No one tells Elvis Presley “no.”Except for Dolly Parton. It was the early ‘70s, and Elvis wanted to sing one of Dolly’s songs. The only snag was that his manager, The Colonel wanted half of the publishing rights.
The queen of country kicked the King of Rock ‘n’ Roll to the curb with a resounding “NO!.”Twenty years later, another musician asked to record the song—and this time the answer was “YES.” Whitney Houston’s rendition of “I Will Always Love You” won her three Grammy’s. And it went on to become the best-selling song by a female artist of all time. Dolly Parton, business savant that she is, raked in the profits in the background. “Enough to buy Graceland,” as she put it. In the ‘90s alone, Houston’s recording of that one song made Parton more than $10 million in royalties. And she didn’t have to sing a single note. In fact, all she did in exchange for that gold mine was not perform her own song for a period of time. She’s still making money from royalties on Whitney’s cover of her song today. That’s what makes royalties one of the best business models known to man. They require:
- Small up-front investment,
- No ongoing work,
- And the potential for a long-term, high payoff.
If it sounds a little too good to be true—that’s because it is.To make music royalties work, you have to be a songwriter, or purchase the rights to the song. And you have to ensure that those songs are hits if you expect to collect a meaningful royalty. The best minds in the music game have figured out a massively lucrative way around both of those… starting with Michael Jackson.
Paid to Do Nothing Except Wait
In 1985, Michael Jackson outbid Paul McCartney to buy the rights to the majority of the Beatles’ catalog.Every time one of those 251 songs was aired on the radio or used in a TV show or played in an arena, the proceeds lined Michael Jackson’s pocket.
Buying a whole bunch of royalties wrapped into one means that you never have to write a single word, you get wide diversification—and best of all, you get a solid, steady cashflow from your investment.
Invest on the Front End, Get a Paycheck Forever
The royalty business model has spread into other industries.While music royalties are inherently unique, the business model of acquiring passive interests for potential future payouts is compelling across industries. Royalty businesses have been created for pizza and steakhouses, tire & lube auto shops and even oil & gas production. Now there’s one industry that’s practically custom-built for the royalty model—and its royalty returns put Dolly Parton and Michael Jackson and even Netflix to shame.
Out of the Ground, Into Your Pocket
This industry is where a lot of real money—I’m talking billions of dollars has been invested.McKinsey says the industry “could be set for significant expansion over the next decade.”
- The Katusa Special Situations Team has identified a royalty company in a niche industry that Katusa Research believes merits attention.
Based on the number of royalty interests in developing and near-term producing assets, we believe they have good potential for growth.And over the next couple of days, I’m going to tell you everything you need to know about it. Let me tell you why. Like the companies in the music business, their mission is to acquire royalties on valuable projects. They owned 18 royalties when they IPO’d just two and a half years ago. Now they own more than 240… Don’t worry. We’ll reveal more details so that you can look at this company’s public filings and review what I think is a good opportunity. More details in 2 days. Regards, Marin Katusa and the KR Special Situations Team
Details and Disclosures
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