Royalty Based Financing Expands to the Music Industry
The benefits of royalty based financing is expanding to other industries, and this time Music Publishers and Record Labels are looking to take advantage.
One of the best kept secrets in alternative investments that provide long term yield has been the music industry. People who can get access to purchase or participate in these types investments usually get immediately hooked because music is so insulated with such a long tail.
The hard part about investing in music is access and understanding. First you have to find a deal then understand how to vet, contract and then close the deal which is fraught with many dangers, too much details to go into here.
The good news is that some innovative companies are bringing these deals directly to you, which is where Alternative X Group can help.
The models for Publisher and Record Labels differ around the risk. This first post I will focus on the Record Label and will use one of our Partners who is innovating this model.
Some background on Record Labels will help. Normal financing options are either tied to an investor, or multiple, or a larger Record Label/Distributor. The investor takes equity, and sometimes a say in the running of the label, while the Distributor provides advances on revenue, which comes with it's own conditions that could include, equity, creative control, and limited capital.
Record labels, just like other entrepreneurial companies, are looking to reduced the equity they are giving away and most importantly reduce the influence others are having on their creative direction. By realizing that their revenue streams are valuable to the right investors and easy to understand, they can take advantage of these new types of models.
Our current Record Label partner has a 20+ year history of focusing on a niche market of classic rock from acts like Lynyrd Skynyrd, Rush, Kiss, Styx, Bad Company and more The investment is more speculative, because you can't predict record sales, but that risk can be reduced by investing in a pool of artists. The basics are that you get paid a royalty on every unit sold and units are accounted for by the industry leading SoundScan reporting.
Once people see the benefits and returns on these types of royalty financings, we think demand and on both sides will expand to create a new marketplace where investors not only get to invest in a good returning asset class, but they might also get to engage with some of their favorite bands as well.
Stay tuned, and check our our website if you are interested in this type of royalty financing.
I'm busy working on my blog posts. Watch this space!