Are Cash Producing Royalties One Of The Most Undervalued Asset Classes Tn The World?

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Alright, welcome back to the show. This is Brad and I have got a really interesting topic today. We're going to talk about royalties, investing in royalties. And if that makes no sense to you whatsoever from this introduction, it will soon. But let me preface that first with what this is all about. So first of all, if this is your very first time listening to Bacon wrapped business, this is my platform for getting really smart, influential, successful people on the phone. People who are doing some really cool stuff that I personally want to know about. There's nobody who comes on the show that I don't have an authentic personal curiosity about who they are, what they're doing and how it'll help both myself, my clients, my partners and you, my audience. And so today is no different. And let me first explain how this episode came about. So for the past several years I've always been a big fan of a newsletter called sovereign man sovereignman.com youm can go subscribe. And he talks about a lot of alternative investments and things that are going on in the economy and it's just a really entertaining read. He's also got a great podcast. That being said, I came across a line at the bottom of one of the episodes that said he was talking about alternative investments and he says I've been buying cash producing royalties, which in my view is one of the most undervalued asset classes in the world. Cash producing royalties. So I clicked on that and I came to a site called royaltyexchange.com and I remembered this site because I came across this maybe a year or two ago, I can't remember when. And it struck my fancy because in my former life I was an investment advisor and my degree is in finance and I've always been highly interested in all types of investments from stocks to bonds to real estate and whatnot. And Royalty Exchange immediately caught my interest because I don't know enough about it. And basically. And our guest today is one of the partners in it. He'll explain. But it's where you buy and sell artistic royalties, right? Like rights to a song. Now I started reading through this and it's an amazing website. I highly recommend you go check it out. There's a lot of education and there's a lot of faq, but I wanted to kind of get to the heart of the matter and ask the, you know, get answers to the questions I don't even know to ask. So that's why I invited Jeff Schneider on the phone today. Jeff is one of the founding partners and CFO of the company royaltyexchange.com and I'm happy to have you here on bacon wrap business with me. Jeff, are you there?

Yeah. Thanks for having me, Brad.

My pleasure. So, yeah, so you heard me introduce the concept of this, but why don't you explain briefly, you know, in your words, what this is all about? Because I've got some very specific questions. Before you do that, let me just tell the audience some of the questions that I want to know. Like I'm going to ask a little bit about the history of this, but I'm also going to ask about this from an investor's perspective. Like, how do we even begin to value this and assess the risk and decide if this is a good investment for us? So for anybody who's got these questions, these are the things we're going to go into. So without any other further ado, tell me a little bit more about royalty exchange.

Sure. I'd love to claim the idea for royalty exchange, but actually I found it as an investor about four years ago. Three or four years ago. Primarily because I was looking for ways to participate in royalty earnings. As an investor, I liked the idea so much, and I had a firm belief that this is actually the largest asset class in the world without an established marketplace. So if you look at any other kind of asset that sits on individual balance sheets or company balance sheets, there's an established marketplace to buy and sell these things, but not for royalties, not for intellectual property. We saw the opportunity to basically solve problems for both sides, the supply side or the seller side of our market. These folks have historically had bad take it or leave it deals.

These folks are the artists.

Yeah, the artist, primarily. And it's usually happened in the back room, a handshake. They either have to take it or leave it. And 20 years ago, they had to take it. And you see a lot of news stories about these artists that have entered into bad deals. Now on the other side of it, you have all of these investors. You have more money floating around the world than almost any other time in history. They're all searching for yield 20% of global debt is. Is trading at a negative interest rate. And so you have all this money floating around looking for deals. They're looking for yield or they're looking for alternative investments that aren't correlated to the stock market. And so I was kind of at that stage several years ago and I found royalty exchange. And we just saw such a huge market for it that we bought the business. And then I think right now we're focused on music. That's where we spend almost all of our time right now. But if you look at how we'll continue to grow, it's music, it's books, it's intellectual property, patents, trademarks, and even alternative energy, wind and solar, all have royalty streams attached to them.

