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Selling your music royalties can provide quick cash upfront while giving investors access to a growing asset class. Here's the key info:
Whether you’re looking for immediate funding or long-term planning, selling royalties can be a powerful financial strategy.
This guide breaks down the process, tax implications, and platforms to help you decide if selling royalties is right for you.
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.
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:
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.
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:
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.
Consider using platforms like Royalty Exchange for valuation tools and access to a wide network of investors.
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.
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:
Benefits of keeping regular royalty payments:
It’s also important to consider how taxes will affect your choice.
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.
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.
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