The recession caused by the pandemic devastated the music industry. Most musicians and music producers are seeking to make some money. The ones who have composed songs haven’t yet received the cash they deserve from traditional sources, publishing houses, and collection agencies for performance rights. There are many firms in finance that are trying to help.
Sound Royalties, Lyric Financial, as well as Royalty Advance are three firms that operate similarly to Ipass loans for personal injuries, but with the difference that cash advances are given against the anticipated settlement in the event of a lawsuit. They conduct a forensic investigation of the royalties paid to the songwriter. They then give an advance of the amount with the potential to pay within one or two days. This is much quicker than traditional publishers who require payment.
Courtney Barnes, an industry veteran who has worked on recent agreements with Smokey Robinson, Deniece Williams, and The Isley Brothers, tells Rolling Stone, “It’s not like a writer can walk into a local branch of a bank and present a profit or loss statement like other small-sized businesses and receive a loan.” “There are only a few places where writers can make quick money, and it’s not like being a writer can promise you a steady paycheck like a 9 to 5 job.” Yet, Barnes warns, writers “should be extremely cautious when interacting with royal loan firms” and must always insist to have the companies test specific situations for them in order to help their clients understand the cost that will change as time passes.
These loans have been in use for quite some time. ParvizOmvidar is the CEO of RoyaltyAdvance.com, which is also known as RoyaltyAdvanceFunding, and has helped broker deals with well-known musicians such as War, Michael Jackson, the Gang, Roy Ayers, and Kool. “We are extremely proud to have been in this industry for three years, which, according to the CEO, is longer than any other company in the sector of music finance.” “We take the time to get to know each of our clients and build relationships with them so that they may call us and talk about their financial concerns.”
The firms I spoke to would not talk about the exact criteria for approval or repayment plans. But, Omvidar clarifies how their loans are similar to how the line of home equity credit operates.
“We created simple credit lines so producers, songwriters musicians, record labels, music publishers, and many others can take out loans and pay back at any time they like without penalty for prepayment,” He declares. “The procedure is quick, simple, straightforward, and quick. We are also very accommodating of various credit problems like past bankruptcy and liens, levies, foreclosures, etc. We are subject to and accountable under the laws governing lending so that the borrowers can be assured that they have an additional layer of control.”
What is the process by which interest rates are established? Omidyar says he takes into account various variables. Because there are so many variables to consider, determining the amount is more of an art than a science, according to Omvidar. “For instance, is it evaluating the entire catalog, or is it only one hit? Are you able to identify a hit? Is it brand fresh and on the edge of gaining traction? Is it approaching the end of its useful life? What is the genre’s essence? In this scenario, who are the players? What are their names and where do they get their money? What liens and debts are still outstanding? The list is inexhaustible,” adds the entrepreneur, who claims that his customers are given short-term loans of 6 to 12months to pay off credit lines, with interest rates as low as 12percent, which is common in the intellectual property world.
RoyaltyExchange, which cites many writers as clients, who have collaborated with artists like NKTOB, Wiz Khalifa, Akon, and Zendaya has a unique approach, different from other companies which finance short-term projects. The company conducts auctions online for the purchase and sale of royalty. This permits investors to bid on a portion of the artist’s royalty streams. Through this method, artists can sell their royalties and receive immediate cash while possibly recovering the stream in the future.
“The difference from a credit card or a loan is the fact that you don’t have to pay back or recuperate the money dependent on the is earning at some point shortly,” states Keegan Gaeng director of artist relations at RoyaltyExchange. “That means that any money that you earn following you’ve completed the deal is yours for keeping and not depend on paying back debt on the terms of another. This is especially important in a situation like this when the ability to predict future royalty income is becoming increasingly difficult.”
The game is centered on the story of SladeEcheverria, lead singer of the alt-rockband Anarbor, who was preparing for a Europeantour when the epidemic struck. The group raised funds through Royalty Exchange. He offered royalties for songs that were played in public, including his 2010 CD “The Words YouDon’t Snug.” Echeverria was making around $1200 per year from catalog appearances. On the Royalty Exchange marketplace, he listed the catalog for $5,500; nevertheless, the bidding process resulted in a total of $14,45012, which was higher than the catalog’s value the previous year.
“Artists should consider catalogs and catalogs as a financial asset as publishers and labels have to do,” Slade states. “As an artist, thinking in this way provides you greater creative and financial autonomy. Additionally, it will help you survive the tough times of this kind with a strategy that will help you stand in a more advantageous position after this is done.”
Companies like RoyaltyAdvance and Royalty Exchange are also known for their speed and efficiency. They usually pay artists faster than traditional publishers as well as PerformingRightsOrganizations (PROs). RichChristina, Senior VP of A&R at WarnerChappellMusic, understands this. Christina, on the other hand, is skeptical that royalty loan companies will become competitors in the future.
“Major publishers have worked and will continue to work to expedite the collection and payment of writer royalties, as well as to assist writers who require immediate assistance, according to the author. “And tremendous progress has been made in recent years. During this time, I’ve worked with a wide range of writers. I’ve heard of only a few of them going through high-interest loaners. They’re certainly not a threat for publishers.”
Are our current economic conditions likely to push more artists to consider alternatives to royalties? Recently, the industry is talking about the potential sale of full catalogs of songs to investment companies like Merck Mercuriadis’ Hipgnosis. Publishers, royalty loans, PROs, and even corporations are all facing stiff competition.
Every decade, according to Omidyar, “a new generation of WallStreet corporations or hedge funds tries to crash into the world of music,” with some surviving longer than others. “Anyone seeking money should guarantee that he has partnered with a respected and dependable source of funds, as well as a true passion and knowledge of music, and whose competency in the world of music has stood the test of time,” says Omidyar.