So let me ask you, let me back up a little bit like you said. And this part is more for my listeners who may, hopefully, I think they're catching it. But bottom line, if you're an artist and you've either written or produced or owned the rights to a stream of royalties, and in essence you have the rights to something which is what royalties are, and you get an income stream, you don't have a lot of options out there. You can sit back and collect that. But sometimes people need or want money now and there is a value to that income stream. So in the past, like you said, they would have to, what, just go out privately and try to find somebody to maybe, you know, purchase the rights to their royalties. And a lot of times they could get screwed because there's no market for that. So it sounds like royalty exchange created the market and it allows investors like you and me, who have cash, who want a non correlated asset class to step in and say, yeah, I'm willing to pay X amount for that, for that stream of income.

Right, exactly. And for the investor, it's a purely passive engagement. So the artist has already created the work. In most cases they have, you know, a history of income. That's what we present on the website. So you can, you can better predict what the future may hold. And so what they're using it for is they want to come out with a new album or they want to go on tour. They need something for their personal finance.

Maybe a new Lamborghini.

That's how marketplaces are created. You know, you have people who need some capital, you have people who have it trying to deploy it. And yeah, so we just, we just do the matching between the two.

Okay, so some of the questions that come up, you know, in my mind as a, as a potential investor, so I totally get the concept. What I don't understand is a how to Value the royalties as an investor. And I'll put an asterisk on that because I do see that. I kind of know that if there's a, if there's a, if something's making, let's say whatever per month, $10,000 per monthly income, and I need, maybe I want a 10% return on my money or I'm happy with whatever. I just structure, I buy it based reverse engineering what kind of income I need to earn. I want to talk about what to expect as far as income goes. But one of the things that really eluded me is how the heck you mitigate the risk and understand the value of a stream of royalties. Because we all know that past performance is not an indicator of future results with royalties. This is a totally separate world because most people don't even see, you know, people see stock markets and they see the bond market and they see real estate and you know, it's a much more transparent marketplace. But for instance, I just went to one of the things on your website right here. This was just a recent auction that closed and it was from, for a Wiz Khalifa catalog, 90 plus songs from Wiz Khalifa's number one Grammy nominated Black Hollywood with a bunch of different songs. And I'm not familiar with the album. I know who Wiz Khalifa is. And I'm looking at the financials here and I see, you know, the last 12 months royalties are about a little over 10,000. And it looked like it sold for $83,000, this portfolio of rights. So that probably is a little bit, you know, what is that 10 divided by 83. Right. That's how you, it's about a 12%.

Yep.

You know, so that's, I, I'm not off base.

The easiest way to think of it is, you know, in, in there's two ways. The, the ultimate way any financial instrument is traded is discounted. Cash flow scenario. Yeah, Stocks are supposed to trade that way. Everything's supposed to trade that way. But in the end what, what it trades at is, it's, it's relative price to other assets and, and a multiple on that. And so I think the easiest way to explain how music royalties may trade is you look at what they've earned over the last 12 months or the average of the last three years. And then you can take a multiple on it. But the key is that the multiple can vary anywhere from. We've seen below a two times multiple. So something that earned $10,000 last year would trade for less than 20. But we've also seen it as high as 12 times. And that's something that earned 10,000. Went. Sold for 120,000. Yeah, 120,000.

Does that all depend upon the apparent stability of that income stream?

Exactly. Okay. Yeah. So the biggest. I would say the probably largest factors in that is. Is the stability of it, the sources of the income. So the age of it. So a song that was written, something that went for 11 or 12 times was a Barry White song that was written 35 years ago. It was his second largest hit. My first, My last, My Everything. And that song has been popular for 30 years. It's gonna be popular for another 30 years. And so it's easier to understand the history. There's less variability in annual income on that one than there is even something like Wiz Khalifa that. It's a little bit newer. It's related to a popular artist right now. So the earnings were strong and growing. So that one went for, I think, a pretty decent multiple. I think it was eight. Eight or so times, seven and a half times. And it's just. It's a matter of those key factors. How stable is it? How old is it, and what are the sources of income? You know, something that has a higher source of streaming income, which, you know, streaming income right now is the largest. It's. It's far outpacing any growth anywhere else in music. And so something that has a lot of streaming income, somebody's going to be willing to pay a higher multiple for that than something that has more temporary placements or relies on CD sales, because there's just fewer of those now.

