Title

What is the optimal pricing model in securitizing the revenue streams of famous individuals?.

Author

Sabrina Fruci

Date of Award

5-1-2015

Document Type

Thesis

School

College of Liberal Arts

Degree Name

Bachelor in Arts

Abstract

This thesis looks to establish an optimal pricing methodology in securitizing the revenue streams of famous individuals, with an application to the singer/songwriter Taylor Swift. First the paper examines historical precedence in regards to entertainment industry and intellectual property securitizations. From musicians, authors, and athletes or telecommunications and pharmaceuticals, the breadth of examples highlights the flexibility in pricing such a highly distinctive asset with potentially volatile future cash flows. An examination of the assets associated with David Bowie, Madonna, and Michael Jackson to the Green Bay Packers, Boston Celtics, and Manchester United shows that the market for entertainment industry and intellectual property securitizations has evolved and changed over time, adapting to the idiosyncratic circumstances surrounding the securitizations. The thesis then builds the theoretical framework surrounding the valuation methodologies applied to the previously discussed historical cases. The six possible securities analyzed through these frameworks are bonds, equity, convertible securities, asset backed securities, futures, and options. As each model provides a unique component in regards to valuation and can offer different benefits to issuers, an optimal model is then constructed based upon the strongest aspects of each of the discussed models. The final model selected was for an equity type of security known as a royalty income trust. This paper argues that the royalty income trust model is best suited to singer-songwriter Taylor Swift. Swift's eight-year meteoric career and five worldwide chart-topping albums make her a prime candidate to test out the royalty income trust model. Providing Swift with the brand building capacity of equity and the legal protection of an asset backed security, the royalty income trust model seems to be the optimal choice not only for Swift but any major brand that has the potential for significant future revenue streams associated with it.