In 1997, David Bowie needed cash. Working with investment banker David Pullman, the forward-thinking musician trialled a solution that the music industry had never seen before: he securitzed his royalties.
The deal: buy a ‘Bowie Bond’, and you were entitled to a share of the royalties from David Bowie’s back catalogue for a period of ten years.
The idea of getting an advance on your royalties from a record label is one we’re familiar with, but the idea of getting one from Wall Street was, at that time, practically unheard of. The arrangement generated $55 million for Bowie, and the deal lasted, as expected, until 2007.
By 2019, the internet has changed the way musicians make money. Crowdfunding is a way of life for some, and artist revenue streams are becoming more diversified, as the rise of Spotify coincides with the return of vinyl. Anything seems possible, as long as someone builds a platform for it.
Royalty Exchange claims to do just that. This “eBay-like” site offers a place for both artists and prospective investors size each other up, with a view to exchanging rights to royalty payments. Typically, the rights marketplace works using an auction format, although it’s possible for private syndicates to arrange their own purchases.
As I write this, for example, there’s a package of two Chris Brown songs ending, whose public performance, radio and streaming rights for the next ten years are currently under a bid of $23,500. A recently closed auction for Miley Cyrus’ Wrecking Ball reached $47,750. The predicted return on investment for both, based on past performance, is unavailable. Royalty Exchange has previously facilitated royalty transactions of songs performed by Beyonce, Ariana Grande, Taylor Swift, and more.
Rights holders can offer any percentage of their royalties, but it’s typically done in increments of 25% up to 100, and the copyrights themselves are generally not included.
But musicianship and financial expertise rarely come together, and nor should they. It’s probably with this in mind that Royalty Exchange’s Know Your Worth app was created. This uses data from performing rights organisations to analyze the profitability of music in question, with the same analysis serving to give investors a reasonable idea of how much the package of royalties is worth.
The Know Your Worth app's Order Books feature lets investors enter specific parameters for royalties they would be interested in, and allow an 'instant offer' to be made to rights holders, providing they fall within a set of given parameters.
You can find out more and get involved – in whichever capacity – at the Royalty Exchange website.
As well as being an Editor At Large for Electronic Musician, James also dispenses software news and views as the co-host of Appetite For Production Podcast, and tweets on Twitter as rusty_jam. You can find his 'collected works' at his website, XoverFreq.