And you're going into some of the next questions that I had, which is, as I said, there's not a lot of transparency for the average person who doesn't understand the royalty market. What are all the sources and how stable are those? And we all know that songs go in and out of style, right? Like, there's probably, you know, maybe only fashion goes in and out of style more than songs. So trying to know if a Wiz Khalifa. I'm just using this as an example. Investment would be good. Is really hard for me to know because I don't know, is it dependent upon people's taste and getting on Spotify or itunes or whatever and constantly streaming. This is there. Let me rephrase it like this, because this is something you might be able to answer, because right now I'm just kind of telling you the questions in my head for you, somebody who's obviously an expert in this, since he's behind the scenes, if you're putting your own money into a royalty stream and you're bidding on something. What are the things you're personally looking for as the benchmarks it needs to have, and what are some of the red flags?

Yeah, I think that's a great question. And I would say the lack of transparency of it is something that we're absolutely looking to fix. So a couple things we do with each and every auction. Well, probably the easiest thing, first thing is I would do as an investor, is we have an investor report that's called the Ultimate Guide to Buying Music Royalties. So in there, we explain a lot of the sources, you know, and the trends of each of the sources. So that's kind of the first place. And then in every auction, what we do is we try to make in the financials, we show different charts on, you know, streaming by source or income by source, income by song, the growth rates behind each. And then we also present all of the raw data so that somebody could do their own analysis. And so I think that's something that we're looking at improving is basically solving that information gap for investors. So for me personally, it is actually everything we just discovered. I mean, we've done 115 auctions in the last about 14 months. And the key factors have been exactly what we talked about. And that is everybody we talk to in the music business, everybody who's acquired large amounts of catalogs. We're teaching investors the same way that catalogs have traded historically. We're just trying to equip them with all the data.

Right. Okay.

So what about.

Is there a price? This is just back to you personally. Is there a price that you. Or is there a yield that you're particularly looking for or a range?

I think yield completely depends on risk. Would I be willing to pay 10 or 12 times for Barry White? I think so. Because you'll be around for a while. Likely, yeah. You see that. So I think all of that depends on risk. Some of the ones I've been excited about also are lower on the multiple place, but they're a little bit riskier. I think that's where us having the marketplace allows all of these things to find their real price because of competition in the market. And none of that used to exist before.

Besides something like it's reliant on CD income. What are some of the other big risk factors that you see?

I think the one of the ones that I would say probably took us a month or two to really catch up to and think about as we were selling these Catalogs is really paying attention to the number of new songs that are added to the catalog every quarter, every year. And so one of the charts that we present now shows the quarterly income, but then it also shows the number of new tracks that earn each quarter. And then probably the easiest way is to draw a contrast. So if you look at like a Wiz Khalifa catalog or a Barry White catalog, Barry White hadn't added any songs for 30 years to what we sold. And the earnings stream was pretty stable. But two months after that or a month around that, we had another catalog where the earnings looked stable from a quarterly basis. But underneath it they were adding about 50 tracts per quarter in order to keep that income stable. And so obviously when they sell it, the buyer or the investor doesn't get any future work. They only get the historical work. Right. So that that catalog will decline in earnings, you know, but so you can't predict that one to be flat and level because in order for it to stay flat they had it add tracks. So I think that's one thing that we make, we make it available in the first bar chart on the financials tab because I do think it's an important one that isn't super obvious on the surface.

Now that's brilliant and that's the kind of stuff that the average investor probably wouldn't know to ask. But you said you do have a report in there that explains a lot of this information.

Well, and it's part of it that I want them to ask.

