Royalty Exchange As A Unique Investment Class With Matthew Smith


TWS 37 | Royalty Exchange


In these times of volatility, it always helps to find other investment opportunities to diversify. Sharing in this episode a unique class of investment that does not really exist anywhere is Matthew Smith. Here, Matthew talks about his company, Royalty Exchange, and how he stumbled upon the royalties niche and created an online marketplace and auction platform where investors and artists can buy and sell royalties. He gives us a view of what goes on in this type of non-correlated asset investment and explains how it goes about intellectual property laws as well as the global demand and consumption for these different types of media. Bringing to light the current situation we are all facing, Matthew then gives his thoughts about the economic reality of the world and why it could open an opportunity for your business to restructure.

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Royalty Exchange As A Unique Investment Class With Matthew Smith

I have a special guest. His name is Matt Smith. He’s the CEO of Royalty Exchange. Matt has been a mentor of mine for years. He was my formal business coach for the better part of three years and one of the smartest in business that I know. He has a cool business. Talk about a non-correlated asset investment and a unique class of investment in and of itself which doesn’t exist anywhere. Matt’s background goes into a lot of entrepreneurial ventures including publishing companies. He’s bought and sold many, as a partner in many, has a brilliant marketing mind. He’s also a passionate, free-market advocate. His venture is dedicated to one of those demands in the marketplace when it comes to an income stream that comes from royalties.

He is facilitating a company in a way to monetize that where it makes sense for an investor and the intellectual property owner. You are going to enjoy it. He’s really smart. Follow him on social media and sign up for a Royalty Exchange account. You can see how cool the platform is and this investment class. I hope you are doing good in relation to everything that’s going on. I know it’s crazy out there. I hope you’re safe, healthy, and happy. It’s one of those times where we realize the value in things that we take for granted and I’m grateful for this time. It’s challenged me from a business standpoint and from a personal standpoint. I hope you are looking at this as being a great opportunity to grow. Hang in there, enjoy the show and we have a lot of cool episodes coming up as well. Stay tuned for those. Here’s my interview with Matt Smith.

Matt, it’s awesome to have you in. Thank you so much for taking the time to do this. 

It’s my pleasure.

I have tremendous respect for you and what you’ve done in business, what you’ve taught me personally. I’m excited to interview you because we’re in the times that we haven’t experienced before because of the global nature of things and how interconnected we are. There’s news all over the place and we’re hearing tons of information, good and bad. I’d love to get your take on that first and then get into what I feel is an amazing company from what you’ve built and it is super niche. It’s one of those investments and businesses that people know about the idea at the same time, being able to turn it into some an investment opportunity is quite something else. First, you’re plugged in and you’re an intuitive person, a deep thinker. How do you view markets as they stand? What’s going on in society? The huge volatility swings with what’s going on, what’s your view on that? 

The major issue that’s going on has to do with the Coronavirus, but my view is that is not the cause of all the market volatility. It’s adding to the concerns that the market is trying to deal with but there was deeper toxicity within the system already that’s been there for a while. It’s a credit bubble we’ve been building for a long time. The pin has pricked it and all the wild swings are the market trying to find some sense of value.

It’s been amazing how quickly it’s gone. It’s surprising to me, it’s like these huge corporations but then it’s like, “We need a bailout. We need money.” It’s just ill-prepared from a number of different perspectives. 

That is one of the most shocking things. Is anyone in America ready to go a month? Nothing has happened yet at this stage in America, not serious at all yet. Everyone is screaming for bailouts and it shows how ill-prepared everyone was. There’s no resilience whatsoever. In the most families balance sheet certainly but definitely in none of these huge corporate balance sheets at all is unbelievably awful the way they’ve been managed.

It’s interesting to see how well-prepared the government was to figure out a way to spend $2 trillion. I would challenge anyone. You have a day to figure out how to spend $2 trillion, go. 

It’s going to take 1,100 pages.

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They were prepared to do that but they weren’t very prepared to do anything else. 

