You Can Now Invest in ‘Shrek’ Music Rights the Same Place You Buy Stocks
Investing platform Public is offering everyday investors a slice of the ‘Shrek’ catalog with quarterly payouts.
Everyday investors will soon be able to own a cut of “Shrek” music royalties alongside their stocks and exchange-traded funds.
Starting Thursday, customers of investing platform Public will be able to purchase a slice of the rights to the score of the “Shrek” film franchise and receive quarterly payouts. While royalty payments fluctuate depending on content consumption, the “Shrek” composition rights generated an annualized dividend yield above 8% in 2022 and 2021, according to Public.
The 768-track catalog earns money every time the “Shrek” movies are streamed or aired on television and when the music plays on a theme-park ride. (It doesn’t include songs from the movies’ soundtracks such as “All Star” by Smash Mouth or “Hallelujah” by Rufus Wainwright.)
Public’s foray into music-royalties investing is the latest effort among financial firms to offer everyday investors access to alternative assets, from blue-chip art to venture capital, that have traditionally been limited to institutions and the ultra wealthy.
“Most people can’t go out and buy a million-dollar royalty interest,” said Keith Marshall, general manager of alternatives at Public.
Customers will be able to buy shares of an entity owning a piece of the “Shrek” score catalog. Public is conducting an initial offering of 88,970 shares for $10 apiece. The entity bought a portion of the “Shrek” music rights from an investor who purchased it on Royalty Exchange, a marketplace for buying and selling music royalties. The composer, Harry Gregson-Williams, sold his rights.
Public plans to offer a secondary market for users to buy and sell shares. Liquidity will depend on customer demand, so it is unclear how easily investors will be able to convert their “Shrek” shares to cash.
The platform is looking to add further music-rights securities for customers after the launch with “Shrek.”
While investing in royalties isn’t new, money pouring into music catalogs has so far come primarily from big competitors like private-equity firms and institutions such as hedge funds. Public says it is among the first firms offering fractionalized investing in music royalties geared toward small investors. Other new startups such as JKBX are also looking to make stakes in music royalties available for individual investors and music fans.
The market for music royalties has expanded as streaming has exploded. Recorded-music revenue in the U.S. grew in 2022 for a seventh consecutive year, rising 6% to a record $15.9 billion, according to the Recording Industry Association of America. Streaming accounted for 84% of that revenue.
Music royalties tend to be less aligned with other financial markets and produce steady income even when the broader economy is rocky, according to Public. The company sees music royalties as a way for customers to diversify their portfolio and reduce correlation with other assets, such as stocks and bonds.
But payouts from music rights aren’t as attractive in the current high-yield environment, when investors can get guaranteed 5% returns on relatively risk-free, cash-like instruments.
Shares of Hipgnosis Songs Fund, a London-listed investment vehicle that owns the rights to tens of thousands of songs written by artists such as Shakira and the Red Hot Chili Peppers, are down 7.4% this year and sit about 38% below their 2021 record.
Income from royalties can also dwindle as songs fade from popularity.
That is why Public says it decided to launch with the “Shrek” music catalog, citing its record of hefty payouts even years after the release of the movies.
“With rates being back, the retail investor has been re-educated around the idea of getting a constant return on cash,” said Leif Abraham, co-founder and co-chief executive of Public. “We find these cash-flow-producing alternative assets super interesting.”
Public is taking a 2.4% cut of the money raised from the initial offering of the “Shrek” investment vehicle. For each subsequent royalty payment, Royalty Exchange charges a 5% fee for services such as collecting the revenue from the music-rights management company and distributing the funds. A Public affiliate then takes a 5% cut of the remaining payout for additional services, such as accounting and tax work.
Launched in 2019, Public has about three million customers. The platform offers stocks, exchange-traded funds, Treasurys, cryptocurrencies and fractionalized investing in other alternative assets such as fine art and collectible sneakers.
Write to Hannah Miao at hannah.miao@wsj.com
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Business NewsNewsYou Can Now Invest in ‘Shrek’ Music Rights the Same Place You Buy Stocks
First Published:3 Oct 2023, 11:01 PM IST
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