Introduction To The Royalty Exchange Marketplace

An introduction to the Royalty Exchange marketplace and where investors can find royalty assets
June 5, 2020

Every month, hundreds of investors join Royalty Exchange looking for an opportunity to invest in music royalties.

That’s because we’re the only meaningful online marketplace for buying and selling royalties. We’re not the buyer or the seller. We’re simply a transparent marketplace where transactions take place with everybody operating on the same playing field.

We primarily offer music royalties, but we do also have royalty opportunities in the movie and trademark space as well. These assets give you the right to receive revenue generated by the royalties acquired.

Rarely are copyrights or control of the content included in the transaction. It’s a passive, often partial interest in a royalty stream, which means you can collect the earnings without requiring doing any of the work needed to keep the royalty flow going.

Marketplace Components

The Royalty Exchange Marketplace consists of…

Auction House

The Auction House is the original, flagship component of the marketplace. This is where we list assets with a starting price set by the seller. Once a listing gets a bid, the auction begins, and typically lasts for about three business days.

Any registered investor can see the same details for each listing. But you need to be a verified investor to place a bid. Verification is a one-time process you can complete at any time. Once verified you can bid away.

Once the auction ends, the highest bidder wins the auction.

(Read More About Auctions)

The eXchange

The eXchange is a public listing of music catalogs that you can make offers on at any time. There’s no auction… just a List Price set by the seller that you can either meet or counteroffer to see if they’ll accept.

The listings in the eXchange come from multiple sources. Some are catalogs listed by artists themselves. These are called Direct Listings. Others are assets previously acquired on the Royalty Exchange marketplace by other investors. These are called Secondary Market Listings.

In either case, you can either accept the List Price to automatically initiate the sale, or make an offer below the List Price to see if the owner will accept. You can also choose to use our automated Standing Order feature, which allows you to place an order for catalogs with specific parameters that we then match.

(Read More About The eXchange)

Private Syndicates

On rare occasions, we will offer Private Syndicates to accredited investors. Private Syndicate participants can acquire an equity interest in multi-million dollar, top-tier catalogs. Unlike auctions, there is no bidding. The cost of Private Syndicate units are known in advance, proving the flexibility to take a position size in each catalog that best suits your strategy and risk profile.

See the links below for a deep dive on each of the above marketplace components.

(Read More About Private Syndicates)

Asset Types

The assets available in both the Auction House and the eXchange fall into several categories: Life of Rights, Term, and Fixed Return.

Term: Life of Rights

Term: Temporary

Fixed Return

Investor collects royalty income for the lifetime of the underlying copyright (Life of the creator PLUS 70 years).

Purchasing a Life of Rights asset gives you the right to collect royalties for the duration of the copyright while you continue to own it. For copyrights created after 1977, that duration is the lifetime of the last living creator plus 70 years.

Investor collects royalty income for a fixed period of time (typically 10 or 30 years). Royalty income then reverts to the original seller after the end of the term.

The fixed timeframe of term-based assets is the preferred option for sellers who otherwise resist selling royalties permanently. As a result, you as an investor gain access to both a broader range of royalty investment opportunities, as well as more diverse and higher quality catalogs (and at lower costs).

Investor collects a fixed dollar amount, which will differ from asset to asset. In this case, the total return is fixed, but the time it takes to collect that total is variable. Once collected, royalty income reverts to the original seller.

These investments function much like advances.  The rate of return will depend both on the amount paid and the time it takes to recoup.

Transaction Process

Regardless of what type of asset you acquire, or how, once the transaction is complete a dedicated Royalty Exchange Account Manager will guide you through every step of the closing process to ensure a smooth and speedy transfer.

While this process may vary slightly depending on the asset, the general steps are:

  1. Buyer wires funds into escrow within two business days after the sale is complete.
  2. Buyer and Seller sign Purchase Agreement
  3. Buyer signs Accounting Agreement with Royalty Exchange
  4. Seller completes assignment form
  5. Royalty Exchange receives confirmation of assignment from the distributor
  6. Funds are released to the Seller from escrow
  7. Buyer starts collecting royalties!

Royalty Administration

Once you’ve acquired an asset on Royalty Exchange, we will administer payments from the royalty distributor on your behalf for as long as you own the asset. This allows us to ensure accurate payments are made. It also allows you to relist and resell any catalog you’ve bought more easily.

The cost of this service covered by a one-time fee of 1% of the final sale price ($500 minimum) added to the transaction at closing.

Many investors ask “What happens if Royalty Exchange goes out of business?” In that highly unlikely event, you will have the option to either collect your royalty payments directly from the distributor or choose one of the many other royalty administration services to facilitate for you.

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About The Auction House

About The eXchange

About Private Syndicates

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