TERM: Estimated 5 years
CATALOG: This is the writer's share of hits from Flo Rida “Low” and “Sugar” as well as other hits like “Walk It Talk It” from Migos ft. Drake
RIGHTS INCLUDED: 100% OF THE WRITERS SHARE PAID BY BMI
TYPE OF ASSETS: ADVANCE OF WRITERS SHARE ROYALTIES
LAST 12 MONTHS REVENUE: $44,526 PAID QUARTERLY
ESTIMATED TIMEFRAME TO PAYBACK: 5 YEARS
LOCKED IN IRR: 21.5%*
TOTAL ESTIMATED PAYBACK: $220,000
INITIAL AUCTION PRICE: $137,084
PROJECTED PROFIT: $82,915
HOW THE ADVANCE WORKS:
Advances look similar to a loan, although it is not a loan because we are advancing them on future royalties, so we call it an advance. It has the same concept as a loan, there is a term, an interest rate, although we use IRR, and payments made during the term. The main difference though is that payments each quarter can be variable because we don’t know what the royalties will be in the future. So we do our best to create a forecast and then model the IRR based on that forecast of royalty inflows.
For this catalog, we have forecasted out the projected payments over 5 years and applied a 21.5% IRR on that projected income which equates to the current bid price of $137,084. Royalties are paid quarterly by BMI and the total payback is $220,000 over the 5 year period.
To ensure a 21.5% IRR, any principal, not paid back in 5 years will incur a 2.7% interest rate per month added to the principal until the principal and the newly incurred interest is paid off. Here is a link to the IRR spreadsheet model. IRR MODEL
So if the advance pays off early, your IRR can potentially increase and if the note goes long, the additional interest fees ensure the IRR stays the same.
To lock in the payments, we do an irrevocable assignment with BMI that locks in the royalty payments until the advance is paid off. This can not be changed for any reason until the advance is paid off.
This is an excellent catalog that has basically been flat over the last two years.
The main income comes from “Low” performed by Flo Rida at 69% to total income which was released in 2009, “Walk it Out” performed by DJ UNK in 2006 (5%) and “Sugar” by Flo Rida in 2009 (1%), are the top long term songs all released 12 plus years ago which contributes mainly to the flat line of revenue. “Walk It Talk It” was released by Migos in 2019 (16%) and continues to be strong even after 2 years.
Looking at the income by type there are no anomalies. All income sources remain strong although we can see the pop that “Walk It Talk It” had in radio, we had a very good pop in Film as these songs continue to draw great usage in film and TV. FYI, General is really International income.
For being the backbone of an advance, this is about as good as you can get for a catalog. Even though there is virtually no risk with these type of advances, it is nice to have a steady forecastable revenue stream. This is a legacy catalog that will continue to generate this type of revenue over the next 5 years and well beyond.
The structure of this advance makes sure the buyer is protected through the assignment with BMI and locks in the return. Although the time can go longer, or shorter, the rate is secure because of the additional interest fees on any principal not paid off.
Detailed Data HERE
Sample Advance Agreement HERE