WHAT IS A ROYALTY INTEREST?
A royalty interest is the right to collect a stream of future royalty payments. Often used in the music and oil industry to describe a percentage ownership of future production or revenues from a given leasehold, these interests may be divested from the original owner of the asset at The Royalty Exchange.
WHAT AM I BUYING?
Simply, you are buying a percentage of a royalty stream as a true alternative asset. Each royalty item has a unique value and right. In the details of the auction item, it will clearly state what type of royalty and the revenue stream associated with that item.
After becoming the winning bidder or purchaser of a royalty stream at The Royalty Exchange, the designated percentage (shown on each Listing) will be assigned to you for the life of the royalty stream and you will receive payments for your new asset each fiscal quarter.
For Music Royalty purchases, click here for an overview of what comprises a song and the different types of royalty rights.
HOW DO I KNOW WHAT A ROYALTY IS WORTH?
Each royalty stream listed at The Royalty Exchange displays a different worth based on it’s historical performance and financial forecast. We provide financial information about the listing’s past royalties (2-3 years), as well as, qualitative analysis discussing the potential pros and cons of each royalty stream.
HOW LONG DO I OWN A ROYALTY STREAM?
Each listing will explicitly display the Length of Ownership.
For Music Royalties, the general length for royalty streams is 70 years plus the life of the author. The Copyright Term Extension Act (CTEA) of 1998 extended copyright terms in the United States by 20 years. Since the Copyright Act of 1976, copyright would last for the life of the author plus 50 years, or 75 years for a work of corporate authorship. The Act extended these terms to life of the author plus 70 years and for works of corporate authorship to 120 years after creation or 95 years after publication, whichever endpoint is earlier. Copyright protection for works published prior to January 1, 1978, was increased by 20 years to a total of 95 years from their publication date.
Click here for more information about US Copyright Law.
The Graph below is good reference point that shows you when a song was copyrighted how long the royalties should last.
HOW AND WHEN DO I RECEIVE ROYALTY CHECKS?
Royalties are paid on a quarterly or biannual basis. The next quarter (after the reassignment of your purchased royalty stream) will be your first royalty recognition.
To ease royalty distribution for our buyers and the industry, The Royalty Exchange acts as the clearinghouse for all payments. This ensures that you will receive every dollar your item earns, and our Royalty Management system also keeps you from having to manage all the intricacies of the respective industry or royalty payer.
WHY DO I HAVE TO REGISTER TO BID?
To protect the confidentiality of the listing and our royalty sellers, we require every interested investor to fill out our simple registration.
To register at The Royalty Exchange, please click here or on the upper right bottom at the top of the screen titled “Register”.
HOW DO I BID ON A LISTING?
Once you have registered for an auction, you are ready to bid. There are a number of ways that you can bid:
Online
You may place bids in real time from anywhere in the world via the Internet at theroyaltyexchange.com.
Telephone
Telephone bids must be booked by emailing info@theroyaltyexchange.com or calling (919) 848-0445 at least 24 hours before the closing of the listing.
Absentee Bid
In the event you are unable to bid online, via phone or attend a live event in person, The Royalty Exchange will act as your representative to secure a listing for you at your designated price.
Proxy Bids
When bidding on a listing, you have the option to put in a proxy bid. This type of bid allows you to put in the highest bid you are willing to place. Only the minimum bid will be placed for you. If someone outbids your minimum bid, our auction system will automatically increase your bid. This will happen until either the bidding closes, or someone outbids your proxy bid.
WHAT ARE THE STANDARD BID INCREMENTS?
The Royalty Exchange will increase bidding by 5% of the starting bid price. For example, a listing with a price of $100,000 would have a standard bid increment of $5,000.
WHAT IS THE 15 MINUTE RULE?
The 15 Minute Rule makes online auctions as fair as possible to all bidders by allowing everyone an equal opportunity to place their best bid.
Specifically, here’s how it works: If a bid is placed in the final 15 minutes of an auction, the listing will stay open for an additional 15 minutes. This process will continue until no bids are placed within a 15 minute time span on the listing. The auction will officially end when the listing indicates the Auction is Closed.
- There is no limit to the number of times an auction can be extended. Therefore, we recommend you check back often before an auction nears closing time.