The markets are a place that you prefer not to be involved with if you can help it because their situations may not have a choice. The volatility is going to continue as the market tries to digest everything that’s going on in the world of what the economic reality will look like. All the big companies have moved guidance. You can’t value a company on P/E ratio. No one has any idea what the E will be at all. A lot of things are out the window and it’s a very uncertain time if you’re a stock market investor, that’s for sure.

One thing that we haven’t discussed in the show and you’re versed enough to maybe talk about it before we get to Royalty Exchange. The word, buyback, is a big part of this stimulus bill and preventing buybacks. People understand dividends. They understand big bonuses to CEOs. Why is buyback in there? What does it have to do with the credit bubble that you mentioned?

Stock buybacks in and of themselves, there’s nothing wrong with. In fact, it can be very good for the investors in those companies but like most tools, if it’s abused, it can cause a lot of damage. Because of the way that the taxation works in these corporations, if you’re looking at, “We can do a dividend distribution to our shareholders or we can buy back stocks in which case increase the per-share dividend that everyone’s getting.” They choose most often to do these stock buybacks because it’s more tax-efficient and investors usually celebrate that idea because it’s fundamentally good for investors. However, it’s executive pay packages that these supposedly the leaders of these big companies have had are usually connected to stock price. One way to make sure that your price goes up is to take a lot of the stock out of circulation.

The stock price goes up because there are fewer shares but no improvement to the corporation has been made. Meanwhile, if you’re doing that especially at the expense of preparing for a rainy day, it’s absurd that Boeing is going to shut down and then that CEO comes on and says, “If there are any restrictions on any benefit from you, we’re not having anything to do with it.” I was like, “Great deal. Sell your stock to the public market. It’s a raised capital like any other company you’d have to do.” Stock buybacks aren’t bad but they were abused and they were given preference over, they were making investments in the long-term or preparing for a rainy day.

That’s coming back to bite companies in a serious way. The one thing that reveals what we’re talking about though about the underlying toxicity in the market relating to stock buybacks is that all of the improvement, the increase in share price over about the last eleven years and the S&P comes from stock buybacks. If those companies weren’t buying back their shares over that time period, the S&P would be the same level it was 10 or 11 years ago. It makes you wonder what was even happening in the market if it was the corporations using all the cash that they were generating to buy their own stock, it was a giant financial exercise. It didn’t serve anyone very well.

It’s the unintended consequence of low-interest rates. The theory behind low-interest rates is that people will borrow and be more productive. With corporations, they would take on big corporate debt at low-interest rates that pension companies would buy or other big institutional investors or sovereign funds would buy then they would use it not to increase the value of the company by innovating R&D infrastructure, they would buy back their stock with it.

Even Apple who has something $250 billion in cash. A big part of it is because a lot of that cash is overseas and then if they brought it back then they’d have to pay taxes on it instead, they sell bonds and then they use that debt to buyback their own stock. This financialization of the world has not been good for the world.

There are those that have incentives to do it. You had mentioned that before, keeping shareholders happy, maintaining a dividend level, maintaining a consistent growth and their specific benefit and incentive packages. At the same time, it’s put them in a pickle because they have big debt payments. If they start to go down in value, that’s ultimately not going to be good. That’s interesting to see how this all shakes out. 

It will be very interesting to watch.

TWS 37 | Royalty Exchange

Royalty Exchange: There is nothing wrong with stock buybacks in and of themselves, but like most tools, if it’s abused, it can cause a lot of damage.


At the same time, sometimes failure and even bankruptcy, most people think bankruptcy is the company goes under and they’re no longer around. The bankruptcy is simply restructuring and settling with predators. It’s healthy for a company sometimes. 

Bankruptcy laws are designed to preserve the assets and to preserve the capability to be productive but basically wipe out the capital structure in the organization. I was talking to someone else about this and they hear these threats about the airlines going bankrupt. I said, “Did you fly in 2012? All the airlines went bankrupt during that time period but they didn’t cancel flights.” They didn’t fire the employees. The planes kept flying but they went through a bankruptcy where they restructured all their debt, they restructured the equity. That’s what they should be doing again. They’re putting fear into people that bankruptcy means it’s the end. It’s trying to protect this investor class. It’s a big mistake.

