In today’s DIY music environment, there’s plenty of opportunities like self-directing your career by taking control of your distribution (though services like Symphonic Distribution), fan promotion, social marketing, tour booking, and more.
But one thing most DIY artists don’t focus on enough is managing finances. The music business has more than enough examples of artists signing bad advance deals or getting in bed with shady business managers.
That’s because artists historically have had few financial resources available to them.
Traditionally, the only source of financial assistance for artists has come in the form of advances from either labels or publishers. For artists who shun the label system in favor of DIY distribution, this is a closed door altogether.
Many artists in desperation turn to private advance companies promising easy cash for what seems at first like reasonable interest rates and terms. But a close read of the fine print often reveal bad deals that make paying off these loans nearly impossible.
Crowdfunding services like Kickstarter, Patreon, PledgeMusic, and others have emerged to disrupt this landscape, allowing artists to ask fans to help fund their projects.
While certainly a valid tactic, the downside to crowdfunding is that you’re tapping into your future earnings, leaving less profit to enjoy once your new album comes out or tour kicks off.
More recently, we’re seeing more investors from outside the music industry enter the market. Some are institutional investors, like the Blackstone private equity group that acquired SESAC. Others are private investors pursing the same strategy, but doing so through individual deals with specific artists.
A handful of companies have emerged to connect artists with private investors for this purpose. Our company, Royalty Exchange, is one. We put artists with a history of royalty earnings “in the room” with thousands of private investors interested in either buying a portion of your royalty stream or providing loans backed by royalty payments.
These investors have different motivations than labels and publishers, and therefore offer greater flexibility in terms. Unlike publishers only interested in 100% of your royalty interest, private investors are content with buying only a percentage of your royalties. This gives you a lump sum of royalty payments up front (say, 3 – 6 years) while keeping all copyright control AND continued monthly payments for the portion of your royalties that you retained.
This allows you to leverage your older work to pay for newer projects. Selling a share of royalty from an older project that’s past its revenue-earning prime allows you to fund a new product with greater immediate revenue potential while protecting future earnings.
Another company connecting artists to private investors is LIVAMP. Instead of buying historical royalties, investors on LIVAMP provide financing for an artist’s upcoming project in return for a percentage of any future returns.
It also offers more flexibility in that artists can repay investors in ways other than the returns of the project they’re raising money to launch. For instance, an artist can use LIVAMP to raise money for a new album, but pay back investors with revenue gained from touring.
Artists ability to access private investors in this way will only further disrupt the traditional music financing system, and offer DIY artists more options to fund their careers than ever before.