- The Royalty Exchange makes every effort to ensure system availability. However (in rare cases), we reserve the right to close an auction prior to, or extend it beyond, the posted closing time. This may be done at our discretion and without warning.
- The Royalty Exchange is not responsible for incomplete, failed, garbled, scrambled, delayed or misdirected computer transmissions due to technical computer hardware or software failures or other errors of any kind.
IS MY BID BINDING?
All bids placed with The Royalty Exchange are legally binding. By registering and bidding at an auction, you are entering into a legal contract. If you are the highest bidder on a listing, you are legally required to pay for it.
ARE THERE FEES ASSOCIATED WITH BUYING AND MANAGING ROYALTIES?
Yes.
The Royalty Exchange charges 2.5% buyer premium, and a recommended 2.5% for the management and payout of your royalty stream.
The buyer’s premium is a percentage of the final bid price of a lot that the buyer pays to The Royalty Exchange in addition to the final bid price. The premium is an industry standard outlined in the buyer’s agreement in the terms and conditions of the website.
The royalty management fee is assessed to manage all of your royalties for you for the life of the royalties. Once you have purchased a royalty stream, you will be able to view all transactions online and keep track of all your royalties through your “Royalty Investment” dashboard.
For certain types of royalty streams, a management fee may be waived if applicable.
WHICH CURRENCY IS USED FOR BIDDING?
All bidding is done in US Dollars only
HOW DO I PAY?
All high bids must be paid 24 hours upon winning. All major credit cards, PayPal, money orders, and cashier’s checks are accepted. For high value items, special banking arrangements can be made.
WHAT IS A RESERVE PRICE AND WHO SETS IT?
The reserve is the minimum hammer price a song may be sold at. The current royalty owner and The Royalty Exchange mutually agree upon an appropriate reserve price.
MAY I LICENSE THE ITEM PROVIDING THE ROYALTY STREAM ONCE I BUY IT?
No. You only have the royalty rights to the item, not the actual (copyright) rights to the item.
HOW LONG WILL I BE ASSURED OF WHAT I’M BUYING AND THE LEGALITY OF THE TRANSACTION?
We do thorough background check of the royalty stream and its ownership. In addition to further verification provided by the current owner of the royalty stream and The Royalty Exchange’s due diligence of the asset, we make sure every asset available at The Royalty Exchange is safe, verified and transparent. For further information, please refer to the terms and conditions of the website and the associated detailed information posted in each listing.
WHAT IS THE “MINIMUM DOCUMENT FEE”?
We have invested a lot of time in creating a standard set of documents to use for each transaction. Unfortunately there many organizations that we deal with that pay royalties and each one has its own sets of ever changing forms and rules and regulations on making these types of assignments. The “Minimum Document Fee” covers all of the basic legal forms as well as our time to process and confirm that each assignment is completed correctly. The Fee scales based on the size of the deal so that we can spread the costs across all transactions, but more importantly, usually the bigger the deal the more complex the transaction.
ARE THERE ANY MORE FEES ON TO OF THE “MINIMUM DOCUMENT FEE”?
There can be, yes. If the buyer wishes to modify any of the terms of the standard agreements then they will be charged, at cost, for those changes. We will inform the buyer, at time of changes, what the current hourly rate is for our legal counsel and only the incurred expenses will be billed and then taken out of closing.
DO I NEED TO HIRE A LAWYER?
Not for the legal transaction, unless you choose. You are always encouraged to retain counsel to represent yourself not only in the transaction, but also to provide additional due diligence on the items you are interested in purchasing.
DO WITHHOLDING TAXES APPLY TO MY ROYALTY STREAM?
Royalty payments may attract withholding taxes as a result of applicable United States Internal Revenue Service (“IRS”) regulations. In certain circumstances, these withholding taxes may be reduced or eliminated by way of efficient and legitimate international tax planning.
The Royalty Exchange has partnered with a renowned international tax planning firm to provide you with direct access to these opportunities. Align Global Consulting is an international tax advisory firm that supports clients that engage in the international commercial marketplace. Align’s comprehensive list of services includes global structuring, global business transactions, cross-border M&A transactions, and international tax planning.
To learn more, please visit www.alignglobalconsulting.com