Music royalties from the “Shrek” franchise are set to become open to retail investors, who will soon have the option to purchase a share of the rights.
On Thursday, trading platform Public will let customers buy what has typically been the domain of private equity firms and institutional investors.
Public will offer 88,970 shares in the “Shrek” music rights for $10 each. The platform acquired a portion of the music rights from another investor, who bought them from composer Harry Gregson-Williams on Royalty Exchange. Public will take a 2.4% cut from the “Shrek” initial offering.
Shareholders will also receive quarterly payouts from royalties generated. While standout songs such as Smash Mouth’s “All Star” will not be included, the “Shrek” soundtrack earns revenue anytime the films are streamed or aired, or when the movie’s music is used in theme-park attractions.
Generally, royalty payouts depend on a soundtrack’s consumption, and can fade as popularity wanes. Public noted that dividends are not guaranteed and will vary based on content consumption, adding that they may not be paid at all. Still, the asset generated an 8.5% dividend yield from 2022 royalties and an 8.33% dividend yield from 2021 royalties, according to Public.
“Investors are increasingly looking to diversify across asset classes, from stocks to collectibles to royalties,” said Keith Marshall, GM of Alternatives at Public, in a statement. “By launching royalties, we are excited to give investors another asset class to build a multi-asset portfolio that can generate passive income.”
Eventually, Public plans to establish a secondary market for the shares, with liquidity contingent on customer demand. And after the launch of the “Shrek” investment vehicle, Platform plans to expand to other music royalties.
Thanks to an eruption in streaming revenue, the royalties market has rapidly expanded. US revenue for recorded music rose 6% to $15.9 billion in 2022 — and streaming accounted for 84% of that.
Public’s venture to fractionalize shares in music rights is among the first of its kind, and could open the space to everyday investors, according to the Wall Street Journal, which first reported the news.
Similarly, startups such as JKBX are also looking to acquire music royalties to offer similar options to individual traders.
Though music royalties may struggle amid higher-yielding competition, such as the risk-free bond market, traders may be attracted to the steady returns that the “Shrek” rights have proved, Public told WSJ.
Meanwhile, music royalties are not the only alternative investments opening up to retail investors. Over the summer, trading firm Artex announced that shares in a high-value art series would be sold for the first time on an a stock exchange.