20-Year Old Sound Recording Royalties
This 90s hip-hop catalog is still growing today thanks to impressive streaming activity.
The Theoretical IRR is a formulaic guideline based on an extrapolation of the normalized, historical earnings trend of the catalog. The Theoretical IRR is not a guarantee of future performance. It should be used for comparison purposes only. Each catalog has its own risk factors and the Theoretical IRR is not based upon a specific analysis of this catalog. Click here to view the basis for all Theoretical IRR calculations.
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.
| Starting Price: | $300,000 |
| Bidding Increment: | $5,000 |
| Closing Price: | $415,000 |
| End Date: | Dec 06, 2018, 3:18 PM MST |
| Last 12 Months' Royalties: | $53,671 |
| Investment Term: | Life of author + 70 years |
| Distributor: | Tommy Boy Entertainment |
| Rights Included: | Sales & Streaming |
| Interests Included: | Rightsholder |
| Track List: | |
| Relist-Eligible? | No |
| Buyer Fees: | $500‡ |
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What rights are included?
Description
Here’s a rare chance to buy into a royalty stream that’s not only stood the test of time, but that continues to grow even today.
The top-earning songs in this catalog are all more than 20 years old, with streaming activity driving growth in royalties. Interestingly, streaming wasn’t even a format when these songs were originally released. Yet, in the last 12 months, 85% of this collection's earnings came from streaming.
You’ll notice in the financial tables we’ve listed streaming growth by service rather than overall format. For instance, Spotify and Apple Music are both driving significant growth in the last year, with increases of 193% and 163%, respectively. This is organic growth not affected by non-repeatable one-time payments. Earnings for Pandora, while also growing, lack year-over-year growth percentages due to unique one-time, not repeatable payments (see note below).
The highest earning recording in this collection, at 34% of income in the last twelve months, is the popular 90s hit “Da’ Dip” from hip-hop artist Freak Nasty. This Platinum-certified song was released in the summer of 1996, and ultimately peaked at No. 15 on the Hot 100.
Also noteworthy is MC Breed’s 1991 release "Ain't No Future in Yo' Frontin'” — bringing in 24% of last year’s earnings, which hit No. 66 on the Billboard Hot 100. Other artists with recordings in this collection include Gangsta Pat, R&B songstress Cherrelle, Ghetto Mafia, and many others.
Finally, this catalog pays on a monthly basis, not quarterly. This means you won’t have to wait long for your first distribution!
Key Drivers
Sound Recording & Streaming. As we’ve come to know, streaming is booming worldwide, and record labels are seeing significant benefits as a result. You can see this trend reflected in the catalog up for auction. In the last year, 85% of royalties came from streaming services alone. This is good news for you as the investor, as it follows the industry macro trend of rising label streaming royalties.
According to an analysis of publicly-stated financial results by Music Business Worldwide, labels Universal, Sony and Warner jointly turned over just above $6 billion — approximately $1 billion a month — between them in the first half of 2018 on a global basis. Streaming contributed over half this total, with over $3 billion in the same period.
iHeartRadio. You’ll notice a spike in earnings in April 2018. This is due to a one-time payment in the amount of $4,150 from iHeartRadio. The payment covers funds paid from iHeartRadio to the record label for excess income in prior accounting periods. The record label then distributed the income amongst the label’s top-played songs on iHeartRadio. Although this is not expected to be repeated, as the winner of this auction you are entitled to any future one-time payments like this should they occur again.
Pandora. There is also a noticeable spike in earnings in November 2017. This spike is from a retroactive payment from Pandora. Online streaming platform Pandora recently shifted from a compulsory license to a direct license with most record labels.
Because of this shift and subsequent label negotiations on rates, Pandora will now pay Tommy Boy Entertainment directly (opposed to paying non-interactive streaming royalties through SoundExchange). As the winning bidder, you’ll be entitled to the payments sent to Tommy Boy for this collection of recordings.
While this spike is not repeatable, the long-term results of the direct licensing deals produce a structural change to the income profile of the catalog. Since then, Pandora earnings have averaged just over $850/month. Unlike the iHeartRadio payment noted above, Pandora earnings will continue going forward.
Hip-Hop and R&B. Hip-hop/R&B overtook Rock in 2017 as the most popular genre of music in the U.S. Now, in the first half of 2018, it accounts for 31% of all music consumption. According to a Nielsen report, total consumption of Urban songs (Hip-Hop/Rap and R&B) grew by 18% in both sales and streams.
About the Royalty Distributor
Tommy Boy Entertainment is a hip-hop and electronic independent label founded in NYC in 1981. The label is credited with launching the careers of notable hip-hop legends Afrika Bambaataa, Queen Latifah, House of Pain, De La Soul, and Naughty By Nature.