That's what I'm saying. A lot of us don't know. We don't know what to ask or we don't know what we don't know. Now have you seen in the past 14 months of doing 150, 115 of these auctions and granted that's, you know, in 14 months, that's not a lot of time to see, you know, long term results. But have you seen some of these go really sour? I mean there's risk inherent in anything. But have there been any? I'm looking for also worst case scenarios, because that's always good to know.

Yeah, I think we're, I mean we're definitely too early for that because most of these things, like I said, are trading for higher multiples. But I would say, I mean if you look at the returns in music over, I guess as an asset class, everything that I've read from trade magazines and kind of investor IP stuff, IP books, talk about between a 14 and 16% return in the music business. But I Think all of that obviously relies on buy price totally. So when you're investing, when you're taking a passive position in an investment, the buy price becomes that much more important. And that's why we recognize the burden on us to present this data clearly and fairly.

Okay, are there. What else am I not asking that I should be asking?

Well, well, I think one of the things you had talked about earlier was the most undervalued asset class from one of Simon's newsletters. And I think probably his point revolves around the fact that the music business went through such disruption for 20 years as everything switched from basic records to CDs to. Then Napster came along and suddenly almost everything became free. So it wasn't until 2015, it was from 1999 to about 2015 the music business shrunk. I mean it almost cut in half, actually, it may have even cut in half. And since 2015, the growth of streaming, the power of Spotify and Apple Music is now really coming into a place where the music business is now growing. It grew double digits last year. You know, you're starting to see institutional money come this way. So over a billion dollars of institutional money have acquired music assets over the last five or six years. Blackstone just bought one of the largest music distributors in the U.S. so you're starting to see institutional money coming here because you see music has turned that corner. So it's, I would say the general trend of a lot of investments is that you get kind of the bigger institutional money coming that way and then you get more family, office and high net worth folks and then it'll eventually get retail and we're nowhere near that point yet. I think the asset class has a long way to go before we get there. And the music business itself sounds like it.

Are there any particular auctions that have closed recently? That or in the past time that besides the Barry one, there's just really interesting to talk about. Are there any kind of good fun stories? This is once more the things that.

I don't know to ask good fun stories. We do have a few. We have sold things outside of music, including photography. So when a video or a picture gets sold or licensed on Getty or Thinkstock or any of those places. So those have been interesting. We had like a helicopter footage. The guy had gone all over the world and filmed helicopter flyover footage. Hours and hours this stuff had been used in like for movies. Movies and commercials all over the place. So I think that one was quite interesting. We had in terms of buyers, you know, we had one where the buyer's daughter got engaged to this country song and so he wanted to buy her a present, a wedding present, and he bought her the royalty rights to this song that she got engaged to. And so now forever, she's gonna get a quarterly check from this song that she got engaged to, related to her wedding.

Wow. Wow, that's cool. I like that. Now, on these listings, there's different kinds of streams you can buy, right? So I could buy the total rights to a song and I'm also seeing something called a peer advance. Tell me about some of the types of things I can buy here. Because it doesn't look like it's just one type, right?

Yeah, good question. So most of our deals are they're permanent purchases of the royalty stream. And so that royalty stream, without getting into too much complexity of the music business, we do go through all of this in that report that I mentioned. But there's kind of two basic copyrights, and I think it is important for investors to understand. There's what's called the composition copyright, and then there's the sound recording copyright. And the composition copyright is the song as it's written and the sound recording is the song as it's recorded. So as an example, the Christmas song Chestnuts Roasting on an Open Fire. So we'll give your listeners fun facts for them this Christmas season. So that song, Chestnuts Roasting on Open Fire was written by Mel Torme, the actor. So he still generates. It was written by him and one other person. He still generates over $300,000 a year in royalties from that song. Wow. And so what he owns as the writer of that is the composition copyright. Alright. When Nat King Cole went to go record it for the first time, and now it's been recorded over 100 other times, the individual artist that records it owns the sound recording copyright. Okay, so let's talk about, you know, really, for the most part, any use of that song pays both of those people. The only real interesting exception to that is the US Radio market. So when your listeners hear that song on Over Christmas, they can, they can tell all of their friends that Mel Torme makes money on that play, but Nat King Cole earns nothing. So almost everything pays Both except for U.S. radio. U.S. radio only pays the songwriter.

