When it comes to alternatives, there’s no shortage of new ideas. Several companies offer investors an income stream from music royalties, with the investing platform Public offering an investment based on music from Shrek movies.
Public announced a mini-IPO for Oct. 5, with the royalty interest in the Shrek music catalog priced at $889,700, broken down into 88,970 shares at $10 each. The film franchise’s soundtrack is composed by Harry Gregson-Williams.
The asset generates royalties when Shrek films (Shrek, Shrek 2, Shrek the Third, and Shrek Forever After, and the TV special Shrek The Halls) air on television, are streamed, or are used in other broadcast programming, or anytime the music plays on a Shrek theme park ride. Investors will receive royalties as quarterly dividend payments, Public said. As of July 2023, the Shrek franchise is the second highest-grossing animated franchise, with over $4 billion in box office revenue, Public said.
Many investors are drawn to music royalties because they can offer a passive income stream and can have a low correlation to traditional investments like stocks and bonds, acting as a diversification tool in a broader investment portfolio.
Music royalties, specifically from a franchise with the massive appeal of “Shrek,” offer a potential cash flow asset that could deliver quarterly dividends to investors, Public says. The historical performance of this particular royalty asset recorded an 8.5% dividend yield in 2022 and an 8.33% yield in 2021, the company added.
Some other companies offering music royalty investments include:
• Royalty Exchange: One of the most well-known platforms, Royalty Exchange connects artists with investors, allowing artists to sell a portion or all of their royalty stream in a competitive auction format.
• SongVest: This platform offers fans and investors a chance to own a share of music royalties through auctions.
• ANote Music: This European platform allows users to invest in music royalties and earn from the music’s future income.
• CurioInvest: Though primarily focused on collectible cars, CurioInvest has branched out to offer investment opportunities in music royalties.
Still, income streams from music royalties aren’t guaranteed. Some of the risks that advisors and investors will want to consider are:
• Market Volatility: Economic downturns might decrease discretionary spending, impacting royalties from music purchases, streaming and concert tickets.
• Changes in Consumption Patterns: With the rise of streaming platforms like Spotify and Apple Music, the way people consume music has changed. A shift in consumption patterns can impact the royalty rates and the overall revenue generated.
• Music Popularity: The revenue generated from a music royalty investment largely depends on the continued popularity and relevance of the music or artist. Trends can change, and what’s popular today might not be tomorrow.
• Contractual and Legal Complexities: Royalties are governed by intricate contracts that can vary significantly.
• Duration of Royalty Streams: Some royalties have a finite duration, and once they expire, they cease to generate income.
• Diversification: Investing in the royalties of a single track or artist can be riskier than diversifying across multiple tracks or artists. A diversified portfolio can mitigate risks associated with the declining popularity of a particular song or artist.
• Platform and Intermediary Risks: If investing through a platform, there’s the risk associated with the platform’s stability, transparency, and integrity.
• Regulatory and Legislative Changes: Changes in copyright laws, royalty rates set by regulatory bodies, or other legislative changes can impact the income from music royalties.
• Global Reach and Distribution: Music that has a global reach or is distributed widely can have a different risk profile than music limited to a specific region or genre.
• Technological Changes: Advances in technology can shift how music is consumed and distributed, impacting royalties.