Music Royalty Offering Analysis: Case Study #3

Updated: Apr 25

Time for the next installment of my music royalty offering analysis series. This time I wanted to take a look at what ANote Music has to offer.


But first...


As always this blog is meant for entertainment. I'm not a financial advisor in any way, shape or form. Anything I suggest here will need your own due diligence! Also there are affiliate links in this article, but I've not allowed that to influence my analysis or opinions. Additionally this offering is in Euros (not US Dollars) so take note. Finally if you are reading this article after May 10, 2022 then this particular auction has closed. But that's okay as the purpose of these "Case Study" posts is simply to show the process I go through analyzing potential investments, not to provide a recommendation on specific investments (again, I'm not a financial advisor).





Okay, glad that's out of the way. In case you missed the first parts of this series, here they are:




The Offering:

For this offering I'm analyzing a new catalog ANote has listed in the marketplace:


Sundance Music Catalogue (yeah, European spelling I know).



Here's how ANote describes this offering (from their website):


"This catalogue, brought to you by Copenhagen-based Sundance Music ApS, gives access to the Master Rights and Neighbouring Rights of Sundance Records and Stunt Records, two labels packed with tracks performed by renowned artists of the Danish and international Jazz scene, including some of the best productions by Scott Hamilton, Kira Skov, Malene Mortensen, Enrico Pieranunzi and Jan Harbeck.


"Sundance Music has gained respectable success in the top of the international and Scandinavian charts and deals with some of the finest Jazz (contemporary, acoustic, vocal, modern and fusion) productions.


"With over 40 years of experience and more than 4500 tracks in its repertoire, the Stunt and Sundance names have been established as synonymous with the reputation associated with only the top jazz labels of the world, with value and high-quality of production, publishing, and distribution around the world being their core commitment."


The rights being offered are Master Rights and Neighbouring (correct, another European spelling) Rights. Here's a good overview if you want to go deeper into what these rights are. In addition these are for Life of Rights so you can expect to earn royalties from this catalog for a really long time (with one caveat - see below).






Here's the breakdown of average royalties over the last 3 years:

  • €243,502 (3 year average)

  • €240,229 (2 year average)

  • €236,597 (last 12 months)





This offering is for 5% of these royalties divided into 10,000 shares. Here's how those numbers break down:

  • €243,502 (3 year average) x 5% = €12,175 offered / 10,000 shares = €1.21/share

  • €240,229 (2 year average) x 5% = €12,011 offered / 10,000 shares = €1.20/share

  • €236,597 (last 12 months) x 5% = €11,830 offered / 10,000 shares = €1.18/share


The catalogue has a starting bid of €18.34 per share, which equates to a 15.5x multiple of the last 12 months of royalties.




There is a buy back clause in the contract that should be taken into consideration (note: I'm not a lawyer so will not give any legal advice).

From contract which can be found on ANote's Website


Here's the full listing details from ANote if you want to go a bit deeper.


My Analysis:

Here are the items that stood out to me when working through the analysis for this catalog.



√ Awesome

= Okay

X Not Ideal



Consistent Royalties: I am impressed with the consistency of the royalties over the last 3 years. Generally speaking there is usually more variability in royalty streams than this. The standard deviation on this catalog over the last few years is the most impressive I think I've seen for a catalog this size.


Vastness of Catalog: This catalog is packed with songs and artists. I am a big fan of that. It helps to spread out the impact that one song or one artist brings to the returns. Smaller catalogs that rely on one or two songs to carry the load are much more risky.


Age of Catalog: This catalog covers songs from the past 40 years. This is ideal as songs that have only been around for a couple of years tend to have a steeper drop off in royalties when compared to songs that are established.


X Buy Back Option: I'm not a fan of buy back options for my investments. I appreciate that there's a premium that would be paid if this buy back was implemented, but it is still something that I do not generally want to see in my investments.


= Multiple: At the opening bid price of €18.34 the multiple for the catalog is ~15.5x. This is in line with what I've seen elsewhere for these type of auctions where smaller investment amounts will get you in the door. You can get better multiples when investing larger amounts but that's not the market that this offering is catering to. By way of comparison I tend to not invest in catalogs that have double digit multiples when I'm investing in larger chunks ($10,000 +).


ANote: I've been investing with ANote for a year or so now, and have been impressed with them. I will be writing a future article breaking down my experience with them so be on the lookout for that.




Conclusion:

I'm in. I've actually already put in a bid for a portion of this catalog. The positives of this catalog greatly outweigh the negatives for me. I can live with the buy back option and larger multiple in order to capture those consistent royalty streams (that I'm assuming will remain consistent given the size and age of the catalog).


To me this is a catalog that I can sit back and relax and watch my quarterly payouts come in. Truly passive investing at its finest.


 

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As always this blog is meant for entertainment. I'm not a financial advisor in any way, shape or form. Anything I suggest here will need your own due diligence!

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