The definition of that word needs to be understood. It’s equated to failure and obsolescence than it is to a good thing to restructure. You hit the nail on the head, the capital structure. The capital structure of most companies, they want to stay relevant. It has to include a lot of debt. 

They can’t survive on it. I was talking to this person about this, I said the same thing with personal bankruptcy. It is seen as a black mark and a failure. If you get to that point, things have gone bad but we’re a society that believes in the opportunity for renewal. It’s the opportunity to do it over that you aren’t condemned forever by something. There are consequences for filing for bankruptcy but when you come out of it, you come out with a chance where there’s hope that you can be productive and contribute again. They’re there for a reason.

The quicker you can start the process over, the lesson’s done if you keep prolonging the inevitability of failure. You’re not going to be able to start the cycle over again or to learn the lesson and apply it to have an even better business. 

The bottom line is it’s supposed to be a good application of capital. You deploy capital in productive uses, then you’re rewarded for that use. Bankruptcy is supposed to breakdown the misallocation of capital. We make it so that the new people can come on and use those productive assets and do something with it. It’s an important part of a capitalist system. It’s not that we’ve had exactly a capitalist system for a while but it proves it again that it’s less existent than ever. Our first instinct is to bail everyone out right away.

The best thing would be for some of them to fail because it would replace leadership, it would put better people in there, and more innovative people in there. That’s healthy because that’s one of the worst things. It’s the whole moral hazard idea where morally, we learn when we fail. That’s a good thing because we’re better and we’re stronger when you prevent that. People don’t learn the lesson they should have and that means that they’re going to have to learn at some point in the future. It’s going to be bigger.

In many ways, if you’re a parent and you don’t allow your child ever experience any negative consequences for anything that happens in their life. Are you helping them or are you hurting them? Negative feedback is a gift and it helps us adjust to course-correct and make better decisions in life and be more successful. It’s critical and moral hazard is everywhere.

One of the guys that formed an affinity toward is Ray Dalio and he’s a successful guy, big hedge fund guy. He wrote a good book called Principles. Principles relate to business and they relate to your personal life so I respect him. One of the things he says from a financial standpoint is when you’re making an investment, you want uncorrelated investments as many as possible. I would say even though you have different sectors, classes of investment on a trading floor or an index, you still have these shifts that regardless of the sector or the industry will fluctuate with the tide. He talks a lot about the idea of uncorrelated assets.

He also has an amazing video. It’s called How the Economic Cycle Works. It’s not the philosophy of it, which is interesting. Most people have a philosophical approach to how things should work but he talks about how it works which is fascinating. Going to the uncorrelated investments because of how cycles work, there are opportunities when things go down and opportunities when things go up but they may not be in the same class of investment. That’s why I wanted to bring you on, and maybe you can comment about Ray Dalio and about economic cycles. I want you to talk about the niche that you discovered, which I would say is an uncorrelated investment that I don’t know if there’s any other platform or other opportunities to own it but through Royalty Exchange.

If you keep prolonging the inevitability of failure, you're not going to be able to start the cycle over again. Click To Tweet

Ray Dalio is brilliant. He has had the longest untarnished record of investment of anyone. It’s quite impressive and his book is very good. I also think that he has a children’s version of that. There are some good points for people and my kids have read it. He’s got a lot to teach us, that’s for sure. The market’s activity is shown how correlated everything is especially if you haven’t been in the markets for a while. We’re surprised that the gold got crushed at the same time as everything else. In 2008 that happened too for a while at least. When there’s a demand for dollars, everything goes down. Everyone needs liquidity. The point about correlation and where Royalty Exchange fits into that is what our business does is we work with one-side artists. It’s almost all in music although we’ve done a couple of things outside of that.

