The Ultimate Passive Investment

December 6, 2016

One of the most sought-after goals of any investor is passive income.

This is a common investment term meant for any strategy that lets you earn money without having to actively do anything other than invest in an asset that generates cash flow.

But there are opportunities where this term can be taken far more literally.

In the music industry, for instance, there are companies dedicated to licensing music to TV producers, filmmakers, and brand advertisers. They didn’t make the music, but they own the publishing rights of those who did.

In some cases, the producers of these TV shows, movies, and ads seek out a specific song they want to use in their media, and find the publishing company who manages those rights to do so. In other cases, they browse through a library of available songs from online e-commerce music licensing platforms like Musicbed.

[Read more about sync licensing]

But more often than not, the publishing companies with large music catalogs have special licensing divisions that actively “work” their catalog… pitching the songs to their contacts in hopes of scoring a placement.

They paid for the rights to these songs, sometimes dearly, so they are now financially motivated to earn as much from them as possible. After all, they want to make their money back. That’s their business.

The publishing companies vary in size and scope, from arms of such large music companies as Sony and Universal, to independent publishers like Ole and PeerMusic, to a host of smaller rights management specialty firms.

Now the interesting part for investors is that these publishers for the most part just own the publishing rights to the songs in their catalog. There are also songwriter shares and recording rights involved as well. Typically, the writer retains the songwriter share, and the recording artist retains the recording rights.

[Read our comprehensive guide to music royalties]

We’ve worked with several writers and recording artists to sell their share of these rights on our platform. When these auctions take place, it’s a fantastic opportunity for investors. Buying the writer or recording artist share of these songs allows an investor essentially to partner with some of the largest music licensing companies on the planet.

These publishing companies not only have the skills, the knowledge, and the connections to make sure the songs in their catalog are licensed (which most investors don’t), but also have the financial incentive to do so. In other words, they share the same financial goal as you, only they have the means to actually make it happen. And every time they do so, whoever owns the songwriter and/or recording rights get paid a portion as well (depending on the type of deal struck).

Investors who buy these shares simply earn their share of the royalties while these companies do all the work. Now that’s a passive investment!

Become a Royalty Exchange Member
Sign Up
Get An Instant Catalog Analysis & Valuation
Sign Up
Interested In Royalty Investing?
Sign Up

Investor Resources

Investor Office Hours Replay: May 2021
A replay of our most recent Investor Q&A session.
Read Post
Music Multiple Mania: What Buyers Are Really Paying for Music Catalogs, And Why
There's no such thing as a "standard" multiple for music catalogs. But there are a standard set of factors that determine how big a multiple a catalog could get. 
Read Post
Office Hours Replay: April 13, 2021
A replay of our monthly Q&A session for all Royalty Exchange investors
Read Post
No items found.