In the sweltering heat of August 1982, a broke young songwriter named Gary Portnoy recorded one of his new songs.
In the past, Gary had penned songs for Air Supply and Dolly Parton, but none of his songs had turned into hits.
Portnoy didn’t know it, but his luck was about to change:
On that hot August day, he ducked into a cramped music studio and recorded a theme song for an upcoming TV show.
The song, “Where Everybody Knows Your Name,” was for a show called “Cheers.”
As you probably know, “Cheers” became a major hit. It ran for 11 seasons and 275 episodes, and it’s still syndicated across the globe today.
The thing is, every time the show airs, money flows into Portnoy’s bank account.
This might be the greatest business model ever invented:
Create something once, get paid on it for life.
This is the royalty business.
How Royalties Work
Simply put, royalties are ongoing payments you receive from an asset that you created or own.
For example, the author J.K. Rowling receives a royalty payment each time someone buys one of her Harry Potter books. (In fact, thanks to these royalties, Forbes pegs Rowling’s net worth at $1 billion.)
Royalties also apply to inventions. For example, Phillips, the electronics giant, pioneered the DVD player. It still receives a royalty whenever a DVD is sold.
It works the same way when a biotech company patents a drug, or when an artist like Portnoy writes a song.
For inventors and content creators, royalties create a rich life…
They create a limitless stream of cash.
How Do You Claim Your Stake?
But what if you’re not a songwriter, or an author, or a scientist?
How can you take advantage of these income streams?
Well, historically, royalty assets have traded hands only between tight networks of insiders:
For example, a drug patent might get acquired by some business-minded doctors or a biotech company.
Or a wealthy investor might acquire the royalty rights to a catalog of songs.
In fact, in one of the most famous royalty transactions of all time, Michael Jackson purchased the rights to the entire Beatles’ catalog.
The year was 1985, and the purchase price was $47.5 million.
At the time, it seemed like a mountain of money. But by the time Jackson died in 2009, it’s estimated that he’d earned nearly $1 billion from his Beatles’ royalties.
Unfortunately, unless you were a wealthy, well-connected insider, getting a stake in one of these royalty streams was off-limits to you.
But that’s about to change...
Royalty Exchange
It’s all thanks to a new website called Royalty Exchange.
Royalty Exchange is a marketplace:
Content creators put their royalty assets up for sale...
And investors bid to buy them.
The company is just getting started, but in a recent phone call with its CEO, I learned that it’s already facilitated some impressive deals.
For example, it helped sell a catalog of music used in commercials and TV shows. The catalog sold for two times last year’s earnings—meaning that the new owner is now being paid a 50% cash yield.
In another example of a music royalty, a catalog that’s been paying consistent cash since the 1990s sold for 7 times last year’s earnings…
If the royalty income for this catalog remains stable, the new owner will earn a 14% annual yield for the next 35 years.
How to Get Started
To visit the site and learn more about how it works, click here.
But to be clear, this opportunity won’t be for everyone...
First of all, only accredited investors can participate (accredited investors have a net worth of at least $1 million, or income of at least $200,000 per year).
Also, Royalty Exchange isn’t a typical crowdfunding site—in other words, you can’t invest a small amount into a royalty asset and receive a fractional stake.
On this marketplace, you’d buy the asset in its entirety, which can lead to relatively high minimum investments.
That being said, the company’s CEO told me that he’s planning to launch new investment options that will allow all investors to dive in.
As always, we’ll keep you posted.
Happy investing.
Best Regards,
Founder
Crowdability.com