These are typically songwriters often for major acts for major artists who know and love. It’s the music you listen to on the radio, but behind that artist are often several songwriters who craft the work. They earn royalties on the use of that music in the same way that the performing artists would. In some cases, in a better way than the artists would. Any song, every time it’s played on Spotify, radio or whatever, there are royalties earned for these different rights holders and it generates substantial income for those artists. If you look at Spotify for instance. If you want to go look at a publicly-traded company that is focused on the music business, you’ll see that something around $0.70 in revenue they bring in, they have to pay out to the rights holders. That would be the labels of performing artists, the songwriters, the publishers that own the IP.

Their cost of goods sold is incredibly high for that business especially because of the boom in streaming over the last several years, it’s been good for rights holders. It’s used to be in the music business that music almost all of the revenue is generating music business was from new work, from music that had come out and out for less than eighteen months. This changed because of streaming and more than half of the revenue that’s created comes from what the music industry calls Deep Catalog. Deep catalog and music businesses are only music that’s been out for more than three years. That’s how short-term thinking they typically are. For instance, Dire Straits, if you remember who Dire Straits is, they haven’t disbanded in the mid-‘90s. It’s a long time ago and yet I own personally some royalties on their music and my portion of the royalty income grew 12% in 2019.

Even though the band hasn’t been performing forever that the music is old because of exposure on these streaming vehicles, it’s generating more and more income. It’s the rising tide with the music industry essentially. In any case, what we do is we work with artists who own these rights on one side but have a need or desire for a lump sum payment for it instead, then we work with investors who are looking for yield and match them up in our marketplace. That’s what Royalty Exchange is all about. We were talking before about market correlation. Most of the royalties that we sell on our platform are what’s considered songwriter public performance royalties. That’s a whole specific class of music royalties. I could go into more degree than anyone is interested in about the different slices of royalties that are there. We looked at that specific slice in particular and we looked at the income that’s produced from that or paid out to artists for that during the last major market downturn we had during the financial crisis.

We compared the growth and distributions to rights holders, compare that with the growth in dividends within the S&P 500. There is no correlation there at all. Dividends from S&P companies during the financial crisis shrank because they had to cut dividends to save capital and all that. They continued to grow throughout that entire period from music royalties. There are a couple of reasons for that. Part of it is that the consumption of music isn’t fundamentally altered by that activity. That wasn’t related to the financial markets. The second thing is that there are long-term contracts, the licensing agreements that exist.

The radio stations and all of that have these long-term licensing agreements with these public performance companies. There’s a multiyear delay. If their ad revenue is shrinking, they can’t justify as big of a licensing deal with these performing writers organizations that represent all the artists. What happens a few years after the downturn has happened, they renegotiate a new deal that’s under slightly better terms but it often works perfectly in terms of the market correlation. Once the market catches up with that downturn, the contract is already there and it continued to be paid out among those old terms which were created during the good times.

I would look at a potential inverse correlation because you’d think that when things are going down where there’s a correction recession, people would want to be lifted up by listening to music or increasing their entertainment. Was there any inverse correlation based on that?

It’s hard to know if the consumption increased during that time period. The general business was in a decline. The music business was in a big decline after the introduction of Napster in the year 2000. That major crosscurrent happening. You also had the rise and there were digital downloads through Apple Music or iTunes at that time. Streaming was starting to come in the very early stages. There are those major crosscurrents, it’s hard to see there. I will say I did see some information showing that streaming consumption went down. This is the first period where what’s the turmoil that’s happening in the United States. That doesn’t substantially affect most of the deals that happen on our platform because of the specific rights that we sell on our platform. That’s because people are staying home and they’re don’t have a commuting time, maybe it’s cut there. It wasn’t a huge decrease but there was a little bit. Maybe a rose is watching the news to figure out what was going on in the world. It had been that but we do see from 2008 that the distribution starters continued to grow while distributions to investors and S&P shrank.

Are you paying attention to how intellectual property and royalties will work globally? Is there any traction there or is that a throw out given the complexity of every country’s intellectual property laws? 

It is deeply complex but there are organizations that are set up in every country around the world that manage the use of intellectual property within that country and the agreements for use by people in other countries. If you think about Spotify, for instance, how they waited for a long time before they finally did pull it in the US. It was because of these unique territorial licensing agreements that had to be worked out with the music labels at that time. International is a strong component of royalties that are earned. One of America’s great exports is our culture film, TV and music. A big portion of the royalties that are created are generated overseas.

