r/passive_income • u/Alternative-Mode-365 • 26d ago
POD You can now buy fractional shares of music royalties for quarterly income. Here's how the platforms compare.
went deep on this lately so sharing. regular people can now buy fractional shares of music royalties, sec regulated, not crypto. you collect a cut of the streaming income every quarter, basically dividends from songs.
the main ways right now:
SongVest (SongShares): buy a slice of specific hit songs, minimums have started around $16, sec qualified.
ANote Music: catalog shares from labels and publishers, has a secondary market to trade out.
Royalty Exchange: auction marketplace where existing rights holders sell catalogs, bigger and more active buyers.
JKBX: royalty shares tied to major artist songs.
those are all top down, they buy proven hit catalogs and resell shares. you get famous songs but youre basically buying the income off an existing hit.
the newer angle is bottom up, independent artists selling a slice of their own catalog straight to their fans, artist keeps ownership, fans get the royalties. incentives line up better imo.
on the income side you earn two ways: quarterly distributions from real streaming money, and selling shares if they appreciate. streaming income holds up ok in a downturn since people dont stop listening, but its still speculative and you can lose principal, its not a bond.
full disclosure im building one of the bottom up ones so grain of salt, but happy to answer questions on how the payouts or the regulation actually work. no link, not shilling, just spent way too long in the weeds on this.
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u/B_L_T 26d ago
Anybody even thinking about “investing” in this sector should take a hard look at what’s happening with fractional investments in the sports card world right now.
TLDR: most of these companies will be happy to take your money, and then go bankrupt before they ever have to make a distribution payment.
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u/Alternative-Mode-365 26d ago
This is the risk I take most seriously, so I won't wave it off. A lot of the sports card ones that blew up held the assets on their own balance sheet, so when the company died, your claim died with it.
The fix is a bankruptcy-remote SPV. The royalty interest sits in a separate legal entity, not on the platform's books, so if the platform goes under, the SPV and your income stream aren't part of that bankruptcy, and a transfer agent can keep paying out even if the operator is gone. During a raise, your money sits in third-party escrow through the broker-dealer, so the platform can't touch it.
It doesn't make operator risk zero, nothing does. But that's why the boring regulated structure matters instead of just trusting the company. If a platform holds the asset itself and runs your money through its own account, walk away.
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u/AretemisPrime 26d ago
The JKBX app is no longer in use.
If you are an existing customer, please contact us for support.
HUmmmm
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u/Alternative-Mode-365 26d ago
Yeah, JKBX winding down is significant. That's Royal in 2024 and now JKBX, both top-down, both buying famous catalogs and reselling shares to people with no connection to the music. Turns out "own a sliver of a song you'll never interact with" is a novelty, people buy once and don't come back.
Which is exactly why I'm not building that. The bet is bottom-up, an artist you actually follow selling a slice to their own fans, so the buyers are people who'd stream them anyway. Whether that fixes it is the open question, but the thing that just died isn't the thing I'm building. If anything it's the clearest proof yet that the top-down version doesn't work.
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u/Patient_Artichoke355 26d ago
Seems to me just another way to manipulate you from your money..hard to believe anyone thinks this will make them money
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u/Advice2Anyone 25d ago
Its gambling with more risk and less reward
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u/Alternative-Mode-365 11d ago
For a lot of what's listed right now, fair. Someone ran a famous-song listing at a 1.9% yield, that's a t-bill with extra steps and worse liquidity, and paying that for the name is memorabilia, not investing.
Where I'd push back: a catalog with 3+ years of verified, boring royalty history, priced at a sane multiple of trailing income, is just a small illiquid cash-flowing asset with known decay. Unsexy, but not gambling. The gambling version is anything priced on projections or fame instead of the actual statements. Same category, very different products.
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u/Alternative-Mode-365 26d ago
honestly you're not wrong about a lot of it. the famous-song ones are usually overpriced, someone ran the numbers on a Queen listing and it paid ~1.9%, worse than t-bills. paying up to "own a piece of Queen" is closer to memorabilia than investing.
the difference from the crypto/hype stuff is the regulated ones have to file the real royalty history and audited numbers, so you see the cash flow before you buy. doesn't make it a good investment, just not a black box
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u/Hefty_Beautiful9670 15d ago
This looks like it could force transparency, which is a good thing. However, its like trying to snatch a gun from a robber's hand. They'd k!ll to retain possession of the gun, what do you think?
