Annualized Royalty Returns (Am I Making any Money?)

It's been 6 months since my first music royalty investment (you can read more about my music royalty investments here). I thought it was time to take a look at how well the catalogs I've owned for 3+ months have been performing . Four of my catalogs have been paid a least a full quarters worth of payments so those are the ones we'll be taking a look at. I have a couple other catalogs that are too new to calculate, but will add them to the next update.

Here are the key factors that go into how I calculate a return on my royalty investments:

  • Purchase Date: Date that my purchase was finalized. Any revenue after that date, and before the expiration date, is mine.

  • Expiration Date: When do I no longer have the rights to this royalty stream. One key thing to note here is a couple of my catalogs are Life of Rights. I default these to 10 years after purchase date even though I will earn royalties after that date. Helps to keep the calculations clean.

  • Current Value (Depreciated): Simply the purchase price minus total depreciated.

  • Total Depreciated: This is a capture of how much I've depreciated the catalog. The equation I use is ((Purchase Price / Total Years I'll Own)*Current Years Owned).

  • Total Revenue: This is simply how much gross revenue I've earned for the catalog. Depreciation has not been backed out of it.

  • Average Revenue / Year: Annualization of the total revenue number.

  • Annualized Rate of Return: This is the percentage I earn on each catalog per year. Basically it is taking the total revenue, subtracting the depreciation, then annualizing it. Here's a breakdown of the formula used (screen show from Investopedia):

Okay, so now that you know what the categories mean, here is a view of my current portfolio of music royalties that I've owned for at least one quarterly payout cycle:

A few things pop out here for me.

  • I'm making money!: All of my catalogs are making money, no losers in the bunch. Lets hope that trend continues.

  • I'm not getting rich: My goal with diversifying into music royalties has never been about getting massive payouts. It has always been about spreading my assets into a diversity of asset classes.

  • Tight range of returns: I expected that I'd have a wider range of returns, so was surprised when the range was 4.03% - 8.29%. My assumption is that this range will widen over time (hopefully to the upside of course). I really do hope to see some double digits here soon.

By no means is this data set large enough, nor the timeline long enough, to draw any hard and fast conclusions on how well my music royalties are performing. Nor is it enough to extrapolate out across the entire asset class. But it is a glimpse into the performance at least.

Be sure to follow along as I plan on making updates frequently. I have a couple of other catalogs that will be included in the next analysis as I will have a full quarterly cycle of revenue from them. I'm excited to see how this plays out.

One more thing, please join our little group on Reddit to follow along with all of the developments in this exciting asset class.


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