Buying music royalty catalogs can be a great way to make money, but it's not always easy. Investors need to look at many things, like how much money the music makes, how popular the artists are, and what might happen in the future.
To do well, you need more than just a passion for music. You must carefully check everything and understand the market. This can seem tricky, but there's a simple way to approach it. By following a step-by-step plan, anyone can learn to spot good investments.
This guide will show you how to evaluate music royalty catalogs. It will explain what to look for, how to check past results, and ways to estimate future earnings. Whether you're new to this or have done it before, these tips can help you make smart choices and possibly earn a steady income from music royalties.
Key Evaluation Criteria
When looking at music royalty catalogs, there are a few important things to check. These factors help you decide if a catalog is worth buying.
Let's break them down:
Catalog Diversity
There should be a lot of different song royalty catalogs to choose from. Having a range of music styles can help spread risk. Even if a certain type of music loses popularity, other types may still do well. It's usually better to have a catalog with songs from more than one genre, like pop, rock, and country.
Diverse catalogs tend to perform better over time. This is because they can appeal to a wider audience and adapt to changing music trends.
It's helpful to look at both new hits and older, steady workers when looking at catalogs. Classic rock is one type of music that has always been popular with people of all ages.
Income Sources
When evaluating a music royalty catalog, it’s essential to consider all income sources, not just streaming revenue. While streaming contributes about 84% of music industry income in 2024, other sources can provide stable earnings too.
Seek catalogs that include diverse revenue streams, such as:
- Digital downloads
- Physical sales (vinyl is making a comeback)
- Radio play
- TV and film sync licensing
- Live performance royalties
- Social media platform usage
Sync licensing grew 4.7% to $632 million in 2023 and is likely to keep rising as demand for content increases. A catalog with varied income sources is generally better equipped to withstand market and tech shifts.
Artist Popularity
When you look at a music royalty catalog, consider how popular the artists are and if they have lasting appeal. Look past where the charts are now and think about the future potential.
Here are some key factors to consider:
- Following and engagement on social media.
- People listening each month on big streaming services
- How often do concerts happen, and how are ticket sales going?
- It appeals to different generations.
- New music comes out regularly.
Legacy artists like The Beatles still make a lot of money from royalties even years after their last album came out.
When you check out how popular an artist is, pay attention to their lasting appeal instead of just what's trending right now.
Contract Details
Reviewing contract details is key when evaluating music royalty catalogs. Focus on:
- Duration of rights: Some last over 50 years, while others are only 10 years. Longer terms often offer more chances to earn returns.
- Royalty rates: These can vary widely; higher rates mean more income for you.
- Territory restrictions: Some rights apply only to certain countries or regions.
- Administrative fees: These can cut into earnings, sometimes by up to 25%, so look for catalogs with lower costs.
- Renewal options: See if the contract allows for extensions and on what terms.
Understanding these points helps you assess the catalog's value and potential. If needed, get legal advice to clarify contract terms.
Market Trends
When looking at music royalty catalogs, it's important to keep up with current market trends. The music industry changes a lot, and genres and styles come and go in popularity.
For example:
- The K-pop industry achieved estimated overseas sales of around 1.24 trillion South Korean won (approximately $930 million).
- Latin music is now the most streamed genre, with 15.1% more than this time last year.
These facts demonstrate significant growth in both the Latin music and K-pop sectors. Also, think about how societal events might affect how much music you listen to. For example, the COVID-19 plague caused more "comfort" music and old hits to be streamed.
Streaming Performance
Evaluating music royalties calls for a strong stream performance.
Look for collections since they often have more value, and songs routinely top one million streams per month. Furthermore, consider platform diversity: great success in numerous services, like Spotify, Apple Music, and Amazon Music, can suggest more universal appeal.
Regularly including songs on popular playlists is another positive sign; their long-term performance usually reflects better. Furthermore, remember that some services, like Spotify, need at least 1,000 streams before royalties start to build.
While high stream counts are essential, steady, long-term performance usually has more value than transitory viral hits.
Seasonal Hits
Don't underestimate the value of seasonal music when evaluating catalogs. Holiday songs, in particular, can be goldmines.
For example, Mariah Carey's "All I Want for Christmas Is You" earns about $2.5 million annually. Christmas songs also collectively generate more royalties yearly.
These songs may not be popular all year, but they do get a big boost yearly. This can really help increase the overall value of a catalog. Think about the value of old holiday favorites and newer seasonal songs when looking at a catalog.
Analyzing Past Performance
When evaluating music royalty catalogs, looking at past performance is crucial. It helps you understand how well the catalog has done and gives clues about its future potential.