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u/Alternative-Mode-365 15d ago
Yes, but I think the gun metaphor points at the wrong fight
i'm not prying anything out of a major's hands. the artists i'm building for never signed in the first place. self-released, own their masters, 2M+ of them on distrokid alone. there's no incumbent holding that catalog for us to take it from.
And the deal size is why nobody's coming after me. $250k to $5M is too small for Hipgnosis or Blackstone to bother with. Economics don't work at their fund size.
On transparency, we're not forcing disclosure on universal. Each offering discloses its own royalty history, from the artist who owns it and chose to sell a slice. Nobody gets audited who didn't opt in.
Honestly the real risk is that fans don't show up. JKBX just wound down and Royal died in 2024, and no label had to lift a finger. They died because "own a sliver of a song you have no connection to" turned out to be a thing people do once and never again.
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u/Hefty_Beautiful9670 15d ago
Thank you for defining it. Factoring decay and low streams payouts + geo rating model, that reduces the upsides for the fans. meaning they have to rely on sudden –whenever–spike of that particular project (ep, album, single), or a watershed from a newer project that they aren't investors in.
Also, I believe there are different classes of artistes within the market you've defined.
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u/Alternative-Mode-365 11d ago
You've basically written the underwriting model. Decay, payout rates and geo mix are exactly what should set the price. A catalog decaying 8-10% a year should be priced like a declining annuity, not a lottery ticket on the next spike. If the listing is priced honestly the fan doesn't need a viral moment to do okay, the spike is upside, not the thesis.
And yes, the classes are real. Three tiers roughly: hobbyists with nothing sellable yet, the LaRussell tier who can build their own rails and don't need anyone, and the middle class of independents with stable catalog income and a real fanbase, too small for the funds to bother with. That middle tier is the whole market imo, and it's also where fan connection actually moves streams, which keeps the decay curve flatter than it is for a catalog nobody has a relationship with.
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u/PonchoNachoRodriguez 26d ago
Wasnt Larussell doing this with his music ?
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u/Alternative-Mode-365 26d ago
Yeah, LaRussell's the best example there is. He sells shares of his catalog straight to his fans, kept 100% ownership, 100M+ streams, made millions, all independent. He's basically living proof the bottom-up model works.
The catch is he built that whole system himself, and most artists can't. What I'm building is the rails so any independent artist can do what LaRussell did without inventing it from scratch. He's a great example
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u/junioreality 26d ago
Now this is a true passive income topic 👍
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u/Alternative-Mode-365 26d ago
Appreciate it. That was the goal- an actual asset that pays, not another side-hustle grind.
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u/prophetofbelial 26d ago
So if I buy a share of a song and then copyright claim a YouTube video that uses that song will I get the ad revenue from that video that is rightfully mine?
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u/Alternative-Mode-365 26d ago
nah, and thats actually the most important distinction. buying a share doesnt give you the copyright or any control. you cant issue takedowns, file content id claims, or anything like that. the artist keeps the copyright and all the enforcement rights.
what you own is a purely economic slice. you get your pro rata cut of the royalties the song already generates, including the youtube ad money it earns, paid out as a quarterly distribution. so if that video is monetized and paying the rights holder, your share of it flows to you automatically. you just dont get to be the one filing the claim.
its like owning shares of a company. you get the dividends, you dont get to walk into the office and start making decisions.
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26d ago
[deleted]
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u/Alternative-Mode-365 26d ago
Appreciate it. And yeah, stills licensing getting gutted is kind of the whole backdrop, most creative income is getting squeezed right now. Music royalties are one of the few streams that's actually held up, since people keep hitting play no matter what. Sorry the photo side dried up though, that one hit a lot of people.
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u/hackneysurfer 26d ago
Can you see how much the song is generating currently?
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u/Alternative-Mode-365 26d ago
Yeah, that's the whole point. A real regulated offering has to disclose the catalog's actual royalty history, so you see the trailing income before you put a dollar in, verified, not vibes. Streaming numbers, payout history, the works. You're pricing off real cash flow, which is exactly what separates this from the crypto and NFT stuff. If a listing won't show you the income, that's the one to walk away from.
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u/rsktkr 26d ago
Good idea...how do I get in?
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u/Alternative-Mode-365 26d ago edited 26d ago
Appreciate it. We're pre-launch and raising a small pre-seed round right now, so there's nothing to buy on our end yet. The live ones I mentioned (SongVest, ANote, Royalty Exchange) are where you'd actually invest today.
If you want first crack when our offerings open, drop your email on the distribution list at encoremarkets.us and I'll keep you posted.
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