A year ago, we introduced a new way to invest in royalties, called Standing Orders.
The feature allows investors to leave an order for royalties that meet their specific criteria.
Our platform then matches any catalog meeting that criteria with the order placed, to facilitate an automatic sale.
For the last year, placing a Standing Order was available only to members of our premium All Access membership tier.
Now we’re opening it to all investors on a limited basis.
Starting today, all verified investors on Royalty Exchange can now place a Standing Order. At launch, non-All Access members will be limited to one Standing Order each, for 10-Year Term assets priced at $25,000 or less.
How Do Standing Orders Work?
Let’s explore the Standing Order feature a bit more closely.
Placing a Standing Order differs from bidding on the Auction House in several ways. First, Standing Orders allow investors to quickly acquire royalty assets through automatic offers and purchases. There’s no need to wait for new listings to appear in the Auction House and actively participate in an auction.
Instead, Standing Orders are matched automatically to catalogs that meet the criteria investors set in advance. There’s no active monitoring needed, allowing investors to fill their desired allocation with multiple types of assets quickly.
Another difference is that investors who place Standing Orders do so based on a focused set of quantitative characteristics: Dollar Age, Earnings, and Trend Rate. There’s no need to review details normally included in an auction listing, such as names of the artists performing the songs, song titles, genres, and so on.
It’s important to note that placing a Standing Order is as binding as a bid in an auction. That means if your order is matched to a catalog, the resulting sale is binding (assuming the seller accepts the offer and the asset passes due diligence).
Finally, there are stricter eligibility requirements for catalogs matched to Standing Orders than for the Auction House. We will only match Standing Orders to catalogs with the following characteristics:
- 3-Year Dollar Age or Greater
- LTM Earnings of at least $1,000
- Adjusted trend rate above -5% annually
- Not primarily earning from production music
Assets with these characteristics carry far less risk, and therefore are more suitable for “sight unseen” acquisition. This provides both improved risk management for investors, and a standardized set of evaluation metrics that apply to all catalogs.
Once placed, Standing Orders are matched to assets on the platform in two ways. First, Standing Orders are matched to new catalogs entering our platform for the first time through our Know Your Worth catalog evaluation app.
This app allows songwriters to submit their catalog into our system by directly linking their PRO account. Our system analyzes the catalog and looks for any Standing Orders that match. Once a match is found, the system makes the songwriter an offer before it appears on the Auction House. If accepted, the deal enters due diligence.
The second way we match Standing Orders to assets is through The eXchange. The eXchange is where assets previously acquired on the Royalty Exchange marketplace are listed for potential resale. You’ve likely already made offers through The eXchange directly. Placing a Standing Order just does the same, only automatically, for assets that meet your order criteria.
Note: For More Detail on matching Standing Orders to eXchange listings, read the article below:
Automated Investing On The eXchange: More Demand. Better Offers.
How To Place A Standing Order
Now let’s take a look at how to place a Standing Order. From the Listing page, navigate to The eXchange menu item at left. You’ll first see the list of eXchange assets. At the top there’s a tab labeled “Standing Orders.” Select that.
Here you’ll see all current Standing Orders and their status.
- Open Orders = Total amount of unmatched Standing Orders
- Pending Orders = Standing Orders matched and going through due diligence
- Filled Orders = Closed Standing Orders total
You can filter these by asset term, order size, LTM multiple, Dollar Age, and status.
To place a Standing Order, simply select the “Place New Standing Order” green button on the top left and follow the instructions on the popup tool:
Select your term and asset type. For now, this will be limited to Term deals and PRO royalties.
Next, fill in the Standing Order details:
- Minimum Dollar Age of the catalog you’d accept
- LTM Multiple you’d be willing to pay. (This multiple sets the price of the asset. The multiple is applied to the assets last 12 months’ earnings, or the average of the last three years of earnings, whichever is lower).
- The amount you’re hoping to allocate is the amount you’re looking to spend. It can be filled in one order, or multiple, until the total order is filled.
Note: A buyer fee of $500 or 1% of the purchase price, whichever is greater, will be added to your offer amount for all assets purchased via Standing Orders. The fee is waived for All Access members.
For more information about Standing Orders, how they work, and more, check out the replay of the tutorial webinar that took place Tuesday, June 2 2020:
Standing Orders Tutorial
Replay
