Knowing how to evaluate royalties is an important component to successful investing.
Knowing how to navigate the information provided in Royalty Exchange listings is equally useful. So we’ve put together this helpful guide on where you can find the information most important to your royalty evaluation style.
Note: we are constantly updating our listing process to include both more useful information and to make this information easier to find. Longtime Royalty Exchange members have likely noticed a number of changes and updates to our listings over the years. We’ll update this guide as we make additional changes in the future.
This is where we list the key identifying specifics of each listing. They include:
Starting Price: The minimum acceptable opening bid to kick off the auction.
Bidding Increment: The minimum acceptable amount for each subsequent bid.
End Date: When the auction is scheduled to end, barring the implementation of the Five Minute Rule.
Earnings History: Typically the last 12 months earnings, unless the catalog is less than a year old, in which case the months available will be listed.
Investment Term: How long the royalty stream purchased will remain with the investor post-auction. Either Life of Rights or 10-Year Term.
Distributors: The organizations responsible for collecting and distributing the royalties in question.
Rights Included: Which royalty types generate the earnings being sold.
Interests Included: Which entity’s share of royalties is being sold (typically Songwriter or Publisher).
Track List: A link to all the songs included in the catalog
First Distribution: The next scheduled payment date for the royalty stream being sold.
Distribution Frequency: The schedule for future payments.
Relist Eligible: Whether the asset for sale is eligible for the Auto Relist program, which gives buyers to chance to resell a purchased asset for a guaranteed 10% return while awaiting the first distribution.
Buyer Fees: The one-time cost to the buyer for catalog administration or other fees unique to each catalog.
With this most pertinent information about each listing up top, investors get a quick snapshot of each listing and determine whether they want to read further.
Next is a quick chart outlining exactly what royalties are included in the listing:
Because there are many different types of royalties a song or catalog could earn, any of which might be available to investors, it’s important to quickly understand exactly which royalty type is included in any given listing.
This chart standardizes that information in an at-a-glance chart. Just one look will immediately tell you which Musical Composition or Sound Recording rights are involved, which specific use of those rights generaties royalties, and their sources of income. It also notes the organization responsible for collecting and distributing the royalties involved.
What follows is a more in-depth description of the listing in question, highlighting the unique characteristics of each listing. This includes details on the top-earning songs, the key drivers of earnings (such as formats and artist-specific activity), factors to consider, and examples of similar closed listings for comparative purposes.
The financials tab presents the key highlights of the listing’s history in visual form, along with a link to the complete Raw Data should investors choose to download and analyze the earnings history using their own valuation method.
While we’ve standardized as much information as possible, not all listings contain the same information, depending on the asset listed. For instance, a listing for a single song will have slight, as all the information available will refer just to that individual song. Sound Recording royalties will be listed differently than Composition Royalties, because they earn royalties in fundamentally different ways.
But listings with similar characteristics will have standardized data presented.
Royalties by Quarter
Royalty investors look for a history of earnings. We present the last three years’ history of earnings of the catalog listed, presented by quarter. Only catalogs younger than three years show less.
This bar chart lets investors quickly get a sense of a catalog’s stability, and identify any outliers on a quarter-to-quarter basis. The full earnings history is available in the Raw Data file.
Royalties By Source
Overall royalties are helpful, but so is more information about the source of those royalties. Which sources are growing vs which are in decline. This graph shows the last 12 months of earnings by source, compared to the 12 months prior, with the growth rate clearly noted at the end.
There’s also a pie chart that lists the last 12 months earnings by source compared to the earnings by source for the lifetime of the catalog.
Royalties by Song
For catalogs with multiple songs, knowing which tracks are responsible for the lion’s share of earnings is an important metric to track. Comparing the song-by-song earnings across the last 12 months, the 12 months prior to that, and for the lifetime of a catalog allows investors to analyze the key drivers and trends of the catalog listed.
The FAQ page is specific to typical auction-related questions, which is why we have it separate from our general FAQ and more accessible from directly in the auction platform.
The Post-Auction tab lists updated details on what happens after an investor wins an auction. The newest of these is that Royalty Exchange will now administer payments for the buyer.
This means Royalty Exchange will collect from the royalty distributor and direct payments to the buyer directly. This allows us to monitor payments on your behalf and ensure accurate payments are made. It also allows buyers to relist and resell any catalog they’ve bought more easily.
Finally, we’ve added a new metric designed to convey multiple points of analysis into a single figure for evaluation purposes.
The Theoretical IRR is just that… It is not a prediction nor an estimate. It’s simply a number that represents the following valuation points:
Dollar Age: Compares the last 12 months earnings against the date each song in the catalog was released. The older the song, the more weight the last 12 months earnings gets as it’s considered more stable. Each song gets its own dollar age, which averaged becomes the single dollar age number.
Trend Rate: the overall increase or decrease of the catalog's earnings with certain one-time payments removed, like a one-time sync or a lawsuit payment, etc. These are removed so that the trend rate is based solely on reoccurring usage.
Decay Rate: The rate at which the Trend Rate falls. Catalogs with higher Dollar Age figures will decay more slowly.
As the bidding price increases, the Theoretical IRR figure will fall. This metric is added only to the 10-Year Term deals, because it requires a finite timeframe (like 10 years) to calculate. Life-of-Rights listings contain too many variables for a meaningful Theoretical IRR to exist.
If no IRR is listed, it’s likely due to a lack of sufficient data to calculate (usually for younger catalogs) or because the data is based on a single factor that could dramatically alter the outcome if it should change at any time.
Royalty Exchange remains committed to continually improving all aspects of our marketplace. We’ll update this guide and new features and changes are made to listings over time. If you ever have any questions or suggestions, please don’t hesitate to reach out.