How to Invest in Royalties

This year Ed Sheeran had the top two hits of 2017.

His song, “Shape Of You” earned $2.6 million in sales, and set the record for the most streamed song of all time.

Dolly Parton is still collecting royalties from her song, “I Will Always Love You.”

It was originally recorded in 1973 and was #1 Billboard country song in 1974 and 1982. Then Whitney Houston covered it for the movie The Bodyguard in 1992 and it reached the #1 spot again and became one of the best-selling singles of all time.

Wouldn’t it be amazing to be able to collect royalties on songs like these, forever?

Even if you’ve never written a song, you can still collect on royalties. If you’re looking for an alternative investment opportunity, royalties are worth looking at.

While stock prices constantly fluctuate, royalty revenues have continued to grow.

According to the International Confederation of Societies of Authors and Composers, in 2008 the 2.5 million artists represented by the group collected over seven billion Euros in royalties.

Now You Can Collect Royalties for Songs You Didn’t Even Write

How is it possible?

There are times when an artist who owns the royalties for a song, and they would rather have some of the money right now. Maybe they want to buy a house, or build their business, or cover immediate living expenses.

Investors who want to have a stable income stream can buy a percentage of those royalties on The Royalty Exchange.

The Royalty Exchange is the #1 marketplace for buying and selling royalties. The company was founded in 2011, and they have auctions and even IPO's on music catalogs like pre-2013 Eminem.

The owner of the royalties puts their work up for auction, with a minimum bid that they will accept. Once the royalties are purchased, the organizations that pay the royalties put the money into an escrow account and the royalties are then paid every quarter or every six months. Buyers get a dashboard where they can keep track of their purchases and earnings.

For example, someone bought 25% of the royalties for the 1984 Alabama song, “If You’re Gonna Play in Texas,” for $56,000. The website shows that that song earned $4,992 in royalties over the past 12 months.

The royalties for an album of worship music was sold for $122,000. That album earned $20,190 in royalties over the past 12 months.

Sometimes the royalties are auctioned off by a collaborator of the song, or by someone who has inherited the royalty rights.

According to an article called, “Are Music Royalties a New Alternative Investment?” by John Waggoner in Investment News, Tony Geiss, the songwriter for a collection of Sesame Street songs including “Elmo's World” gave his share of the royalties to charity. His estate auctioned them off for $580,000 so that the charities could benefit from the gift immediately.

Royalties can go up because a song was used in a soundtrack or because one of the artists died. Royalties for songs are not correlated to the stock market, which is a big draw for investors.

Get Started on These Platforms

The Royalty Exchange is an online royalty marketplace where you can bid on royalties in many industries such as music, film, TV, books, solar energy, pharmaceutical, intellectual property, oil, gas and more. You pay a 2.5% buyer premium and another 2.5% for the management and payout of your royalty stream.

Lyric Financial is another royalty platform to try. Lyric Financial is a company created to help musicians have the money they need to finance their careers and pay the bills. They give musicians short-term advances on their all or a portion of their royalties. They also offer lines of credit to musicians who earn $100,000 or more a year in royalties.

SongVest describes themselves as the stock market of music. Through their website, you can buy or sell royalties. Fans can finance albums that are being made now through a crowdfunding model, and in return get a percentage of the royalties. The money raised allows the musicians to create and market the albums.

How Can You Tell if a Song Will Earn a Lot of Money?

According to an article on The Royalty Exchange, the most important factor in how much money a song makes is how often it is used. The more popular the song is, the more it is played, and the more money it will make.

In addition to popularity, holiday songs make a lot of money over a long period of time because they are played over and over every year.

If a song is used in a soundtrack to a movie, it will earn more royalties.

And when a song is covered and reinterpreted by a new artist, both the original artist and the new artist will earn royalties.

The top ten highest earning songs are “Candle in the Wind,” by Elton John and Bernie Taupin; “The Christmas Song,” by Mel Torme and Bob Wells; “Pretty Woman” by Roy Orbison and Bill Dees; “Every Breath You Take,” by Sting; “Santa Claus is Coming to Town” by Haven Gillespie and Fred J. Coots; “Stand By Me,” by Ben E. King, Jerry Leiber and Mike Stoller; “Unchained Melody,” by Alex North and Hy Zaret; “Yesterday” by John Lennon and Paul McCartney; “You’ve Lost That Feeling,” by Barry Mann, Cynthia Weil and Phil Spector; and “White Christmas,” by Irving Berlin.

Pension Funds are Increasing their Returns by Investing in Royalties

In his article, “Warren Buffett’s Tollbooth Investment Strategy,” Simon Black writes that most pension funds are seriously underfunded simply because they get a low return.

When pension managers invest, they are looking for ways to get a safe return. Unfortunately, it’s nearly impossible to get a safe return of more than 7-8%.

But royalties are different. Royalties can often bring in as much as 10-25% per year.

