📰 This Week…

I’m on vacation, so we’ll take a break from our regular newsletter for a specialty topic. This week we’re taking a (brief) look at fractional music royalty investing platform JKBX.

🤔 What is JKBX?

JKBX is the newest investment platform that focuses on fractional investments into music royalty assets. Despite being the newest entrant, they may also be the most well-known. That’s due to a press blitz the company did prior to their launch.

JKBX has reportedly raised over $16M so far, including Spotify among their backers. The platform officially launched and started accepting investments in early March.

🛒 What Offerings Does JKBX Have?

JKBX takes a familiar approach to fractionalization. They have SEC-qualified offerings under regulation A. Share prices start from $1-$2 and go up to $55.

The platform has focused on sourcing offerings from well-known artists and songs. Among their current listing you’ll find music from Taylor Swift, Beyoncé, OneRepublic, and more.

The offerings page lists out the following information:

• Song Information - Name, artist, description, who it was written by, and who it was recorded by

• Offering Statistics - Size, number of shares, yield, 2020-2023 income

• Song Statistics - Streaming stats for various platforms like Spotify and Pandora

They do not currently have a secondary market, but state that they plan to add one soon.

💸 JKBX Fees

On paper, JKBX charges very little fees.

That’s the main fee they discuss. Though there are other things that aren’t “fees” investors should be aware of.

Based on my understanding of their offering circular, they list 86 different offerings that total $50,320,552 for sale through the platform. However, they purchased those same 86 assets for $45,283,941.56.

That’s about a $5M difference that is being maintained by JKBX. While they’re not defining it as a “fee” per se, it’s pretty much the same impact to investors as a sourcing fee. It amounts to ~11.12% which is fairly in-line with sourcing fees elsewhere.

💰 JKBX Returns

This is where things are more disappointing.

Let’s start with the most recent developments. Here’s a snippet of an email from JKBX from the end of June:

The email also includes a link to this page to explore all the “high yield” assets. The 9.66% referenced in the email was achieved by exactly 1 song. Things trail off quickly after that:

If we look at the totality of the offering information from the circular, yields are always below 4%:

⚖️ Comparisons

SongVest

This year SongVest has employed a similar strategy for their fractional offerings. Specifically, trying to get new people interested in the asset class/platform with offerings based on popular songs.

There are a few offerings that are more “music fan” oriented. They also lack much in the way of financial details (TLC example, BulletBoys example).

Outside of that, here’s a list of the more “normal” offerings that have more of an investment angle to them:

• Beyoncé: Countdown (~10.6% trailing yield)

• Beyoncé: Radio (~6.9% trailing yield)

• Young Thug: "Best Friend" (~8.1% trailing yield)

• Justin Bieber: Rockin' Around the Christmas Tree (7.2% trailing yield)

• Justin Bieber: "Peaches" (~6.4% trailing yield)

• NAS: Affirmative Action (~6.8% trailing yield)

Countdown is re-visiting a previous offering with unsold shares.

To be clear, these are not home run yields either. However, they’re generally providing a much more attractive entry point than JKBX’s ~3.75%-4%. There’s also a lot more information about the earnings history of each song, which makes it easier to make an informed decision.

ANote Music

ANote Music has, is in some sense, the most mature platform of the bunch due to their secondary market.

They don’t have the same strategy as JKBX and tend to have less recognizable catalogs that are more investment-oriented. Though some actually have recognizable songs and artists when you dig into them. One example is the “Sterling Fox” catalog. It has songs from Britney Spears, Lindsey Sterling, and more.

Many of their offerings provide trailing yields in the 6-14% range, with 8-12% being the most common.

The big knock on ANote is that it’s a completely European platform. Everything is in Euros, there are fees to transfer money into the accounts, and they won’t provide you with US tax documents.

😑 JKBX - My Thoughts

Music royalties are one of my favorite alternative asset classes. I am also a fan of the idea of fractionalized offerings making things more accessible.

But I don’t like what JKBX has available.

Information

They provide very limited information to investors.

You can’t see any information about the sources of earnings. How much of a song’s earnings were from TV/film placements that might not be sustained?

Are the earnings overwhelmingly from one service like Apple Music or YouTube? Are they mostly domestic or international?

These are questions that other investment platforms do a much better job of answering. It’s also information that I feel like shows a more serious attempt to cater to investors.

Returns

In short, they aren’t good. Their “high yield” assets earned 5.84%-9.66% for one year. These are good numbers for an FDIC-insured certificate of deposit. They aren’t at all impressive for music royalties.

“If I Lose Myself” is the top performer - the 9.66%. That would be pretty solid for an older song with a track record of consistently performing at that level. However, it earned only 2.87% in 2022. That screams of a one-off event that is unlikely to be replicated in 2024 or 2025. Of course, with the limited data available it’s hard to investigate further.

As a point of comparison, so far, I’ve been seeing about 12-14% annualized returns from my factional investments on SongVest.

Conclusion

JKBX appears to be a functional platform that lacks enticing investment opportunities. For those looking to start with fractional investments, there are simply better alternatives.

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