Selling your music royalties can provide quick cash upfront while giving investors access to a growing asset class. Here's the key info:
- What Are Royalty Sales?
Songwriters can sell future royalty payments for a lump sum. Platforms like Royalty Exchange have facilitated over 2,300 deals worth $190M. - Why Sell?
- Get upfront cash for financial security or career investment.
- Benefit from lower capital gains tax (20%) compared to regular income tax (37%).
- Simplify estate planning or reduce market risks.
- Types of Royalties You Can Sell:
- Performance Royalties (radio, streaming, live events).
- Mechanical Royalties (streaming, physical sales).
- Sync Royalties (movies, TV, ads).
- Print Royalties (sheet music sales).
- Catalog Value:
- Older catalogs: 10x–15x annual earnings.
- Newer catalogs: 5x–10x annual earnings.
- Selling Options:
- Full sale: Get a larger payout but lose future income.
- Partial sale: Retain some rights and income.
- Alternative Funding:
- Royalty advances: Keep ownership while accessing cash.
- Catalog financing: Use your catalog as collateral for loans.
Whether you’re looking for immediate funding or long-term planning, selling royalties can be a powerful financial strategy.
Quick Comparison
This guide breaks down the process, tax implications, and platforms to help you decide if selling royalties is right for you.
Music Royalty Types
4 Main Royalty Categories
Music royalties come in different forms, each providing unique ways to earn revenue.
Performance Royalties
These are earned whenever a song is played publicly, such as on the radio, through streaming platforms, or at live events. Collection is managed by organizations like BMI, ASCAP, or SESAC. Because of consistent plays on radio and streaming services, performance royalties often provide a steady income stream.
Mechanical Royalties
Mechanical royalties are payments for the reproduction and distribution of copyrighted music. In the U.S., the Copyright Act sets these royalties at about $0.06 per 100 on-demand streams. With the rise of digital platforms, this type of royalty has gained increased importance.
Synchronization (Sync) Royalties
These are earned when music is licensed for use in visual media, such as movies, TV shows, or video games. Sync royalties are typically one-time payments but can be quite lucrative, particularly in the gaming and visual media industries.
Print Music Royalties
This type of royalty comes from the sale of sheet music and is a reliable income source, especially in classical and educational music markets.
Here’s a quick breakdown of these royalty types:
Knowing these categories helps artists, producers, songwriters, and investors understand how payments are structured and collected.
Sellable Royalty Rights
Selling royalty rights depends on what rights you own and your financial goals.
First, confirm what rights you actually own. Typically, songwriters hold publishing rights, while performers and record labels control recording rights This distinction is crucial when assessing the value of your catalog.
Factors That Impact Value:
- Historical earnings consistency
- Potential for future streaming revenue
- Popularity of the genre
- Age of the catalog
- Variety of income sources
- Termination rights under copyright law
The 1976 Copyright Act allows songwriters to reclaim their rights 40 years after selling them, potentially enabling another sale in the future.
The rise of streaming has made royalty income more reliable. Experts note that music publishing income has weathered economic cycles well, making it an appealing investment for those seeking steady returns.
Catalog Value and Sale Preparation
Calculating Royalty Value
Music catalog deals typically close at multiples ranging from 5x to 15x Net Publisher's Share (NPS). Established catalogs with enduring appeal often land between 10x and 15x NPS, while newer catalogs tend to sell for 5x to 10x NPS.
Here are three common methods used to value music catalogs:
To estimate your catalog's worth, focus on these areas:
- Historical Performance
Exclude irregular payments like one-off sync fees or catch-up royalties. Review at least 3–5 years of consistent royalty data. - Future Potential
Evaluate streaming growth trends, sync licensing opportunities, and shifts in genre popularity that could boost demand.
By signing up as a potential seller with Royalty Exchange, you can get a free catalog valuation by easily importing all of your royalty earnings sources for free without committing to a sale.
Once you have a clear valuation, it’s time to prepare the documentation needed for a potential sale.
Pre-Sale Checklist
- Organize Documentation
Gather song lists with publication dates, royalty reports, record contracts, and licensing agreements. - Conduct Legal and Financial Reviews
Confirm copyright ownership and termination rights under the Copyright Act. Ensure a clear chain of title for all works. - Market Your Catalog
Create an overview of your catalog, including revenue projections and performance metrics. - Skip Those Steps
By signing up as a potential seller on Royalty Exchange get a full white-glove service hitting the full checklist from legal overview to full catalog valuation for free without committing to a sale.
Consider using platforms like Royalty Exchange for valuation tools and access to a wide network of investors.
- Manage Risks
Include usage restrictions in contracts, maintain partial rights where feasible, and negotiate buy-back options. Document any obligations or commitments tied to the sale.
Sales Platforms
Available Marketplaces
Royalty Exchange has facilitated over 2,300 deals, totaling $190 million. It's an open marketplace where creators can list royalty assets without any upfront costs. The platform charges a commission only after a successful sale.
Before listing, Royalty Exchange verifies ownership, reviews the financial history of the assets, and sets up auctions with starting prices and minimum bid requirements. These steps ensure that all catalogs meet the platform's standards before being presented to investors.
This process makes Royalty Exchange an interesting option, especially when compared to other platforms designed for larger transactions.
Money Matters
Lump Sum vs Regular Income
When selling a royalty asset, you’ll need to decide between getting a one-time lump sum payment or continuing to receive regular royalty income. Each option has its own perks and drawbacks.
Benefits of a lump sum payment:
- Immediate Access to Funds: Get a large upfront payment instead of waiting for periodic checks.
- Reduced Market Risk: Avoid the unpredictability of future royalty income.
- Simplified Financial Planning: Secure a fixed amount you can use right away.
Benefits of keeping regular royalty payments:
- Steady Income: Continue earning periodic payments as your work generates revenue.
It’s also important to consider how taxes will affect your choice.
Tax Effects
Taxes can have a big impact on how much money you actually take home from a royalty sale. Here’s a breakdown:
Consulting with tax professionals who specialize in music rights can help you structure the sale in a way that minimizes taxes and maximizes your earnings.
Making Your Decision
Decision Factors
When deciding whether to sell your music catalog, it's important to weigh the factors that can shape your financial future.
These factors can help you make a more informed decision about selling your catalog.