Interesting. So I can give you the reason why they play. What'd you say? Nat King Cole. They can play Nat King Cole's version of Chestnuts, but they don't pay Nat anything. Right?

Right. Yeah, they don't pay. They don't pay Nat anything. So now obviously all of that as streaming has picked up. Streaming will pay both the Mel Torme estate and Nat King Cole, Nat King Cole's estate. But. But for US Radio, it's just like the unique little place that only pays one of the two.

So our song writers, some of the richest people in the music.

Music industry or no, no, they're not. So. So part of the reason why the US did that as actually this answers your question, is that the songwriters, since they're not the mainstream artist, doesn't have many different ways to monetize, so it.

Kind of protects them.

Like an artist, for example, can go on tour and the radio is, you know, the way the US looks at it is the radio is free advertising for that artist. So the songwriter doesn't have that protection. And so that's why the US kind of stepped in and put in a regulation around that. So it is a unique one. But in most cases the artist is the one. A lot of times the artist is also the songwriter. So that's one way that they're making money from both copyrights just because they did both.

Right, right, Interesting.

But the artist is, say the artist is only the sound recording copyright, you know, they. They make money in other ways, whether it's on tour or, you know, getting other record. Record label deals.

Yeah, that is interesting. As I said, I. I know so little about this. That being said, I did start to look into all the BMI, ASCAP regulations and laws back in 90. Oh man, what was it, like 96 or 97? A friend of mine and I, or two of my friends, we started our very first online business and we were going to. Back when house and techno music very, very, very first started, we were going to digitize that or actually tie into some streams at nightclubs that were doing this because you couldn't really buy that many CDs of it. They were just spinning them in clubs, so we were going to go after them. And by the way, like, real player and streaming was brand spanking new. Cuban hadn't even sold his company yet. I remember when that happened. And yeah, but streaming was so brand new. And I remember potentially wanting to go to some of the bigger people and wondering to know if we had to go through BMI ascap. And I was trying to figure it out and I was in my early to mid-20s, like, I don't know what I'm doing. This is so weird. This is such a crazy industry to try to navigate when I didn't know anything. So here I am. Full circle.

Yeah. No, it is funny that you have some familiarity with them. Right.

So basically, if people want to explore this as an alternative asset class, they should empty out their savings and put everything they have into one auction. Right? I'm joking.

As all good asset managers would tell you. Yes, exactly.

But in essence, it looks like you do have a ton of great education on here. And would you say that, like, if you were giving me advice on exploring this as an option? I read the education you've got on the site. I take a look at some of the auctions, I dig in, get my hands a little bit dirty figuring out, you know, learning what I don't know, and maybe even starting with what am I, you know, what returns am I looking to make? Like, do I want 8%, do I need 20% or what? What would be worth it? Kind of assess the risk factors. That being said, risk factors are probably the hardest things to assess. Do you guys as a company offer any guidance whatsoever like Q and A? If I. If I wanted to know something about this, you know, the Wiz Khalifa, it's a closed auction now, but if I wanted to know some more details on that and just get some guidance from an investor standpoint, do you have any resources there?

Yeah. So, I mean, the easiest way, as I mentioned, was probably if they sign up, get that report. I always recommend people kind of get oriented by looking at multiple auctions, looking at some closed ones, even just passively watching some new ones that we have coming up. So we've been doing two to three a week, so you don't have to bid on the first one that you see. I think it's always good to orient yourself to understand how it works. And then we do have a great account management team. So as questions come up, feel free to ask questions. Of course, we can't answer questions as to the value. Everybody's in their different scenario. But if it's a question about the music business or understanding it or the risk, I mean, we're happy to answer anything. Any questions aside from what do you. Is this going to go up or down in the future?

