The market for song royalties is a hit for investors
Ben stennis is a country-music songwriter from Nashville who has written hits for performers such as Tim McGraw and Jason Aldean. Earlier this year, as the music industry was stopped in its tracks by the coronavirus, a company called Royalty Exchange offered him the chance to raise some cash. Since 2016 it has run an online marketplace that brings together musicians who want to sell their work and punters wanting to invest in royalties. Anthony Martini, a partner in Royalty Exchange, says it has 25,000 potential investors on its books, from pension funds to "dentists from Ohio". The rate of investors signing up has doubled this year, compared with 2019.
Music royalties are a complicated business. When a song is recorded, copyrights are created both for the composition of the song and the recording itself. Each of those rights is then split into mechanical rights (generated when a song is sold in a physical format or streamed), performance rights (when it is played on the radio or live at a concert) and synchronisation rights (when it appears in a film, television programme or a video game).
The idea of investing in royalties is not new. In 1985 Michael Jackson forked out $47.5m for the rights to the recordings of around 250 songs by The Beatles; Taylor Swift is trying to buy the rights to some of her master tapes after her previous record label was sold. But firms like Royalty Exchange are making rights affordable to a wider pool of investors; some auctions start with prices in the four figures. (Mr Stennis sold his rights, and paid off his mortgage with the proceeds.)