By now, everyone knows that the recording industry isn’t what it once was. The days of lucrative record deals with huge advances are, for the most part, long gone. As a result, the lure of the major label is seriously diminished, and most artists are doing it all themselves.
Bands are making records to promote tours rather than the other way around. We know that musicians (seasoned or budding) can sit in their garage with a laptop and record at a decent quality. The tools are available online to make the music available (Spotify, Youtube, Bandcamp, etc), and thanks to social media, artists can market themselves, too. Now there’s a Denver-based company called Royalty Exchange that is helping those same artists make money with their work.
Director of communications Antony Bruno says that the company was founded in 2011, then purchased by the current owners in 2015. It essentially works like an auction, with artists putting their work on the block and selling to investors. The company makes its money by taking a commission, like a realtor.
“If bands want to get involved, it’s really simple,” says Bruno. “Usually they have some goal in mind of what they’d like to achieve, and we work with them, looking at their catalogue and their net earnings, and have a recommendation about how much of what they’re currently making they can make available to investors. Everything is customized for the artist. So long as the portion of whatever it is that they decide to make available on the site is making at least $2,500 a year, we can create something for them. We tell the investors there’s a new listing available, give them all the details about the earnings of the listing, all of the information the investor might need to know, and then when it gets a bid, that kicks off the auction. The auction typically lasts about three days.”
It sounds simple, and musicians that aren’t particularly well known to the masses are making decent money — so there must be a catch. Bruno is candid in saying that, for some, selling their royalties in perpetuity for work that they've put their heart and soul into can be a jolt.
“What this is, is very new and different,” Bruno says. “It’s far more flexible and transparent than the way things have gone in the past. In fact, the way that royalty transactions traditionally happened in the music business — maybe ‘scam’ would be a worse way of putting it — it wasn’t a very fair deal for the artist. What we’re doing is offering a marketplace where there can be price discovery, where everything is transparent and in the open. You can see every transaction ever conducted on our website right now. You can see the starting price, the closing price — everything is there to look at. Transparency and competition, we think, are essential to bringing royalty transactions into more of a fair light. That said, we’ve been doing this for about two years now, and we’re only recently seeing an increase in the number of people who are coming to us to strike deals. At least half of the people who have worked with us have either come back or referred a friend. That’s the best endorsement that I can think of.”
Local musician Michael Skaggs, who plays in the bands Shamecult and Outline in Color and produces other groups, initially heard about Royalty Exchange when he was on Facebook and saw a targeted ad a few times. Eventually he clicked, liked what he saw and reached out. He says that it works incredibly well for him and his bands.
“My band Outline in Color has been around for almost eight years, and we’ve done all sorts of things, from DIY headlining tours where we go out by ourselves and just do what we can to a national support tour and international touring,” Skaggs says. “With a lot of that comes a lot of financial expenditure, debt, and all of that kind of stuff. We were in a precarious financial situation, and what Royalty Exchange was presenting to us was an opportunity that would essentially eliminate the debt that we had accrued over the years and put us in a situation where we would be far better off and be able to do the things that we want to do as a band.”
Skaggs says that Royalty Exchange takes a 15 percent cut of the revenue that they help generate, which might sound like a lot, but he believes it to be much smaller than the percentages taken by labels. Plus, with 21,000 private investors in the database, the chances of finding a buyer and getting some cash are greater. And perhaps most important, Skaggs sees this as yet another chance for artists to be in control of their own destiny (even if, perhaps ironically, it means relinquishing some control of their work).
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“A lot of times, labels think they know what the consumer wants,” Skaggs says. “It’s not until you start touring and interfacing with bands directly that you really see what trends are happening in music. And a lot of bands that have been through that wringer often feel like they’re more suited to market their own releases than an established record label. So having these funds to not only take care of the debt that we’ve accumulated but also to market our future release without giving up the equity in that release is huge. Most times, to get the funding out of a record company, you’ve got to give up the majority of your equity before it’s even out.”
Bruno concurs, adding that, while labels aren’t obsolete, there are other options now.
“The label isn’t the only bank you have to go to — you have private investors now,” he says. “The other side is, the industry has absolutely been on the downturn for the last fifteen years, but that’s turning around. That growth is accelerating — 17 percent growth [in 2017]. You’re seeing the industry rebounding, and what’s happening is it’s a little bit different than how artists made money before, where you’d sell your album and make most of your money in that eighteen-month retail window. Now, with streaming, you’re not getting that initial bump. You’re earning forever now, with every stream. It elongates the lifetime of the earnings of music, so it’s a different economic model. The idea is that it’s a different kind of music business, and it’s rebounding because of these new models.”
For more information, visit Royalty Exchange online.