What are dividends and yields?

Dividends are regular cash payments made to investors from the revenues or profits generated by their investments. In traditional stocks, companies may pay dividends quarterly from their earnings. In alternative investments like artist SPVs, dividends come from the actual revenue streams the SPV owns—streaming royalties, tour income, merchandise sales, or business ventures.

Yield is simply your annual dividend income expressed as a percentage of your initial investment. If you invest $10,000 and receive $800 in dividends over a year, your yield is 8%. This metric helps you compare income-generating investments and understand your cash-on-cash returns.

Alternative investments can have many different structures. On the Mars platform it is anticipate that yields may be more dynamic and interesting than traditional dividends. Instead of waiting for a company's board to declare a dividend, you receive your share of revenues as they're collected—creating a more direct connection between the asset's performance and your income.

How dividends work in artist SPVs

From revenue to your bank account

When you invest in an artist SPV, here's how money flows to you:

Revenue collection: The SPV receives money from all assigned sources—examples include: Spotify pays streaming royalties monthly, tour promoters settle after each show, merchandise companies pay quarterly, and business ventures distribute based on their own schedules.

Aggregation period: The SPV typically collects revenues for a set period (usually quarterly) to make distributions efficient and cost-effective. Some SPVs distribute monthly if revenue volumes justify the administrative cost.

Distribution calculation: After covering operational expenses (legal, accounting, administration), the remaining revenue is distributed pro-rata to investors. If you own 2% of the SPV and there's $50,000 to distribute, you receive $1,000.

Payment delivery: Distributions typically arrive via ACH transfer or check, with detailed statements showing revenue sources and calculations. You'll know exactly where your dividend came from—which songs were streamed, which tours generated income, which businesses contributed.

Predictable vs. variable income

Unlike traditional stock dividends that companies can cut at will, artist SPV dividends are contractually tied to actual revenues. This creates both advantages and considerations:

The upside: You can't be cut off from dividends by a board decision. As long as people stream the music or buy the products, you receive your share. The artist can't decide to "retain earnings" instead of paying you.

The variability: Your dividends fluctuate with actual performance. A viral TikTok moment could spike your next distribution. A slow touring season might reduce it. This creates more dynamic income than traditional fixed dividends.

The transparency: You can get an understanding of  potential upcoming distributions by tracking performance metrics. Since SPV’s on the Mars platform will be designed to receive a predetermined percentage of the revenue streams, If you see streaming numbers rising or tour dates selling out, there is strong potential for higher dividends .

Types of yields in alternative investments

Current cash yield

This is the most straightforward yield—the cash distributions you receive annually divided by your investment. For established artist catalogs with stable streaming, current yields might range from 5-12% annually. These yields come from:

Streaming royalties: Easy to track and growing globally

Publishing royalties: Radio play, cover versions, and sync licenses 

Tour income: Seasonal but can be substantial, especially for actively touring artists 

Merchandise and products: Continuous sales through online and venue channels

Current cash yield is what you can actually spend or reinvest, making it the most practical measure for income-focused investors.

Growth-adjusted yield

Some artist investments start with lower current yields but offer growing distributions over time. An emerging artist might generate 3% current yield, but if their streaming doubles annually, your yield on cost could reach 15% within a few years. Inversely, it could also go down if the artists’ streaming numbers decrease. 

This growth can come from:

• Increasing streaming penetration globally
• Artist career growth and larger tours
• New business ventures coming online
• Back catalog appreciation as songs gain classic status

Smart investors consider both current and potential future yields when evaluating opportunities.

Total return including appreciation

Beyond dividends, your SPV interest might appreciate in value. If an artist's catalog becomes more valuable, future investors might pay more for SPV interests in secondary markets (however, there is no guarantee a secondary market will exist for any SPV interest). Your total return combines:

Dividend yield: The ongoing cash distributions Capital appreciation: Potential increase in your SPV interest value Special distributions: One-time payments from sync licenses, catalog sales, or business exits

While harder to predict, total return potential can make lower-yielding investments attractive if significant appreciation is likely.

Comparing yields across investments

Artist SPVs vs. traditional dividends

Stock dividends (S&P 500): Typically  around 1.5-2% annually,¹ with potential for growth but also cuts during recessions. Requires faith in corporate management decisions.

REITs: Typically 3-5% yields from real estate income, but sensitive to interest rates and property markets. Monthly or quarterly distributions.

Artist SPVs: Can range from 4-15% depending on asset quality and structure. More variable but often higher yielding than traditional investments, with lower correlation to stock markets.

Artist SPVs vs. other alternatives

Private credit: Typically requires larger minimums and longer lockups. Less transparent than artist revenues.

Dividend-focused ETFs: Daily liquidity but full market exposure. No unique access.

Artist SPVs often provide competitive yields with the added cultural connection and non-correlation with traditional markets. And the corresponding risk due to illiquid nature of the investment.

Factors affecting your yield

Revenue performance drivers

Your dividend yield depends on numerous factors:

Platform dynamics: Changes in Spotify's payment rates or YouTube's monetization directly impact distributions. Growing streaming adoption in India or Africa could boost yields.

Cultural relevance: Songs experiencing revivals through movies, TikTok, or cultural moments see yield spikes. Conversely, fading relevance reduces distributions.

Artist activity: Active touring, new releases, and business launches increase yields. Artist retirement or inactivity reduces them.

Market expansion: New revenue sources—Web3, virtual concerts, AI licensing—could enhance yields beyond current projections.

Structure and fees impact

The SPV structure affects your net yield:

Expense ratio: Operating costs come out before distributions. Lower expenses mean higher yields.

