When You Wish Upon a Star: Explaining the Cautious Growth of Royalty-Backed Securitization

Abstract

This article focuses on the phenomenon of securitizing future royalties of entertainers, illustrating why securitzation of such royalties has not been embraced more enthusiastically. The article begins by describing the securitization process in general and the differences between mortgage-backed and asset-backed securities. The article then examines the benefits of securitization as applied to entertainment royalties. Benefits of securitization include immediate liquidity, less expensive capital, and diversification of the suppliers of the originator’s funding. However, securitization does not make sense for many entertainers unless they need large sums of cash. Moreover, securitizing royalties may not be viable because it creates a host of copyright issues.

Keywords: securitization, royalties, copyright

JEL Classification: L82 , K22, O34