That makes a lot of sense. As I flip through here, I'm trying to see if there's anything else that kind of stands out as a. You mentioned. Did you really mention any of the other red flags I know you mentioned? One of them was, are they. Is a lot of the. Is the source income coming from. Coming from brand new stuff. Right. In essence, propping it up so when they. When they stop adding new songs to that catalog, it goes down. Is there anything else that's kind of a. Like CDs? You said, is there anything else that kind of stands out? Like, yeah, this makes it less than ideal?

I mean, I think that's all information gathering. So I think one thing that we certainly pay attention to and we talk with the artist about where to start the auction, obviously. And you know, part of it is understanding if there are copyrights included, then that means you're going to own the copyright and that makes it more of an active investment on your part because you have to defend the copyright. Not necessarily to defend, but to make sure that it, it keeps getting used and make sure that it's on Spotify and make sure that it's in these places.

So there's a difference between owning. Like I could buy the royalty stream, but I'm not buying the copyright.

Right? Yeah.

Questions I don't know to ask. That's good.

Yeah. So the royalty stream is, if you think about, as we mentioned, with the two different copyrights and then say there's more than one songwriter. So almost any royalty stream associated with a single song may be split seven or eight ways. And so when you're buying an asset, understanding if you're buying a purely passive investment, which most of ours are, but every now and then, like I think last week or two weeks ago, we closed one that included the copyrights. And in some ways that think of that, like, I probably shouldn't use this term, but it's like business in a box. So it includes the copyrights. It's already placed everywhere. But in the end, you do own the copyrights and you can be more active in that investment than most of the other investments.

When you say more active, like give me an example of.

So say you own the copyrights and you have a friend who runs an ad agency. So you call up that friend and you say, hey, I own the copyrights of this song. Do you think you could get it in a commercial or use it online or get, get it placed and those.

Because I can approve it because I own it. Otherwise, if I only own the royalty stream, I'll just use Wiz Khalifa. But Wiz owns all the copyrights. I can't ultimately approve the use of anything.

Right. So what you're kind of depending on or relying on is Wiz is going to stay active or his publisher or his label is going to continue to promote his music, which, when you only own a fraction of it, it's actually great because they have all the incentive to Keep pushing. And that's what makes it a real passive investment. So that's part of the reason I liked it is I'm like all these other people have the incentive to push and I can just sit back and collect the check. But as an investor who's new to it, I would just make sure that they're aware of that trade off between active and passive.

What percentage of the auctions that you guys do would you say just offhand include copyrights or don't. Is that. Is that a common thing or not?

Definitely less than 10%. Include the copyright.

So if you can get it, it's obviously going to be. You're going to pay more for it because you've got more earning potential.

Yeah, yeah. So I think it's all a trade off of. I mean, then it's more about the opportunity cost of your time. That's the way I look at it.

So let me flip the script here and talk about the business side for royalty exchange. You guys obviously can attract. Attract artists who have royalty owners. Because you're out there, they didn't even know that this existed. There may be somebody who's like you said, they want to do something with the cash so they contact you. Are you guys out there actively shopping for royalty rights? Are you doing anything proactive there?

Yeah, we have a sales team that's dedicated to educating artists. And basically, you know what we're in a place is helping them out because they have more opportunity now to actually control their destiny than they did 10 years ago. So it's actually a really good time to be an artist. That there's. With the growth of streaming, it used to be that a song would make all of its money on the radio and then kind of tail off. Even the Barry White song that we mentioned.

Right.

Most of its earnings was made 30 years ago and now it's just consistent, which is great for an investor. But artists now, and we're seeing catalogs now of musicians who they got their start online. All of their presence has been digital and digital is what grows. And so every month and every quarter, they've been seeing growth. And that's the stuff that never happened 20 years ago. You know, these people didn't control their own destiny. They couldn't build their own fan base. But now online with social and all the other platforms, they can. So the easiest example is Chance the rapper. Yeah. Just Run won a Grammy and he's never sold a CD in his life.

