Historic royalty income is no indication of future royalty income. Future royalty income is dependent upon future sales and licensing revenue generated by the sound recordings or compositions associated with this listing.
What is a peer advance?
With a Peer Advance, the investor is buying limited-term rights to collect royalty income until a fixed return is achieved.
In this case, the investor would pay $32,258 for the right to collect the seller's royalty income until the investor receives a total of $39,000 in royalty payments. The total return, what we call the 'Repayment Amount', equals the Advance Amount plus a 21% return ($32,258 x 1.21 = $39,000).
With this investment, the variable is not the amount of return the investor can expect. The investor will receive all royalties generated until the total return is achieved.
Instead, the variable is the amount of time it takes for the investor to receive the full Repayment Amount. You will receive $39,000 in royalty payments. The only question is how long it will take. Fortunately, we can look at the earnings history of the asset to approximate the payback period.
The seller has indicated that they plan on releasing new songs. Earnings from these songs would be applied to the advance. If they release the songs in Q1 and it increases earnings by 20% and 10% in Q1 and Q2 (which is conservative according to the release of their last two songs) then the investor will receive the Repayment Amount in 12 months. That's approximately a 20.9% Annual Rate of Return.
If future quarterly payments equal the average of the last four quarters, the investor will receive the Repayment Amount in 15 months. That's approximately a 16.4% Annual Rate of Return.
If future quarterly payments equal the most recent quarterly payment, the investor will receive the Repayment Amount in 18 months. That would generate approximately a 13.5% Annual Rate of Return.
Even if future quarterly payments drop by 10% in each quarter, the investor will receive the Repayment Amount in about 21 months. Even in this case, the Annual Rate of Return is about 8.8%.
What is the Royalty income stream?
The investor is purchasing rights to 100% of the royalties earned by the sound recordings in the seller's Tunecore catalog until the full Repayment Amount is realized. This catalog generates royalties from digital downloads and streaming.
In the past 12 months, this catalog has generated $32,258. More details can be found in the financial information tab above.
How do payments work?
Royalty Exchange will collect and distribute the royalties generated by the seller's catalog of musical works to the investor on a quarterly basis. Payments will continue until the investor recoups $39,000. As soon as the investor realizes the entire Repayment Amount, the owner will again receive 100% of their royalties.
The first payment to the investor will be in April 2017.
*Information presented is not intended to be investment, tax or legal advice. Past performance of this royalty stream is no guarantee of future results. Estimated or projected investment returns and payback periods are not guaranteed, and investors may lose some or all of the principal invested. Investors should consult their financial advisor if they have any questions or need additional information.
Public performance royalties are payments made by radio stations, hotels, restaurants, night clubs, etc. to the composition copyright holder(s) for each public performance of the copyrighted work. In the U.S., public performance royalties are typically paid to performing rights organizations (e.g., ASCAP, BMI) who then distribute the royalties to the copyright holder(s).
Mechanical royalties are royalties deriving from per-unit payments made by recording companies or digital download providers to the composition copyright holder(s) for every purchase of a sound recording that reproduces the copyrighted composition.
Non-interactive digital performance royalties are payments made by non-interactive music services (i.e. those that mimic the experience of a radio broadcast) of a statutorily-set amount (on either a per-play or annual basis—depending on the type of service) to SoundExchange for the benefit of the sound recording copyright holder and the performing artists for the right to perform the copyrighted sound recording via non-interactive, digital means.
non-interactive digital performance royalties
The royalties owed to the creator(s) of a musical composition which are paid in return for the right to reproduce, distribute, or perform the copyrighted work.
A musical composition is one of the two copyrightable parts of a recorded song. It consists of the song's music, including any accompanying words, (i.e. the portion of a song that is capable of being fully expressed as sheet music) and is separate from any particular recording of the song or its performance by any particular artist.
A sound recording is one of the two copyrightable portions of a recorded song. It results from the fixation of a series of musical, spoken, or other sounds in a tangible (at least momentarily permanent) medium.
The portion of royalties owed to the owner of a sound recording. The owner may the performing artist, the producer, or another party (such as a record label) who contractually acquired the ownership of the copyrighted work (e.g., through a recording agreement), owns it by virtue of an employer-employee relationship with the creator(s) of the work, or specially commissioned the work.
rights owner's share
The portion of royalties owed to the performers of a sound recording in return for the right to perform the copyrighted work via non-interactive, digital services (e.g., Pandora, Spotify).
The portion of royalties owed to the music publisher which are paid in return for the right to reproduce, distribute, or perform a copyrighted musical composition, arising from a contractual obligation (i.e. a publishing agreement) or employer-employee relationship with the creator of composition (i.e. the songwriter(s)).
If an asset requires splitting up a catalog by works or percentages, Royalty Exchange may need to provide royalty accounting services to the buyer, seller, or both. This is because the royalty distributor may not be able to split royalties as intended by the asset transfer. Royalty Exchange's involvement helps to ensure accurate royalty payments. It also helps assure buyers and sellers that they are not missing out on potential earnings.
The accounting process often involves manual spreadsheet work and coordinating with royalty distributors. Royalty Exchange's goal is for the accounting service to be temporary. We plan to work with distributors to find solutions that will allow us to revert accounting and payment obligations back to the distributor, removing ourselves from the process. In the meantime, we've instituted the 5% fee to help offset costs in the manual accounting.
Please see the sample accounting agreement document for reference.
Why does Royalty Exchange need to account?
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