Music creators, songwriters, and arrangers own copyrights to their works.
So, they have a right to royalties for the public usage of their songs on radios, TVs, and other streaming service providers such as Spotify, YouTube, Netflix, Apple Music, Amazon Music, etc.
As music streaming continues to gain popularity, as seen during the pandemic, private equity investors are taking a keen interest in royalties as an investment option with relatively low risks.
Surprisingly, investors are willing to pay top dollar for publishing rights that can be as high as 10 to 15 times the average rights value in a year.
But Why Are Private Equity Investors Eyeing Royalties?
Private equity investors are always looking for investments that can guarantee the most return on investments and the highest level of market stability. For most of 2020 and 2021, as COVID-19 forced people to stay indoors, music and video content consumption skyrocketed.
An increase in video content consumption meant an increase in royalties for artists. This ability of royalties to pay off even during economic downturns puts them at par with stable investment options such as bonds, making them an attractive investment opportunity for private equity investors.
What Rights Are Investors Buying?
A single song can have multiple persons owning rights, from the songwriter, the artist, and the producer. Often the artist will have the publishing rights to a song while the recording label retains the master rights or sound recordings.
Often private equity investors eye the publishing rights owned by the artist, which can include the lyrics, melody, and song arrangements. With publishing rights, an artist can earn royalties from multiple sources.
A publishing rights holder earns 12% of the revenue generated by the song on a streaming platform such as Spotify or Apple Music. Also, the owner of publishing rights earns revenue every time a song is played on a radio or TV station, bars, restaurants, and other public spaces.
Another source of revenue for publishing rights holders is when the song, its melody, or arrangement is used in film soundtracks, TV shows, video games, and commercials.
Proving Ownership of Publishing Rights
Under copyright law, a person that creates an art form assumes copyright to the art from the moment they create and store it in a tangible form. However, this type of copyright ownership cannot guarantee that your copyright has sufficient protections under the law. Also, without legal copyright documentation, you cannot trade your publishing rights.
To legally bind your ownership of an art form, you must register it with the Canadian Intellectual Property Office. The registration of copyright process, though relatively straightforward, can be complicated, so you may want to seek the help of an intellectual property lawyer when registering copyright ownership.
Should I Sell My Publishing Rights?
Your decision should be solely based on what works best for you, but you may want to talk to a financial advisor. It should be advised by several factors, such as your song’s popularity and annual royalties.
The more popular an art form is, the higher the returns in terms of royalties in the long run. The returns from royalties come in small trickles over a long period, sometimes well beyond a creator’s lifetime.
On the other hand, selling your publishing rights could mean earning a lump in exchange for the long-term trickle. Once you sell your rights, the yearly trickle of royalties goes to the private equity investor.
There are several options for selling your publishing rights. You can choose to sell some rights and retain others. Also, you can choose to sell half of your rights which means you retain a right to half of the royalties.