Isn't that crazy?

Yeah. So. And I guarantee if you were to look at his earnings stream. I don't know him personally, but I can guarantee his income is going up every period and not down the way most radio play used to happen.

Yeah. So are you guys actively looking then to get in front of more artists and people who own royalties to educate?

Oh yeah. So yeah, we do. I mean we do traditional marketing and then you know, I would say we certainly have a presence at a lot of like musician type events or artists creative events.

Nice. Now do you offer for. And I asked this question somewhat selfishly, but also for my other listeners out there. Like for instance, if I. And I don't, I actually don't have this. But hypothetically, let's say my best friend has a royalty stream, he's an artist, he's got a great royalty stream, etc. And I'm able to make some kind of an introduction. Does royalty exchange have anything set up to reward them or is that something that I would do with my friend to say, hey, if you sell this, give me 10%? I'm always thinking like an entrepreneur.

Yeah, no, I like the way you're thinking. We have done a little bit of that. But I would say almost all of our sales come from people who have sold from us before or a direct referral just because they are happy with the result. So I think. I don't know the exact stat. The last time I remember it, it was like 50 or 53% of our auctions were repeat customers or referrals.

And these are the, these are the investors or the artists.

The artists.

Okay. Are the artists that are mainly selling on your site, are they performers, writers, producers? Is there a, is there a commonality there in like who they are? Because I don't know. Once more, I don't know enough about.

Good question. I would say we serve them all, but a majority of them are songwriters, writers.

Perfect. Okay. How often do you see the singer songwriter these days? Is it a lot more separation between the songwriter and the performer out there in the music industry?

Wow.

I don't know enough about the market.

I can't say I have a good enough view of that to know.

I don't know.

The thing I do know is that collaborations have gone way up now that streaming and tracking has become a little bit easier. Collaborations have definitely gone up, but I don't know about singer songwriter.

Yeah, that's interesting though. So if a person has. Once more, I'm in the artist's shoes here. Now if I have a, if I have a royalty rights and a stream or copyright something Is there something that makes it like, is there a minimum requirement to list with royalty exchange? Is there something that, like, well, you know, you're making a hundred bucks a month, you don't, don't even bother, or is that fine?

I would say we'll look at a lot of things, but we do internally, we have a few requirements. I mean, if the song has been around for 20 years and it's earning $1,000 a year, that's fine. But if it's a brand new song that, you know, we don't know what the future may hold, we will. I mean, we turn down a lot of deals because we want to make sure that we only present, you know, reasonable deals to investors. Right on.

That makes sense. Well, this is really, really cool. And Jeff, you've answered a lot of the questions I had. You've illuminated some of the questions I wouldn't even know to ask. Are there any nuts you guys are trying to crack right now with the business? Whether it's just getting more exposure, whether it's resources, people you're trying to meet, things you're trying to, people you're trying to hire, it doesn't matter. This is just kind of like where myself and my listeners, if we can solve your problem, we can always reach out to you and help out. So I call this my nutcracking question.

Yeah, I love that question. I mean, we're always looking for supply side of the business, and so that's definitely an important factor for us. The other thing I would say a very kind of interesting path that we may, that we'll head down over the next year or so is, you know, everything we do right now is one to one. So it's one buyer to one seller. And a way to make sure that we can get into these premier assets is to be able to securitize those. And so we will be. Basically, it solves a real problem for these kind of the artists that are big, top level, premier artists, but you know, they, they can't go to Goldman Sachs and get a financial product for them. So by us basically securitizing them and allowing a lot of their fans to buy in and other investors to have a product that generates the yield that a royalty stream does is something that we're really excited about.

Okay, so let's hunt that rabbit because now you're talking some stuff that I like to talk about as well. So let's run an example on this. Let's say a marquee artist, right, Like Eminem or somebody huge Is that who you're talking about? Like somebody who's, like, really, really premium?

Just. Yeah. Top level artist.