TWS 37 | Royalty Exchange

Royalty Exchange: One of America’s great exports is its culture—film, TV, and music.


There was a presentation I saw and it was Peter Diamandis who was giving it. He was talking about the growth of people coming online and it’s going to double in the next couple of years because of the satellite infrastructure that’s going in place. You’re right, it’s one of those things where whether it’s TV shows, movies or pop culture music, the more people that are online, the more people are going to have access to it because more underdeveloped countries don’t have the structure in place to create the songs, not necessarily have the ability to come together as multiple artists with that organization to you get the same quality. I think you have some protection there. It’s also interesting how the global demand will increase and improve royalties as well. 

The other thing I would say is that you might be familiar with Techstars, which is a technology incubator. They have franchises all over the world for different sectors and there’s one for music. We’re one of the sponsoring members of it meaning we contribute capital to fund the different startups that are going through the incubator. Alongside of some of Warner music, Sony Music, Sony Corp Innovation Fund is in there and lots of other people in the music business. The music industry has a bad reputation. It probably well-earned in part for not being innovative when Napster came along for missing that and then not adjusting well to it and got dragged kicking and screaming into the streaming world.

It doesn’t seem that’s what’s happening anymore. It seems like they learned. I’m working with the different companies that are coming through the Techstars incubator. You can see that they’re constantly looking for new ways to license the music, license the IP anywhere they can whether it’s new consumer apps like TikTok. Your kids or grandkids and the people reading this know what that is. It’s been huge and driven a lot of new royalty income for rights holders that didn’t exist a year ago but it’s a big source of revenue. In gaming licenses for within video games, all of that’s happening. The music industry is finding new ways to bundle in licensing opportunities with music into other experiences. It is also proven to be a significant driver for ongoing royalty revenue.

My mom was a music professor and I grew up around music. My brother is a professional artist in Vegas. Music is one of those things that I’ve come to believe is a part of life. It’s part of what motivates us and what gets us through things. It’s cool to see how businesses are innovating ways to bring those opportunities, bring music to more people and finding innovative ways of doing it. If you look at all the different technologies that are coming soon, AR, Augmented Reality. Maybe VR gets a second wind. Anything new like if it’s just it without music, it’s not the same regardless of what the technology is. 

I’ve said to people, “If you ever do a video of yourself, you’re filming yourself doing anything and you feel like you looked silly, slowed it down and add a soundtrack, you could make anybody look a hero.”

If you put like 30 settings to the 23.98 frame rate and then you put some music to it, you look like you’re a movie star. 

The music invokes things in us, we don’t realize even so it’s huge. There’s a lot of innovation happening around it maybe it was late to the party but they’re doing a good job and that’s going to create ongoing sources of earnings for rights holders.

Going to the Royalty Exchange platform, it’s not the primary artists. It’s the one that’s on the title of the song. 

A lot of times, it’s not the performing artist.

It’s the songwriter or one of the musicians that’s playing an instrument. They have these streams of income coming in. They sell that stream of income on your platform for a lump sum. They need money for whatever purpose. 

A negative feedback is a gift, and it helps us correct our course, make better decisions in life, and be more successful. Click To Tweet

A lot of people go, “Why would they sell?” You have to understand. These are the original gig workers. You’re talking about Uber drivers and people like that that are unbankable, meaning if they want to go get a mortgage for their home, it’s difficult. Musicians looked like unemployed people. Songwriters look completely unemployed. Their access to capital than out of the capital markets doesn’t exist. With all of us, a little bit of injection of cash at the right time in your life can have outsize gains in productivity and what’s possible in our careers and futures, the same is true to these artists. This is the platform that creates a competitive marketplace where they can get fair market value for their assets.

What’s unique about Royalty Exchange is on the platform first, anybody can go on there and register. Is that still available? You can go on and see what’s up for bid but that brings up that point of auction. Can you talk briefly about the auction component of how somebody goes about buying a royalty stream?

