We use standard industry datasets and forecasting techniques to estimate the value of a song, EP, or album and then price our tokens. There are a variety of factors that we consider, including a song's historical performance and royalty revenue (if it's been out for a bit), and we work closely with artists and their teams to ensure we have accurate information. Our methodology is consistent with those used by the largest private equity investors & hedge funds.
It’s worth noting that these forecasts are estimates. We don’t guarantee outcomes because a lot of factors go into a song’s future performance and its royalty payout per stream, including the platforms that the streams come from and where in the world people are streaming from.
Here’s how it works.
Inside our pricing formula
Estimating song performance
We first analyze a song or artist’s historical streaming income and then estimate how a song will perform over the next 10 years based on a variety of factors such as age, genre, popularity by region, etc.
The biggest impacts on a song’s performance projections are age and sub-genre. Younger songs tend to get the most streams in the first year and then decline over a few years until streams stabilize, whereas older songs have already reached steady consumption. These decline rates vary across genres.
Artists who release on Royal can choose whether to drop new music, such as Diplo’s “Don’t Forget My Love”, or past catalog favorites, such as Royce da 5’9”’s “Caterpillar”.
- New releases: We look at the average streaming revenue of comparable, recently released songs in an artist’s catalog.
- Past releases: We look at the specific song’s historical streaming trends and revenue.
Royal does not account for an artist's growth or a song's potential for virality in our pricing. We believe that this is one of the exciting parts of our platform! Fans can bet on the artists and songs that they believe will grow in popularity, and if they're right, they can expect outsized returns from their tokens.
Estimating streaming royalties
Once we’ve estimated song performance, we forecast potential royalties. To estimate these royalties, we rely on two key inputs:
- streaming market's industry growth projections, by region
- performance and historical trends of comparable songs
We use reports from analysts at major banks and media research centers such as Goldman Sachs and MIDiA to inform our industry growth projections. When selecting comparable songs, we look at key metrics like artist popularity, genre, energy, acousticness, danceability, etc., and then leverage the performance of these songs to estimate how we expect the music being shared on Royal to perform.
You can learn more about how to claim royalty payouts here.