
Step 4: Get your catalog in front of as many buyers as possible.
Step 5: Define the terms of the sale.
Step 6: Give those buyers a deadline. Tell them “No offers will be considered after this date.”
Step 7: Make them compete at auction to see who’s willing to pay you the most money for the part of your catalog you want to sell.
Step 8: Impose a deadline on when the winner must pay.
Step 9: Collect your money, accomplish your goals, and get back to kicking ass and making great art.
That’s exactly what we do. We execute that 9-step process, hand-in-hand with you in order to ensure that you get the absolutely best results possible. Remember, the better you do, the better we do.
It takes a lot of work and requires discipline, commitment, and creativity. But it’s all we do.
You don’t want your team, who sell a handful of catalogs a year, running some haphazard process for you on one of the biggest deals of your life. There is too much at stake.
Here’s exactly how we have conduct all our deals…
First, we have a conversation about your goals, plans, and desires. We get to know you better so we can help you.
Next, we gather up all your royalty statements and analyze them.
After that, we put together 2 valuations for you: (1) a full catalog valuation; and (2) an 80/20 catalog valuation.
Next, we show you exactly how much your catalog is worth so you are armed with knowledge. If the numbers on the deal make sense and help you get closer to your goals… then we talk about how we’ll get the deal done for you.
After that, we put together a simple agreement that gives us the right to sell whatever portion of your catalog makes sense to you.
Then, we complete the due diligence process.
Next, we list your catalog on our marketplace where20,000+ buyers compete to see who’s willing to pay you the most.
Finally, we collect the money from the winning bidder and complete the royalty transfer process for you.
Now that seems like a lot of steps but we have it down to a science. Instead of taking months… it normally takes us less than 30 days. We can complete some deals in a week depending on who is paying your royalties.
That’s the power of focus and specialization.
Every buyer out there is going to try to run their process on you. Don’t let it happen. You won’t win playing somebody else’s game.
Now those are the 6 secrets that we’ve learned after completing hundreds of catalog deals for more than $73 million.
Have a plan for the money. Think it through and don’t sell your catalog if you don’t have a plan.
Create competition. You’re going to get the best deal by having buyers fight over you.
Hire a specialist. Don’t do one of the biggest deals of your life with a part-time dealmaker working for you.
It doesn’t have to be an all-or-nothing deal. Don’t sell your entire catalog if you don’t need to.
Understand the value of your catalog before you start the process. If you go in blind, you’re going to get robbed.
Run a process. Set rules. Have a deadline. You won’t win playing somebody else’s game.
I sincerely hope that you found this series valuable and enlightening.
If you’re serious about selling your catalog and you have a plan for the money… we’d be honored to help you make it happen.
Here’s what you should do next...
The tool grabs and analyzes your ASCAP or BMI statements, shows you the analytics on your catalog, and also will match you with investor offers on your royalties.
The tool is really fast and the money you can get is locked in. But it may not be the right option for everybody.
For one, the offer and the analysis are only on your ASCAP or BMI royalties. For most artists, the PROs only make up a portion of the total income.
Second, any offer you see is based on what investors would pay for your catalog, without seeing what songs are in it. Sometimes, the Know Your Worth offer is the best we can do. Sometimes, we can do better.
Either way, Know Your Worth is a no-risk and easy way to explore your options. And, this is the first step you should take if you want to work with us to raise money.