There are two ways now that people can buy assets in our marketplace. The primary way and what we’re known for is auctions. What happens is we work with an artist, we validate the income from the catalog, and we validate that they, in fact, own and have the ability to transfer it and then we set it up for an auction. Something like eBay and Sotheby’s mix. Some of the assets can be expensive. We’ve had assets that are in the seven figures that have been auctioned on the platform but the average bundle of rights that gets auctioned off on the platform is about $60,000. It’s what the ending price that is on it. There’s a big range of different assets to get auctioned. If there’s an investor, if you’re interested, we have every auction we’ve ever done, they’re all there.

You can look at the bidding history, what music was, what its earnings were, and how much it sold for. You can get a lot of information by looking at what’s there. Like on eBay, you can watch an auction so you can see how people are bidding on it in real-time. I would encourage, if you’re interested in this at all, do that. Go look and watch auctions but don’t bid on anything right away. Watch some stuff, see how the market works, see how other investors who’ve been bidding on things for a long time. Interact with it and you’ll get a much better sense if it’s right for you at all and if so, at what level? The other part we have, and this is relatively new is a secondary market. Any assets in the past transacted on the platform get automatically listed in the secondary market. Once they’re listed in the secondary market, you can see the assets and what their income is.

If the owner of that asset, this would be the investor, are interested in selling it, they can list the list price. They can say, “If you’re interested in this, I’m willing to sell it for this price.” That’s listed there. Alternatively, you can make an unsolicited bid on any asset that is there. There’s a much wider variety than you would see up for auction at any one time. There are 150 assets in the secondary market. You can compare by age, how old the catalog is, by its earnings of the catalog and you get lost probably because there’s so much information on each one. Auctions can make people nervous. I’ve been known in charity auctions to make very rational decisions, get competitive in them so you’ve got to be careful with auctions. In the secondary market, you can peruse at your own interests and you can place unsolicited offers for people. If they accept it, we’ll facilitate the transaction in the background.

Let’s say I invest in an album or invest in a product and now the income starts, does that come through your platform? Is there an escrow account? How does all that work? 

Here’s the most important thing. When you buy one of these, it’s not as though you need to rely on the artists sending you a check every quarter. What happens is title is transferred at the organizations that collect and distribute the royalties level and they assign the royalty to the new owner. We would handle those all individually. We would individually title them all and people would receive. If you own ten of them, you will get ten different payments from these PROs, Performance Rights Organizations. It’s difficult to keep track of which one is which, but we would have them send all the checks to you. Since then, we started offering a free service for people, we collect and then immediately send out the payment to people. The reason we do that is one, we can see if there’s an issue.

If you have a question about something that’s going on, we can help facilitate and answer for that versus hundreds of other people calling these organizations that aren’t used to it all dealing with investors, they’re used to dealing with artists. If it comes a time where you want to sell the asset, we can facilitate that much more quickly because we have an ongoing record of the performance of the assets. We facilitate the transaction or the ongoing payments for our investors. The payments in most cases, they occur every quarter. When I say most cases, sometimes if it’s with the label, the label might only payout to the rights holder twice a year, for instance, some pay every single month. The typical arrangement is every single quarter, it pays out of check. On average, those checks amount into a little over 12% return for the investors.

Talk about the taxes. Are royalties taxed differently than other assets?

It depends at what point in their life cycle you’re looking at. From an investor perspective, if I acquire somebody’s royalties from them, I’m paying them and then they’re going to pay a capital gain on it. Instead of paying, they would normally be paying royalty income on it but they’re going to pay a capital gain. I encourage everyone to consult their own tax authority or tax accountant. I’m not a tax person but it’s a lot like real estate. In that, you can amateurize the cost of the asset over time. Depreciate it. That offsets a substantial portion of the income unlike real estate, which might have a schedule of twenty years or something in most cases, typically ten. If it’s generating a 10% yield for you, your tax base on this can be low. You’re going to be in a good position. The poorly understood things about this asset class is that from a tax standpoint, it has special treatment in the Tax Code and it’s good for investors.

