Stock Idea: Dividends from Eminem

Ever thought about owning Media Royalties as an asset class in your portfolio? What would that even look like? One example, is profiting off every time The Real Slim Shady is streamed in Spotify, Pandora, or Youtube. According to Royalty Flow, which recently filed for an IPO in September, you can do just that by owning their stock. Except you wouldn't just own a stake in The Real Slim Shady, you'd own a stake in his entire music catalog created between 1999 and 2013.

A quick look at some of the details surrounding this IPO reveals why it could be an exciting but risky venture.

Opportunities
* New uncorrelated asset class for your portfolio
* Opportunity to participate in revenue generated from the expected boom in entertainment industry driven by the onset of streaming. Goldman Sachs projections put music industry revenue at $28 bn by 2030
* Benefit from firm that claims to have expertise in selecting well managed IP Royalties

Risks
* Lack of Diversified Income (they only have an Option to own a % of royalties from Eminem's catalog dependant on the success of their IPO and haven't referenced any new assets in the pipeline)
* Piracy
* Litigation (such as disputes with Counterparties)

My questions to you....

**Have you looked into adding Royalties as an asset class in your portfolio? Does this seem like a novel idea to you (it did to me)? What's your outlook for Royalty Flow? **

UPDATE: Check out this post for a discussion Eminem's recent rap on Trump.

Comments (11)

 
10/9/17

Definitely an interesting question. I don't know enough about it, and therefore haven't yet considered having royalties included in my portfolio.

I'm also curious to hear from people who have actually bought or sold Royalties. I can see the risk, but I could see it really paying off as well.

 
10/9/17

This should be valued just like any other stream of cash.

 
10/9/17

It should, so why don't more people/banks include it as an asset?

Or maybe they do and I just haven't come across it in my personal experience.

 
Best Response
10/9/17

When you want to invest in gangster Dr. Dre but get this...

 
10/11/17

Interesting discussion!
Who owns these royalties? How are they valued, and do you need to bring an independent third party valuation?

 
10/12/17

After Eminem's freestyle about Trump, my guess is that these royalties are much less valuable than they were two days ago.

 
10/12/17

@George_Banker

Good point! But I also wonder the contrary...

Could this sort of publicity stunt result in more people streaming Eminem's music (i.e., good for royalties)? Especially those that agree with his point of view. I also know he told his fan base if they opposed his views on Trump that they could f*** off. Very polarizing but could go either way. I guess it depends on the political leanings of his fan base.

I haven't seen any boycott Eminem posts on Twitter, have you?

 
10/12/17

I think he means the whole appeal of being Eminem is that he is really edgy/different, and now that he just goes with the rest of the celebrities.... he kinda loses his edginess

 
10/12/17

Didn't they try something similar with pro athletes on their endorsements? Remember there were some football players involved.

26 Broadway
where's your sense of humor?

 
10/12/17

Pretty sure you're thinking of Fantex. That had some traction, especially for stuff like minor league baseball players so they could get some cash up front to get through the minors at some discount to their projected future value. It is a similar model to injury insurance that college football guys get when going back for senior year, but instead of protecting from downside at a larger payout, they give up a pretty large portion of the payout to compensate the risk of having a full career and the projected development.

 
10/14/17

1-Click to Unlock All Comments - 100% FREE

Why do I need to be signed in?
WSO is a knowledge-sharing community that depends on everyone being able to pitch in when they know something.
+ Bonus: 6 Free Financial Modeling Lessons with 1-Click Signup ($199 value)