You are getting paid for other people to use an asset that you own. Warren Buffett compares owning royalties to owning a toll road. Once you build the road you can collect cash forever just for letting people use the road.

For this reason, many pension fund managers have been adding royalties to their mix of assets as a way to safely boost their returns.

  • The Canada Pension Plan Investment Board allocated $325 million for a percentage of the royalties in Venetoclax, a cancer drug.
  • Round Hill Music Royalty Fund owns rights to more than 4,000 songs, including Chris Kenner’s Land of a Thousand Dances, which appears in the movie Forrest Gump. According to the CEO of Round Hill Music Royalty Fund, the song generates between $300,000-$400,000 a year.

The benefits of investing in royalties are that you can have a steady income that lasts for the lifetime of the copyright or patent, royalties are not influenced by the stock market and so they are a good way to diversify your portfolio, and there is always the possibility that your royalty will have a revenue spike.

You Can Invest in Royalties in Other Industries

What is a royalty? Whenever the owner of an asset is paid so that other people can use that asset, they are receiving a royalty.
Aside from the entertainment industry, people can invest in royalties in oil, natural gas, and other minerals.

In her article, “Royalties as an Alternative Investment,” Enelda Butler explained it this way: “The owner may license the asset to be used by another party, and will be paid a percentage of the net revenues of the asset based on its usage. Royalties can also be used to allow investors in a company to have a percentage ownership of future production or revenues that will be paid at specified intervals like annually, quarterly or monthly.”

It’s like owning an oil well without all the drilling.

Owning and operating an oil well is out of reach for most people.

But you can get a percentage of all the revenue that comes from all that by investing in an oil and gas royalty trust.

In “Energy Investing 101: Tackling Oil & Gas Royalty Trusts,” Motley Fool writer Tyler Crowe provides a good primer for people who want to take advantage of these high-yield investments.

Investing in a royalty trust is similar to buying the royalties to a song. The oil company will issue units of a royalty trust so that they can raise capital.

There are several reasons why these investments are worth including in your portfolio.

  • They are corporate tax-exempt.
  • The distributions count as capital gains, which have a lower tax rate.
  • You will become a part owner, which means that you can lower your cost basis by depreciating the asset, delay your taxes and take advantage of tax credits.
  • The ten largest oil and gas royalty trusts get returns that range from 8.4% to 28.5%. Royalty trusts are required to distribute all of their cash flow, which is why the yields are so high.

Oil and gas royalty trusts are more like bonds than trusts. They have a finite lifespan. Crowe said, It’s value slowly declines over time until it’s no longer economically feasible to pull oil and gas from the well.”

The amount of the distributions vary depending on oil and gas prices, how much the wells are producing and other factors. Although the yields may be high, there is no guarantee that you will earn back the principal. That said, some of the well-established trusts have beaten the S&P 500 for the past 15 years.

Before deciding to invest, the Motley Fool recommends looking at three things. 1) The production mix of the well; what percentage is oil, natural gas, etc. 2) The Payback period; the amount of time it will take to break even. 3) The shelf life of the trust; the total amount of time the trust will be in production.

Royalty Companies in the Mining Industry

In a Stansberry Research article called, “How to Make the Biggest Safest Returns Possible with Royalty Companies,” John Doody, the editor of Gold Stock Analyst, explains the benefits of investing in royalty companies.

One of the biggest benefits is that investing in royalty companies lets you enjoy the high returns from the precious metals mines without the risk that can come with mines.

“There's a lot of risk associated with a one- or two-mine company. It's common to see mines encounter difficulties for various reasons, and the related mining stocks might lose 25%, 50%, or more of their value in one day,” said Doody. “On the other hand, if a big royalty company had a royalty on that mine, it wouldn't be a big deal, because there would be royalties from other mines that could take up the slack.”

Royalties as a Form of Venture Capital Financing

epaCUBE was founded in Dallas, TX, in 2001. It is a SaaS company that provides profit optimization solutions.

They needed funding so that they could adjust their business model and fund new sales and marketing effort. To make this happen, they went to Cypress Growth Capital, who gave them $2 million in 2013.

Cypress offers royalty-based growth capital. The Cypress Growth Capital website said, “Unlike a traditional equity investment, extraordinary growth projections and market opportunity are not prerequisites for royalty-based growth capital. As a royalty investor, our investment success is not dependent on an exit event, like a sale of the company or a public stock offering.”

Entrepreneurs and start-ups are turning to a royalty based model of capital funding, like the ones offered at Cypress.

Normally, companies have to give up the control of their company and a chunk of equity whenever they receive funding from investors. But with royalty-based financing, investors get a monthly payout based on the revenue of the company. Rather than get an ownership stake, investors get a guaranteed percentage of the sales.

Royalty Capital Management, BDC Capital and Rockwater Capital are three investment firms that specialize in the royalty-based model.