TWS 37 | Royalty Exchange

Royalty Exchange: A little injection of cash at the right time in your life can have outsize gains in productivity and what’s possible in our careers and futures.


Do you communicate or have ways like accountants have somebody who had been invested in something in this direction that they can use and understand the income stream better?

We have a letter from a tax attorney that describes the way and points to the parts of the Tax Code. We facilitate the general guidance from this tax accountant but we don’t set people up with bookkeepers or anything like that around it. That’s something they have to handle on their own. We haven’t heard of that being a major problem for anybody yet.

It’s fascinating and it’s one of those assets that people are familiar with what royalties are. The artists, movie stars and actors get it. At the same time, how that has been turned into investment opportunities? There are not any opportunities. You had mentioned once that these types of investments exist at a high level like Goldman Sachs or a BlackRock level but not necessarily at the retail level. 

That’s been bad for both sides because it used to be the big featured artists that had a deal that was big enough and could go and get liquidity through somebody like Goldman. Before the hundreds of thousands of songwriters who contributed substantially to these works, the size of their catalogs were not big enough. The income, while it’s generated $25,000 a year for them in passive income, it’s great. From an investor, I’d go, “I would love doing that passive income if I can buy it at a six multiple or an eight multiple, I buy it all day long.” For them, there was no market for this. They had no access to liquidity and investors had no access to the yield. Our goal is trying to make it so that it’s not just the superstars and not the Goldman Sachs of the world that the transact. We’ve done well with that. I want to say one thing about how long the royalties last. That’s one of the common questions we have.

In US Copyright Law, anything after 1978, it looked like this. The IP is owned by the rights holder for life of the last living author plus 70 years. You might have three writers on one song and it stays for all three of those rights holders or their heirs until all of them are deceased and then the 70-year mark starts counting. They last for a long time. On our platform, we sell primarily the royalties in one of two ways. One way is life of rights, which is for life of the last living author plus 70 years. The other way is a ten-year term. You’re buying the right that income stream over the next decade. You get 100% of the income that comes from it. After that ten-year period, it goes back to the original rights holders. Both of those are available on the platform. Which one is better? It all depends on the price. Most of the earnings of these things, if you’re doing it for forecasting out, the biggest value of those earning is going to be over the next decade. As assets that generate income that are uncorrelated, it’s unique whether it’s for 10 years or for 70.

Is that choice done by the holder of the IP or is it done by the investor? 

It’s done by the holder of the IP. They’re told from early in their career, “Don’t ever sell your royalties. Don’t ever sell your rights.” The reason for that is because you always hear these stories about artists getting these awful deals with labels and things like that. That knowledge has been passed down. Try and keep them from getting in those bad deals. Some of them will live that way until they die, they’re never going to sell their rights. By having the ten-year option, it opens up the possibilities.

Matt, this has been fascinating. Thank you for sharing all of this. I love your platform too. Can you give the readers some ways that they can connect with you or connect with Royalty Exchange, get on the platform and look at what’s going on there? 

The best thing you do is go to You can see all of the things we’ve ever done on there, all of the assets that have transacted. One of the other things is that this space has always been prone to secrecy. When deals happen, they’re behind closed doors. No one talks about the multiple they went for anything that. We’ve done hundreds and hundreds of transactions and all the information on them is in the public domain. You can get a good sense of how the market functions and it makes it so that you can participate in an intelligent way if it’s right for you.

Matt, it’s awesome to connect with you. Any last words? 

Thank you for your time and all that you do, Patrick. I appreciate it.

Thanks for reading. I hope you enjoyed. Make sure you go on to iTunes, give us a good review. We also have a new YouTube channel, that’s up and running. We’ll see you next time.

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About Matt Smith

TWS 37 | Royalty ExchangeMatt Smith is an experienced entrepreneur, investor, and advisor who has founded and led multiple successful businesses. He is a passionate free market advocate dedicated to providing rightsholders and creative professionals with fair financial options, and has extensive experience with alternative investment strategies.



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