Introduction to Royalty Investing
Royalty investing has become an innovative way for individuals to generate passive income. Platforms like Royalty Exchange allow investors to buy and sell royalty streams from music, movies, and even unique items like patented products. One noteworthy example is the sale of the publishing royalties for Tate McRae's smash hit "You Broke Me First." This article explores the key financials, earnings potential, and reasons why this asset fetched a $1,250,000 final sale price.
What Was Sold in This Auction?
- Song: "You Broke Me First" by Tate McRae
- Asset Type: Publishing Royalties
- Sale Price: $1,250,000
- Royalty Duration: Life of rights
- Sales Multiple: 6.92x
The investment offered ownership in the publishing royalties of the chart-topping track, giving the buyer access to earnings from streaming, performance, and sync licensing.
Why "You Broke Me First" Is an Attractive Asset
1. Chart Success and Accolades:
Released in 2020, "You Broke Me First" became a global phenomenon, amassing over 1 billion streams on Spotify and receiving platinum certifications across several countries. There are only 849 songs to ever hit 1 billion streams on Spotify for context.
2. Steady Historical Earnings:
According to the Royalty Exchange listing:
- Last 12 Months Earnings: $180,749
- 3-Year Average Earnings: $311,749
- Total Earnings Since Release: $950,869
The royalty stream reflects consistent performance, with a solid track record even after peaking.
3. High Performance from International Streams:
Over 62% of the track’s income comes from international sources, demonstrating its global appeal.
Key Financial Metrics
- Dollar Age: 3.46 years (a relatively young song in terms of earning potential)
- LTM (Last Twelve Months) Multiple: 6.92x
The sale price was calculated at nearly seven times the last year’s earnings—an industry-standard multiple indicating confidence in future returns. You can see in the listing itself that the earnings in the past few quarters are starting to find their stability showing more consistent and safer returns over time. Streaming and performance royalties accounted for 80% of the total earnings of this listing in the past 12 months.
Pros of Investing in Royalties Like This One
- Passive Income Potential:
Music royalties generate quarterly payments, making them an ideal investment for those seeking consistent cash flow and ongoing passive yield. - Diversification:
Investing in royalties helps diversify portfolios away from traditional stocks and real estate. - Cultural Relevance:
Songs like "You Broke Me First" benefit from recurring streams due to their cultural impact and viral trends.
Cons and Risks to Consider
- Earnings Variability:
Historical royalties do not guarantee future income, and the earnings can fluctuate based on market demand and new releases. - Competition for Premium Assets:
Popular listings on Royalty Exchange often have significant bidding competition, potentially driving up prices. - Market Dependency:
A significant portion of this asset’s income comes from streaming platforms, making it sensitive to changes in streaming payout policies.
Why the Winning Bidder May Have Found It Attractive
The bidder likely saw value in the song’s continued global streaming performance and sync licensing opportunities. Songs used in TV shows, commercials, and films often receive substantial payouts, and "You Broke Me First" is well-positioned for more sync deals. Also, Tate McRae has grown in popularity since this songs release, so as she continues to build an even bigger fanbase, this song will continue to remain evergreen for more fans over time.
Moreover, the shift from bi-annual to quarterly royalty payments starting in 2022 provides more frequent income distributions, enhancing the investment’s cash flow appeal.
How to Get Started on Royalty Exchange
Interested in owning a share of music royalties? Here’s how you can start:
- Sign Up: Visit the Royalty Exchange website and create an account.
- Browse Listings: Explore music catalogs from major artists like Jay-Z, Ariana Grande, and Jimi Hendrix.
- Place a Bid: Choose a royalty listing and place your bid. Each auction includes detailed earnings reports to guide your investment decisions.
- Manage Your Earnings: Once you win, you’ll start receiving royalty payments based on the income generated by the asset.
Final Thoughts: Is Music Royalty Investing Right for You?
Investing in music royalties offers an exciting way to earn passive income while diversifying your portfolio. "You Broke Me First" is an example of a premium music asset that captivated both fans and investors, fetching a $1.25M sale. With the right research and strategy, platforms like Royalty Exchange can help investors tap into lucrative income streams from the entertainment world.
