Meet the Companies Vying to Bring Quick Money to the Music Industry
As the pandemic-induced economic crisis decimates the music industry, many musicians and songwriters scramble for a living. For those who have written songs but have yet to receive payment through traditional sources – publishers and performing rights collection agencies – a number of financial firms are vying to help them.
Royalty Advance, Sound Royalties, and Lyric Financial are three companies that operate in much the same way as personal injury loans when a cash advance is granted against an expected legal settlement. Lenders perform forensic analysis of royalties generated by a songwriter. They then offer an advance on that amount with funding possible within days – much faster than the time conventional publishers take to process payments.
“It’s not like a songwriter can go to their local bank with an income statement like any other small business and get a loan,” Courtney Barnes, an industry veteran who recently signed publishing contracts for The Isley Brothers, Smokey Robinson and Deniece. Williams, tell Rolling stone. “So there are a limited number of places writers can find quick funding. And as you know, it’s not like being a writer can give you a predictable income like a 9 to 5. “But, warns Barnes, writers” should be very careful when talking to royalty loan companies. – and should always ask companies to run specific scenarios with them, so they can understand the fees charged over time.
Royalty loan programs have been around for some time. Parviz Omvidar is President of RoyaltyAdvance.com, also known as Royalty Advance Funding, which has negotiated deals with well-known names such as Michael Jackson, War, Kool and the Gang, and Roy Ayers. “We are very proud to have been in the same industry for over three decades, which to our knowledge is longer than any other participant in music finance,” he says. “We get to know each of our borrowers and develop relationships with each of them, so they can just pick up the phone and call us about their financing needs.”
All of the companies I spoke to were reluctant to talk about their specific approval criteria and repayment programs, but Omvidar explains that their loans work the same way as a home equity line of credit. “We have simple lines of credit in place, so songwriters, producers, music publishers, record companies and others can borrow and repay as they wish without any prepayment penalties,” he says. “The process is quick, easy and straightforward. And we are very forgiving of many credit issues, such as past bankruptcies, foreclosures, liens, debits, et cetera. We are regulated and held accountable by lending laws, so borrowers can be confident that there is an additional level of oversight.
How are interest rates determined? Omvidar says it weighs a number of variables. “Determining the rate is more of an art than a science, because there are so many factors that need to be taken into account,” he says. “For example, are we evaluating a diverse catalog or are we working with a wonder? Is there a blow? Is it new and developing? Or is he on his last legs? What is the gender? How many players are involved? Who are the players and what are their finances? What are the debts and privileges at stake? The list is getting longer and longer. ”He adds that his borrowers take short-term advances ranging from six to 12 months on their lines of credit, and interest rates can be as low as 12%, which is the standard for the intellectual property world.
Royalty Exchange, which cites a long list of writers as clients who have worked with artists such as Wiz Khalifa, NKTOB, Zendaya, and Akon, has a different model than other companies that offer short-term funding. The company holds online auctions for the purchase and sale of music royalties, with investors bidding for a portion of an artist’s royalty stream. Through this process, the artist can sell royalties and earn immediate income, with the option to pick up the stream at a later date.
“The difference between this and a loan or an advance is that there is no obligation to repay or get the money back based on what someone else might earn in the future,” says Keegan. Gaeng, Artist Relations Manager at Royalty Exchange. “This means that all the money you earn after the transaction is yours and is not subject to paying off one debt on another’s terms. This is particularly important at a time like today when predicting future royalty income is increasingly uncertain. “
Gaeng uses the example of Slade Echeverria, singer of alternative rock band Anarbor, who had planned a European tour before the pandemic. He turned to Royalty Exchange to raise funds. He sold the public performance royalties to a song collection that included the 2010 LP The Words You Don’t Swallow. Echeverria earned approximately $ 1,200 per year in performing royalties from this catalog. He listed it for $ 5,000 on the Royalty Exchange, but the auction took the final sale price to $ 14,450, 12 times what the catalog earned last year.
“Artists should view their catalogs as financial assets, just as labels and publishers do,” says Slade. “Thinking this way gives you a lot more financial and creative control as an artist, and it will support you through difficult times like these in a way that will allow you to emerge in an even better position once all. that ended. “
Companies like Royalty Exchange and Royalty Advance also emphasize speed: they can often get money to artists much faster than conventional music publishers and performing rights organizations (PROs). This is something Rich Christina, senior vice president of A&R at Warner Chappell Music, is aware of – but Christina dismisses the idea that royalty lending companies could ever turn into competition.
“Great publishers have worked and continue to work hard to expedite the collection and payment of royalties from writers as well as to help writers in need in a timely manner,” he says. “And great progress has been made in recent years. I have dealt with a great number of writers over the years. I have only heard of very few of them taking the high interest lending route. They are certainly not a competition for publishers.
Will the current economic situation encourage more artists to experiment with other royalty avenues? In recent months, the industry has been particularly talking about the possibility of selling entire song catalogs to investment operations like Merck Mercuriadis’ Hipgnosis. For publishers, PROs and royalty lenders, the competition is intensifying.
Omvidar points out that “there are new Wall Street companies or hedge funds that try to crash into the music world” once a decade, some of them with more resistance than others. “Anyone seeking funding should make sure that he or she is working with a company that has a reliable and reliable source of capital, that has a genuine love and knowledge of music, and whose experience in the music industry. music world has passed the test of time, “he says.