From Usher and Justin Timberlake to Oil & Gas: The Royalty Exchange Lets You Buy—and Sell—it All

Jun 17, 2014

A recent auction on the Royalty Exchange featured royalties from songs sung by the R&B artist Usher, among others. Source: Sony Music Entertainment

If you want to buy a car, simply head to your local dealership. Want a computer? There are lots of places that sell them. But what if you want to buy a piece of your favorite TLC song released 15 years ago?

For that, you can go to the Royalty Exchange.

Founded by Sean Peace in 2011, the Royalty Exchange connects royalty owners with potential buyers and investors. For those unacquainted with royalties, here’s what you need to know. Royalties are payments made from one person or entity to another for the right to use an asset. What is an asset, you might ask? Well, an asset can be just about anything. If you’re a musician who writes a hit song, for example, the song itself would be your asset. On the other end of the spectrum, if you’re looking to make money off of the solar panels affixed to your rooftop, the clean energy system would qualify as your asset.

If you’re still unclear on what, exactly, royalties and assets are, you’re not alone, concedes Sean Daley, the company’s vice president of marketing. The Royalty Exchange does its part to educate both buyers and sellers on the ins and outs of royalties, but it’s a lot of ground to cover.

“It is a challenge for us,” Daley says. “The music side of royalties is quite complex. Even people in the industry have a hard time understanding all the differences. Education is definitely a big hurdle for us. We have a lot of FAQs on the site trying to answer a lot of those questions for people. We’re about to roll out a number of educational videos based on the FAQs and the questions we get all the time from investors and sellers.”

The Royalty Exchange serves as a novel marketplace, especially for musicians and artists who own the rights to songs and other intellectual property. Yet the company evolved from another business that Peace, a serial entrepreneur, started earlier in his career, explains Daley.

“The Royalty Exchange was born out of another company that Sean had started called SongVest, which was a music memorabilia site,” he says. “As he began working with artists, writers, and producers they started offering up pieces of their royalty streams—and again this was very small pieces at that time. He discovered the moment that they offered up their royalties that people began to be more invested and interested in the royalty aspect of it than the actual memorabilia. The idea for Royalty Exchange was born there.”

Since then, the young company has seen a steady stream of users participate in its auctions. It’s also attracted attention from prominent investors, raising more than $2 million last year from Grotech Ventures, a Virginia-based venture firm. One of the most appealing traits of the site, argues Daley, is that owners are able to sell a portion of their royalties, which allows them to maintain rights to their intellectual property. They can also set the length of investment for each royalty stream they auction off.

“That’s what we enable: we enable artists and producers and writers to break up their shares,” he says. “They don’t have to sell it all with us—and we certainly don’t encourage them to sell their copyrights. We focus primarily on the royalty aspect so investors can just own a piece of that.”

Like the company itself, the Royalty Exchange’s customer base has evolved over the past 18 months. At first, it attracted a lot of fans, Daley says, who were interested in buying partial rights to songs from artists like Usher, TLC, and Three Doors Down. “It started out with collectors and fans, for lack of a better term, because of the entertainment aspect of it,” he explains. “We quickly migrated to people who have deep pockets—high net-worth individuals—and right now we cater to accredited investors.”

Looking toward the future, Daley says the company has no plans of slowing down. In fact, it expects to continue breaking into new—and potentially very lucrative—areas. “For the near future, it’s going to be music, entertainment, and energy,” Daley says. “In the distant future we’re probably going to branch out into more of the patent space and licensing.” 

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