Diversify Your Portfolio with Royalties

Investing in royalties is a good way to diversify your portfolio because it is possible to get a high return on your investment with relatively low risk.

Musicians occasionally sell all or part of the royalties for their songs and albums, and investors can bid on them on several online marketplaces. Once you win a bid on a royalty, you will receive the royalty checks whenever that song is played. Many pension funds are turning to royalties as a way to increase their yields.

Other industries have opportunities to buy royalties. The oil and gas industry sells royalty rights through oil and gas royalty trusts. Many startups and small businesses are funded through royalty deals where the investor gets a percentage of the revenues that are coming in.



  1. what is the broker account SoFi, I have a T. D. Ameritrade Account, do I need a SoFi broker account in order to buy Royalty investments?

  2. what is the broker account SoFi, I have a T. D. Ameritrade Account, do I need a SoFi broker account in order to buy Royalty investments?

  3. Hi Susan,

    This is a great article. But please can you specifically advise how to invest in Tech royalties? What platform shock I use. Since I am guessing most of the companies are not public yet, where can I invest in them. I have not found any definitive vehicle.

    Can you advise please?


  4. Hi!I’m just wondering, how can I or avail investing tech royalties. Any suggestions of a company I have to go to invest on this? What company or website can you suggest that can help me in investing in tech royalties? And also, for pharmaceutical royalties? and also like Apple royalties?

  5. Hi. Very informative articles. I enjoyed reading them.
    Where do I go if I am interested in purchasing royalties in gold mining? Carol

    • HI Carol, you can look at the gold royalties and streaming stocks. The most well-known is probably Royal Gold, Inc. (RGLD).

  6. I am brand new to investing. I would like to invest in tech royalties. How do I begin & which do you suggest I start with. NEED HELP DESPARATELY – WANT TO START ADAP ESPECIALLY IN 5G Companies. One is Qualmm. Any HELP WOULD BE GREATLY APPRECIATED!!!
    Tbanks for your help & time in this matter!
    As I am getting into to this late 56 years old & bad health! NEED HELP!!! 🙂

  7. I’m very interested in learning more about stock rental royalties, REITS, tech, and energy. If there’s a one stop shop, or program to learn, earn, and share, Thanks…

  8. Susan:

    Thanks for mentioning SongVest, and I am amazed at how much traffic I get from your site. If you would like to see our newest offering which I think will be the model for all companies moving forward check our and our current offering at

    The difference is that our investors get paid a royalty of 5% of top-line revenue from day one. So they don’t have to wait for some exit to start to collect royalties. I would be interested on your take in this new model. It is more of a fun investment that allows you to participate in the company, music and the artists we sign. Happy to discuss.

  9. Please point me in the right direction for TECH ROYALTIES BETTER KNOWN AS CRYPTOS. HOW SOON CAN I START AND WHAT TYPE OF FEES INVOLVED???? Thx greg

  10. this is a great artcle, i ve found many informations i was looking for
    could u advise where exactly i can buy mining royalties if i start with 1000 dollar and i don t have a previous experience.
    thank you in advance,

  11. I have been researching royalties in several of these markets for some time. My difficulty is not finding vehicles to invest in. It is creating the initial investment to do so. What do you recommend for gathering the seed money to purchase said royalties?

    • Most people take a percentage of their income and invest it every week, month, quarter, year. People work part-time jobs. Some people have sold cars or rental houses or tapped home equity. Lots of different ways to come up with investment capital.

  12. I am interested in the Pharmaceutical Royalties, Precious Metals Royalty, and Rare Minerals Royalty programs. I need more information like the company names and if they are traded on the open markets. I would also like the private investments side and information on how to invest with them as well.

    Thank you.


  13. Thank you for the information.I would like to invest in streaming media like Netflix and in TV serials.How do I start?

    • Couple of options. You can invest directly in Netflix since it’s a public company. You could also contact SAG-AFTRA about buying actors’ royalties. And I’ve noticed film royalties available on Royalty Exchange – most recently the movie Trading Places.

  14. This has certainly been an eye opening article for me as I am in the process of launching a business teaching people how to budget properly and giving suggestions on investing strategies and opportunities. As a result, I am constantly looking for new opportunities and strategies that I can point my future clients to further investigate and choose for themselves.

  15. In order to arrive at Net Investment Income, Gross Investment Income (items described in items 7-11 above) is reduced by deductions that are properly allocable to items of Gross Investment Income. Examples of deductions, a portion of which may be properly allocable to Gross Investment Income, include investment interest expense, investment advisory and brokerage fees, expenses related to rental and royalty income, tax preparation fees, fiduciary expenses (in the case of an estate or trust) and state and local income taxes.

  16. Thanks pls can you show me how to start buying royalties in Christian songs,oil,and minerals?how to books etc

  17. Great !!!!! article Susan, Just the Info I wanted to learn about, keep it up = Alternative Investments,

    Josh, in Orlando

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