Reference ID: 12009900
The company, codenamed Project Apollo, is an exciting opportunity to diversify investments with safe, secure revenue-generating music catalogues of recording artists.
Apollo provides direct exposure to music revenues from the recent hyper-growth in global streaming platforms by acquiring song royalties for shareholders. The business is on target to achieve its goal of increasing shareholder value by accumulating a diversified portfolio of cash flowing royalties to pay increasing dividends. In addition, investors enjoy the flow-on effect of capital growth due to catalogues appreciating in value over time.
Apollo currently holds the royalty rights for various catalogues of artists like Rihanna, Enrique Iglesias, Drake, Beach Boys, Justin Bieber, Eminem, and Jay Z to name a few.
Minimum investment size of $50k with the average investor injection of $500k. Dividend yield averaging out at 10% annually. Apollo has set its sights to become and is on target to be, the first royalty ownership company to float on a stock exchange, maximising the capital growth of investor capital at which point valuation is forecast to increase between 10x to 18x. Meaning that an initial investment today of 100k would increase to over $1,000,000 upon the IPO.
What makes the deal unique?
- Monthly Cashflow Income - due to the predictable consumption of music over various platforms, revenues can be accurately forecasted and investors enjoy regular, predictable disbursements.
- Strong Advisory Group – including Matthew Knowles (best known for being the manager for Destiny’s Child and father of Beyonce and Solange Knowles), Ron Altbach (Beach Boys backup band member & investment banker), Andrew Loog Oldham (first manager and producer of the Rolling Stones)
- Traction. Has already raised $17m, already paid out over $1m in dividends while having a portfolio of 28 catalogues valued at $40m.
- Global music assets. While most in the industry are purely looking at the US and UK markets. Apollo is looking at global music catalogues for example Bollywood (India), Kpop (Korean) and Chinese markets for returns.
- Buys Equity valuations and turns it into fixed income valuations.
- . Apollo owns the copyright which means they enhance revenues through syncs in an advertisement, movie, TV show, etc. Copyrights can be repurposed or covered by new artists to create more income. Most importantly, Apollo focuses on the top 1% iconic anthem evergreen cashflow songs.
- Imminent IPO. The company will provide an exceptional opportunity for investors by being the first music rights company to float on an exchange. This will see the company trade at P/E ratio’s similar to those commanded by REITs in the range of 20x to 50x in 2022.
Why royalties are one of the best alternative assets?
• Alternative Investments in royalties are gaining popularity among astute investors due to the industry offering a low correlation to traditional investments like stocks and bonds while offering a significant return both from a passive income in the form of dividends while enjoying capital appreciation.
• When you add them to your portfolio, you will receive significant diversification benefits immediately and this will continue over time. The goal and result can be better risk-adjusted returns. Royalty income is derived from intellectual properties and music consumption doesn’t change when interest rates go up or when stock market sentiment turns bearish.
• Royalties have a relative price or NAV (net asset value) stability.
• Royalties have the potential for significant capital appreciation.
Market Drivers & Timing
- New industry participants. Music catalogue acquisition is now being bought by Wall Street firms thus supporting and bolstering momentum for the trend. The Wall Street Journal recently reported that catalogues are trading at 10 to 18x their annual value. That means a catalogue that earns $50,000 in a given year could easily be sold for anywhere between $5 million and $40 million. The largest sales in 2021 have been Bob Dylan and Taylor Swift at $300m and $400m respectively.
- Backed by investment banks. In 2016, Goldman Sachs – “Music In the Air” report estimated the music streaming industry to be worth $3.9bn and forecast that by 2030 it would break $34Bn. In 2020, in the midst of the pandemic, it is on target with reported revenues of $22Bn. In addition, BlackRock Alternative Investors, a division of blue-chip financial company BlackRock, announced a $300m investment in an industry player which was an acquirer of music catalogues.
- Poised for growth. Music royalty revenues are now at a 15 year high set to continue growing at a rapid rate driven by the following key trends:
o Growing paid subscriptions a in a rapidly growing marketplace ie Spotify/Apple/ YouTube music. Growth in paid streaming in key developed markets such as the US (27% penetration in 2019), the UK (28%), Germany (18%) and Japan (8%), where penetration rates are still well below those in early adopter markets such as Sweden (43%)
o Ad-funded streaming to benefit from strong consumption growth and improved monetisation due to increase transparency and data available from digital downloads and streams
o Emerging opportunities for music licensing, e.g. short-form video, e-fitness e.g TikTok and Peloton
o Upside from regulatory intervention ie European Union Copyright Directive (2019), Music Modernisation Act (2018) and Fair Play Act
o Smartphones usage to drive 1.2bn in paid users by 2030