Royalty Income

Dominic Thomas
Dec 2023  •  1 min read

Royalty Income

For those of you who are business minded or ‘entrepreneurial’ (perhaps the most overused business word), the ‘rules’ around royalty income may be changing.

In recent decades we have all seen, particularly in the arts, how doing your work once and then getting paid repeatedly for it is the most honest definition of a ‘passive income’.

This is most evident in the music and film sector where stars of the past continue to earn income from repeats, resales, commissions and so on of a performance long ago. In fact I think it was George Lucas and his Star Wars franchise that really brought this to most people’s attention.

Imagine, you worked hard, made an album or wrote a book and forty years later you are still collecting money for your labour. Some of our clients are in this happy position.

So the twist is that this appears to be changing, well for some anyway. Various financially successful artists have been selling their back catalogue for a single, substantial lump sum, forfeiting the future royalties.

I wonder what this suggests? Perhaps that they would prefer to have the lump sum to spend, invest or gift rather than a lifetime of income. Perhaps they are concerned about the ability and resources to prevent plagiarism in the future or to restrict the use of their materials in other ways. Perhaps they are concerned that AI will actually make them irrelevant. I don’t know why, but it’s certainly an unexpected change to the basic business model in some sectors.

In September we learned that pop princess Katy Perry has agreed a deal to sell her back catalogue for around $225m. Her actor husband Orlando Bloom played Will Turner in Pirates of the Caribbean, so no need for bootleg albums for Katy (or perhaps bootstrap albums, with such a load of pieces of eight).

Katy Perry reportedly makes $225m by selling her music catalogue:  https://www.bbc.co.uk/news/entertainment-arts-66853047

Royalty Income2023-12-17T13:36:40+00:00

Glengarry Glen Ross

Glengarry Glen Ross

The 1984 play by David Mamet opened in London last week. I had seen the 1992 film but had not the play. They are certainly different. To my mind the characters in the film generated more sympathy than those in the play. Whatever your view, the performances are strong, but perhaps not as strong as the language which is about as “locker room” as you can get, as clashing egos and dysfunctional ideas about masculinity are spat across the space between characters.

These are “men” that have a fluid understanding of truth, it seems that they believe that it serves their purpose to be economical with the truth. Selling whatever they can for as much as they can to whomever they can. We are all probably familiar with the hard sell and yet despite it being largely frowned upon here in Britain, we are all still regularly blitzed by people trying to grab our attention. This week I’ve had the customary junk emails, a few text messages and a call or two about an accident that wasn’t my fault and never happened. Selling, sadly, is a regular bedfellow of scamming.

Always Closing

Anyone in business will recognise the constant problem of attracting and obtaining new customers. Those that provide a particular product may only ever sell it once, as opposed to those that sell a service. It is telling that in the play, none of the characters really possess much by way of a sense of ethics. Sadly this is nothing new and of course the notion of hypocrisy (at best) lying (at worst) is familiar in almost any sector of society and unique to none. To the salesman (person) the enquiry or “lead” is their opportunity to close a sale. However bad or unethical selling can only lead to a failed business and one that closes.

A Brood of Vipers

I have never really understood those that knowingly and deliberately lie in order to make a sale. Financial services (my sector) is of course one where many sharks and charlatans have resided. Life may be harder for them now, but invariably they exist and find a way to part people from their money with apparent ease. Some “advisers” often refer to the “good old days” of financial services, by which they mean earning a commission for selling products. It may interest you to know that back in those good old days there were about 250,000 people selling financial products, primarily in person, often at your doorstep. Today there are around 25,000 authorised individuals who are able to provide advice and arrange “stuff”. Of those probably no more than 5,000 are financial planners, who, like me, don’t need to arrange “stuff” to get paid and provide a valuable service to clients, but of course most of us will arrange investments and the like as required.