Revenue share percentage: If the SPV only gets 50% of revenues while the artist keeps 50%, your yield is effectively halved compared to 100% ownership.

Payment frequency: Monthly distributions compound better than annual ones if you're reinvesting, but cost more to administer.

Time and vintage effects

When you invest matters:

Early investment: Getting in before an artist breaks through means lower initial yields but potential for dramatic growth.

Mature catalog investment: Established songs provide immediate predictable yields but less growth potential.

Seasonal patterns: Tour-heavy revenues create higher summer distributions. Holiday songs spike in Q4. Understanding patterns helps predict cash flows.

Understanding yield potential

Portfolio construction strategies

Smart investors build yield-optimized portfolios:

Diversification across artists: Combine established catalog yields with emerging artist growth potential. Mix genres for different fan base dynamics.

Revenue type balance: Blend pure streaming plays with tour-heavy artists and merchandise-strong brands. Different revenue types peak at different times.

Geographic exposure: Artists with global appeal provide more stable yields than regional acts. International streaming growth boosts yields over time.

Vintage diversity: Stagger investments across different career stages—emerging, peak, and catalog artists—for balanced current and future yields.

Reinvestment and compounding

Unlike traditional stocks where dividend reinvestment can be automatic, SPV distributions require active decisions:

Redeployment strategy: Use distributions from stable catalog investments to fund higher-risk, higher-potential emerging artists.

Active yield monitoring

Stay informed to optimize yields:

Track performance metrics: Watch streaming numbers, tour announcements, and business developments. These leading indicators can help predict future distributions.

Understand payment cycles: Know when different revenue sources pay out to anticipate distribution timing.

Monitor industry trends: Changes in streaming economics, touring dynamics, or merchandise channels affect future yields.

Risks to dividend stability

Industry-wide challenges

Several factors could reduce yields across all artist investments:

Platform economics: If streaming services significantly cut royalty rates, all music-based yields decline.

Economic downturns: Reduced concert attendance and merchandise purchases during recessions impact yields, though streaming typically remains stable.

Technology disruption: New platforms or consumption methods could reshape revenue models, affecting distribution amounts and timing.

Asset-specific risks

Individual investments face unique yield risks:

Artist controversies: Scandals can reduce streaming and touring income, directly impacting distributions.

Genre cycles: Music styles go in and out of fashion. Today's hot genre might be tomorrow's oldies station.

Rights disputes: Legal challenges to ownership or revenue rights can delay or reduce distributions.

Competition for attention: With millions of songs available, maintaining streaming levels requires constant promotion and relevance.

Tax considerations for dividends

How distributions are taxed

SPV distributions typically flow through as:

Ordinary income: Most dividend distributions are taxed at your regular income tax rate, not the preferential qualified dividend rate.

K-1 reporting: You'll receive a K-1 form showing your share of income, which might include multiple types of revenue with different tax treatment.

State considerations: Depending on where revenues are generated and where you live, state tax implications vary.

International withholding: Foreign streaming revenues might have withholding taxes that affect net yields.

Understanding tax implications helps you calculate true after-tax yields and compare investments accurately.

Evaluating yield opportunities

Key metrics to analyze

Before investing for yield, examine:

Revenue diversity: Multiple revenue streams provide more stable yields than single-source dependence.

Payout ratio: What percentage of gross revenues reach investors after expenses? Higher ratios mean better yields.

Growth trajectory: Is the yield likely to increase, remain stable, or decline over time?

Red flags to avoid

Watch out for:

Unrealistic projections: Promised yields significantly above market rates often indicate excessive risk or unrealistic assumptions.

Declining metrics: Falling streaming numbers or tour attendance suggest future yield reductions.

Concentrated revenue sources: Over-reliance on one platform or revenue type creates yield vulnerability.

High expense ratios: Excessive operational costs reduce net yields regardless of gross revenue performance.

The future of investment yields

The alternative investment landscape is evolving to provide more yield opportunities:

Tokenization and automation: Blockchain technology could enable real-time distributions, eliminating payment delays and reducing costs.

Yield optimization platforms: New tools help investors identify and compare yield opportunities across different alternative investments.

Hybrid structures: Innovations combining fixed minimum yields with performance upside provide more predictable income.

Secondary markets: Developing liquidity options may allow investors to trade between yield-focused and growth-focused opportunities, if this option exists. 

Building a yield-focused portfolio

Successful yield investing in alternatives requires balancing several factors:

Income needs: Match distribution timing and amounts to your cash flow requirements.

Risk tolerance: Higher yields often mean higher risk. Ensure yield chase doesn't compromise portfolio stability.

Time horizon: Longer holding periods allow riding out yield variability and benefiting from compounding.

Total return perspective: Don't focus solely on yield—consider appreciation potential and total return.

Artist SPVs and alternative investments offer compelling yield opportunities for investors seeking income beyond traditional dividends. With streaming revenues growing globally, touring recovering post-pandemic, and artists building diverse business empires, these investments can provide attractive, uncorrelated income streams.

The key is understanding what drives yields, how to evaluate opportunities, and how to build a diversified portfolio that generates sustainable distributions. Whether you're seeking current income or building for future yield growth, alternative investments offer unique opportunities to generate cash flow while participating in the creative economy.

Resources:

https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/spearn.htm

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Disclaimer - Investing in private markets and alternative investments is risky and there is no guarantee of a return, and the possibility of losing the entire investment. Many investments are not successful. Most of the investments on the Mars platform are illiquid and long-term investments. 

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