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If you’re a songwriter or recording artist, another creative aspect within music is managing your career, similar to working for a small company.
There’s a lot of discussion on what that means for music distribution, fan marketing and touring booking, social media marketing, and more in the present DIY music industry. However, one thing that most creative professionals don’t get enough guidance on is managing their money.
Small-scale businesses have one major thing they share… they have the requirement of the working capital (otherwise known to us in the form of “money”). Working capital is the money that companies utilize to meet their financial requirements in the short term and to invest in new products and offerings. According to of Bridge Payday, For businesses, this includes paying for expenses for payroll, paying invoices and purchasing inventory, and so on.
If cash is tight and businesses are struggling, they need working capital loans to keep in business. But what options do creative professionals need to do to get through their shortfalls? How can you keep yourself up financially while writing new music or a brand new album? Working capital isn’t easy to find for everyone, not just the most successful songwriters and musicians.
Advancements in Labels and Publishers
The answer has historically been in advances from labels or publishers. But they aren’t always specific bets.
- Advances have to be “recouped,” meaning the publisher/label retains your future earnings to cover any costs they’ve paid for during the process (recording time or music videos, etc.). Suppose you do not recoup the money in your advance. In that case, you will never receive additional payments beyond the initial advance and usually end up being owed by the publisher/label at the end of the day.
- Labels are tighter in their funds nowadays, which means advances are decreasing and are lower. Publishers are also more reluctant to grant advances. Some collection societies have been unable to offer them altogether.
Private Advance Services
Many creative rights holders desperate for cash have sought out private advance businesses. They promise quick money in exchange for what appears to be reasonable conditions initially. However, a closer look at the fine print, you will discover that they are committing high-interest rates that compound and strict terms that make the process of paying off these loans and getting control of your copyrights nearly impossible.
In the case of both publisher/label and private advances, the money you earn from every new song you make after signing the advance contract is used for paying off the loan instead of going into your pockets.
Crowdfunding
Crowdfunding is an innovative and exciting alternative to conventional loans and advances. Platforms such as Kickstarter, Patreon, PledgeMusic, and others permit fans to contribute money to passionate projects, including music. The fans will receive the album when it’s been made, usually with additional benefits such as getting their names included in the book’s notes or any other acknowledgment.
The advantage of crowdfunding is that there are no recouping schemes or shady interest rates for advance loans to repay. However, the downside is that you’re dipping into the future income to fund the project, which leaves less left on the table.
Crowdfunding isn’t always a sure thing either. Although Kickstarter claims that 54% of its music-related campaigns it runs are successful, which means that 46% of them don’t. Only artists with a substantial following can take advantage of this feature. It takes immense effort to market and entices fans to contribute.
Bank Loans
When companies need to obtain a loan, they will have their inventory, property, and assets as collateral. Banks are aware of these assets. Artists who have only their royalties as collateral have limited options. Only a few banks are willing to provide loans to artists using royalty as collateral. However, it takes a considerable time to approve such loans.
Banks are also highly conservative in their lending policies. This means they offer lower loan amounts.
Selling Catalogues
Artists with a long history of royalties may try to sell these royalties after the earnings slow to a minimum. There are consistently publishing companies seeking to increase their library and happy to get your royalties off your shoulders.
The problem is that the following are the main reasons: a) they usually seek out royalties that are more than a certain level, and the second) it’s generally an all-or-nothing agreement that gives you all of the stakes and takes away all potential control in the future.
Additionally, These transactions are typically done through backroom agreements that do not value royalty payments adequately. Buyers are willing to offer vast sums of money to prevent the buyer from negotiating. However, it’s not easy to determine if you’re getting the most value you can get.
The Negotiation Game
Other than crowdfunding, all of the alternatives above require negotiations that put you, the creator, at a disadvantage. They’re not negotiating with you because their money is at risk. They’re looking to ensure they get a fair price for their own. A good deal for them is a bad bargain for you.
The Alternative for Artists
Royalty Exchange offers an alternative method to sell royalties, or obtain loans and advances. Our online marketplace helps artists get money by connecting them directly with private investors interested in buying royalties or granting loans backed by royalty payments.
There are many benefits to this:
There’s nothing like nickel-and-dime recouping or predatory interest rates. There aren’t any backroom deals that leave you wondering whether you paid the correct price. All loans and sales are made in an open marketplace, where the price, terms, and details are made available to everyone to view. This transparency leads to an environment of competition among investors, ultimately resulting in the most favorable deal for both rights holders and artists.
This process also provides the flexibility you need without losing control of copyright. This isn’t an “all-in” arrangement that gives you no long-term position in your royalty payments. You can also sell
- A percentage or a percentage SoundExchange OR PRO revenues
- sync revenue generated from one song
- The performance or mechanical royalties on a single album, song, or an entire catalog
It lets you leverage your previous work to finance more recent projects. Selling a portion of the royalty from an older piece that’s beyond its revenue-generating peak enables you to create a product that has a higher potential for immediate revenue while securing future profits. After you sign the deal, the money you earn through creating music will go directly into your account.
Most important, we won’t bargain against you. We don’t purchase royalties or offer advances. We’re only the market. We only perform well if you’re doing good. The better deal you receive, the better for us. Therefore, our interests align.