Remember, while past performance is important, it does not always guarantee future results.
So, use this analysis as one part of your overall evaluation process when considering investing in music royalties.
Here's how to do it:
Historical Earnings Data
Start by compiling the last three to five years of income data. Usually, reports from collecting groups or royal pronouncements from the monarchy provide this information.
Look for:
- Total annual income
- Earnings for each song or track
- Seasonal trends—such as Christmas song holiday surges
- Trends in several income sources (sync licensing, radio, streaming)
Looking at this information, focus on:
- Consistency: Often, a stable catalog is shown by steady income over time.
- Look for rising patterns to indicate possible expanding popularity.
- Decline: If you believe you could turn things around, downward trends could be a red flag but could also offer an opportunity.
For the catalogs they highlight, platforms like Royalty Exchange provide comprehensive historical data. Investors can thus more easily evaluate historical performance with accuracy. Their graphs and charts displaying income trends help one to identify trends.
Market Trends
Understanding broader market trends is crucial when evaluating music royalty catalogs. These trends provide essential context for a catalog's performance and can offer valuable insights into its future potential.
Here are some key market trends to consider when evaluating a music royalty catalog:
- Streaming Growth: The shift to streaming has changed how royalties are earned. Check if the catalog's earnings match the overall streaming growth.
- Genre Popularity: Music genres change in popularity. For example, K-pop is growing, while some other genres are declining.
- Technology Changes: New platforms can affect earnings. For instance, TikTok has created new ways for songs to earn money.
- Global Expansion: As streaming services enter new countries, they create new markets for music.
As you look at these trends, ask yourself:
- Has the catalog benefited from or been hurt by these trends?
- Based on present trends, are there chances that haven't been taken yet?
- What effects might future trends have on the catalog's sales?
In addition to catalog listings, Royalty Exchange often provides information about the market. For instance, you could talk about related trends or compare how well a catalog works to industry standards. This extra knowledge can help you figure out how well a catalog has done in the past and how well it could do in the future.
Predicting Future Earnings
Music copyright catalogs need to be evaluated by predicting how much money they will make in the future. Though future earnings are unknown, studying these elements will enable investors to decide with knowledge of possible returns.
Let's look at key factors that can influence future earnings:
Industry Trends
There are always new changes in the music business. The cool thing to do now is stream. The music business will make 84% of its money in 2024, according to Forbes. It looks like this trend will keep getting stronger.
The same goes for short movies that you can find on sites like TikTok right now. Songs that become popular here often see a big rise in streaming across all platforms.
When looking at catalogs on Royalty Exchange, check if the songs fit current trends. Are they popular on TikTok? Do they appear on big playlists? Royalty Exchange shows detailed streaming data for each catalog, which can help you guess how well the songs might do in the future.
Technological Advancements
With the help of new technology, musicians can now make money in new ways. AI is getting better at figuring out which songs will be hits and making custom playlists. Virtual and augmented reality are also making it easier to license music in new ways.
When checking out a catalog on Royalty Exchange, think about how well the music might work with new tech. Could the songs be used in video games or VR experiences? Royalty Exchange often lists different income sources for each catalog, including licensing for new media. This info can help you see if a catalog is ready for future tech trends.
Economic Factors
The overall economy affects music earnings too. When times are tough, people might cut back on music subscriptions. But music is often seen as recession-resistant - people still want entertainment during hard times. In good economic times, there might be more chances for licensing music in ads, movies, and TV shows.
Royalty Exchange provides earnings history for each catalog. Look at how steady the earnings have been. Have they stayed strong during past economic ups and downs? This history can help you guess how well the catalog might handle future economic changes.
Conclusion
It takes some careful thought and study to evaluate music royalty catalogs. It's all about seeing the big picture, from the types of songs in the catalog to their past performance and potential future success. On Royalty Exchange you can sign up as an investor and search through thousands of music catalog listings that include producer and songwriter royalties to some of the biggest songs of the past few decades. Discover why song royalties are one of the best investments to grow your wealth in 2024 and download the free Ultimate Guide To Music Royalties to learn everything you need to know about investing in royalties.
When looking at a catalog, consider important factors like its diversity, income sources, artist popularity, and current market trends. It’s also essential to keep an eye on streaming numbers and contract details, as these can significantly affect earnings.
It can be a lot easier to do this with platforms like Royalty Exchange. They give you specific information and easy-to-use tools to look into and invest in music royalties. This info can help you turn your love of music into a possible source of passive income.
Remember that careful research is necessary to make intelligent business decisions in this exciting field. As long as you do it correctly, investing in music royalty catalogs can be profitable. It will surely give you a unique link to the world of music.