Money Interest

Money is invariably the barrier to an honest conversation. In 2013 after much mucking around the regulator of the day banned most forms of commission (note I started the firm in 1999 completely removing commission). In January 2018 the rules will be taken to a higher level due to a European agreement (MIFID2). This will mean advisers and product providers need to be crystal clear about their charges and agree terms for their service. This is coming from a sensible, laudable intention of protecting investors, unfortunately I can see very few benefits at this stage, at least for those that are already provided with a costed and agreed service, as our clients are. If anything, people are more likely to make more bad decisions, focussed on cost rather than value. One of the new rules is quarterly valuations and prompt/immediate notification if a portfolio falls by 10%. These sort of actions tend to panic investors and shift their focus to the short-term rather than the long-term benefits of disciplined investing and having a proper financial plan.

Unintended Consequences… again

Your in-boxes will become fuller of correspondence, which will in turn lead to either inertia or anxiety, perhaps both. This is likely to be followed by the current serpent de jour, dressed as a helpful paramedic, but actually seeking to suck a pint of blood or two for themselves – the ambulance chasers will find some way to bombard you and convince some, many perhaps that their portfolio will only ever rise and if it doesn’t or didn’t, please take a ticket and join the queue for those seeking remedy or the fantasy of one. To my mind the equivalent of worrying that an egg was broken when the intention is to make an omelette. If I’m sounding fed up or perhaps “aggressive” this is because, well I am certainly tired of pointless changes, but equally aware that we will need to do more work, for no benefit, which will result in higher costs and fees, which will inevitably be passed on to clients. It won’t really deter the liars or crooks, perhaps it will make like marginally harder, but those are people that never play by the rules and would never offer you anything of value.

As for the play, well it’s on in London near Embankment tube. It has not been updated (if it has I cannot see where). It has contains some very uncomfortable language – racism and sexism which jar and are not helpful to the underlying message of the play. Of course it deals with bigger topics such as the dog-eat-dog world that forms of capitalism create, where collaboration isn’t in evidence, but rather ruining your peers helps your own cause. Starring Christian Slater, Kris Marshall, Oliver Ryan and Don Warrington to name a few. Get your tickets here – (warning – very sweary!)

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

Glengarry Glen Ross2023-12-01T12:18:21+00:00

That old sales technique…

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We’re not selling, we offer an opportunity to buy… eh?

I had to laugh, sorry. I was listening to an item on Radio 4 about how temporary workers are being sold insurance that they either don’t need or won’t pay out. Now we’ve all heard this stuff before… PPI springs to mind for starters. I admit that I know nothing about this sort of insurance (accident cover, for temporary workers) but of course I do have a pretty good handle on financial protection. Anyway I was amused to listen to the defence that to the effect that “it is not being sold…. it is being offered” the “offering” techniques seem to be the same as any sales technique, but I hadn’t heard this excuse before. The important issue being that insurance being sold is a regulated activity and therefore needs proper disclosures etc to meet standards set by the regulator.

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Admittedly, I am have witnessed the process reported. Indeed I am reliant upon the information provided by the reporter, but frankly, the way it looks… if it walks like a dog, smells like a dog, barks like a dog, looks like a dog…. it probably is a dog. if not, then I think the regulator is in for some testing times ahead… what would stop all advisers simply saying that they are offering pensions, investments etc… and therefore not selling them (arranging may be a more palatable term). I imagine that the regulator would have something to say and demand compliance and payment of their fees. So I assume and hope that the FCA apply similar logic to those merely making such “offerings” or “opportunities to buy”.

Everyone sells, but there are still lots of grubby sales techniques

It seems that many people don’t like the term “selling” yet we all do it. Yes all of us. Selling is merely persuading someone to make a choice. Ethical or good or “proper” selling is therefore persuading people to make choices to their personal or collective advantage. We all do this a lot of the time as Daniel Pink illustrates so well in his book “To Sell Is Human”. Without actual “selling” nothing much would happen and we certainly wouldn’t have a recognisable economy. However clearly there are many that sell (or try to) unethically. I was disappointed to receive an email this week offering to sell me names, addresses and full contact details of people that may have had PPI “second use PPI hot key leads” . In fact it made me cringe (ok perhaps range)… I can buy (anyone can) 100,000 for £6,500. I don’t buy leads, but of course what arrives in my email box (initially) is open season. If you are anything like me, you are fed up with the banks that sold it and the claims companies that keep texting, emailing or phoning. They are an utter nuisance and ought to be banned.

Dominic Thomas: Solomons IFA

That old sales technique…2023-12-01T12:23:56+00:00
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