Okay, so Eminem came to mind just because. Why not give me the example of that again? Because I like where you're going here, and I just want to make sure we map this out because I may even have some ideas.

Yeah. So, I mean, obviously it's hard to know any of the math without any details, but, I mean, the general concept is our objective would be to create a royalty stream or an asset that somebody could buy in their E Trade account and have it generate far superior yields to anything else that's in the stock market, but also, in the end, not be correlated to it.

Right. So this would be the artist who is saying, all right, I'm making. I'm throwing numbers out there just because. Why not? I'm making $5 million a year off this royalty stream. Right. Something big. And I want to allow my fans and other investors, etcetera, to be able. If this is securitized in some way, they may not buy it for $50 million, but they may buy it. They may have $5,000 to put in and they'll get a piece of that stream. Is that what you're talking about?

Exactly. They would get. They would get a piece of that stream.

Interesting.

So what.

Is that being done at all right now? Or is that something that, like a new derivative has to be created in order for that to happen?

That's. Yeah, that's where it is. It's a little early to talk about it, but it's something that we've got. We've got to kind of crack that nut, as you said.

That's a good nut to crack. I can see how that can work, especially these days with. Are you familiar? And I don't know if these are even. This could be apples to oranges, but like, regulation A equity crowdfunding. Have you looked into that?

Yeah, we're definitely aware of Reg A.

Nice. Because that's been something. I've advised a handful of companies on their marketing strategies for Reg A deals.

Oh, really?

Yep. And then I've got other colleagues and friends who are heavily, heavily involved in that. I just wonder how that could kind of work where. Because, I mean, they really are securitizing. And I'm just, you know, thinking out loud here where if, you know, they file the. If I'm an artist and I file the. All the necessary requirements with the sec, and I put it out there to say, yeah, listen, this is my, you know, my royalty Rights are this, you can buy. I'm selling 40% of the. You know, this for $5 million. People can buy in now they have a piece of that. I mean, that. That may. That may be a way to do it using some of the. The reggae plus regulations, but I don't know. But that's. Yeah, I see that huge opportunity.

We're trying to look into all the different options. It's just hard to speculate at this point.

Totally. Well, if you ever want some resources, some people who are 10 times more expert than myself in that. In that area, please don't hesitate to reach out offline because I've got some great intros I could make.

I would love it. Yeah, thank you.

Well, man, this is. This has been really, really good. I appreciate you taking the time on the call to answer these questions and it's been a pleasure to meet you. Hopefully my listeners appreciate. This is why, you know, I have this entire platform so I can reach out to people like yourself and I can just find out more. And, you know, personally, I'm scared to death of the stock market prices right now. There's a whole lot of uncertainty in it. I personally see it as very, you know, pretty overpriced compared to where I'm comfortable with. So I'm constantly looking for alternative asset classes that are not correlated to it for this exact reason. So once more, this is a. This is a really interesting opportunity. Jeff, is there anything else you'd like to add or any questions you've got or anything else you'd like to need?

No, I really appreciate the time and I mean, obviously we're all here to answer any questions if your listeners have them. So just feel free to reach out to myself or the account management team.

Perfect. Well, thank you very much for everybody, one of you listeners out there. If you've got any other questions about this, I've mentioned the website before. You can go to royaltyexchange.com and check out Jeff and his partner's website and take a look at some really cool, really cool business model and something that. Because there's probably not as many, I'm guessing, probably not as many investors out there looking at this. That means that the demand may be lower than if it was something like the stock market, thus your ability to potentially get much higher returns. I don't know if I need a legal disclaimer, but from my days in the financial advice world, I am not advising you. Check with your advisor, your accountant, or your lawyer. That being said, anything that you want to ask me any guest recommendations, any big questions, or if you just want a second opinion on stuff you are doing in your business, don't hesitate to reach out to me directly at askbrad at baconwrappedbusiness. Com. I do read every single one and I'm happy to hear what you have to say. So thank you very much Jeff and to everybody else, tune in next time.