One of the biggest disadvantages songwriters face today is the lack of a free market.
This extends most notably to the inability to negotiate the terms of licensing music. But it can also extend to the inability to bargain for the terms or amount of an advance.
If you’re a creator with an income-generating royalty stream, the reality is that you’re sitting on a goldmine. The traditional system of artist advances has just convinced you to accept pennies for it, and with terrible terms.
That’s why we’ve introduced today our new Term Advance option. It combines two powerful concepts that we think will revolutionize the way advances are offered.
First, we’ve introduced competitive bidding among investors willing to fund an advance. This results in larger advance amounts than can be found elsewhere. Second, we’ve added an innovative new term-based format that guarantees a debt-free experience. The advance is settled after a fixed period of time rather than a fixed repayment amount.
The first two Term Advance auctions are live now and you can check them out.
Here’s how it works.
You may know Royalty Exchange as a site where songwriters can sell a portion of their royalties. But it’s so much more powerful than that. It’s actually a platform where investors compete to give artists money.
Think about that for a minute. Investors on our platform have to win the right to invest in a creator or catalog. That gives creators far more control than simply accepting the terms you're offered. Anytime you introduce free market principles to an industry, its value increases exponentially.
For instance, we have over 22,500 investors registered on our site. Those who register for an auction bid against each other to win it. While you sets the starting price, competitive bidding dictates the final price. Almost always, the the result more than expected.
Since 2016, creators have raised over $14 million on Royalty Exchange. That’s new money coming into the music industry, reinvested in the creative community. Term Advance applies this same competitive marketplace to advances.
With traditional advances, artists’ earnings are funneled to the advance company until a fixed amount of money is repaid. The terms of these deals often carry high effective interest rates, and expensive penalties if the repayment schedule is not met. And since the size of these advances are so small, artists typically just get a new advance once the old one is paid off.
Term Advance offers a sharp departure from this cycle of debt. There’s no obligation to repay a fixed amount. Instead, Term Advance returns creators’ royalty income after a fixed period of time… no matter what. It’s more like a temporary sale rather than a loan.
What’s more, creators decide what part of their catalog they take the advance on, while they continue to collect royalties on the part they keep.
For example, a songwriter could temporarily sell 25% of an existing catalog to an investor on Royalty Exchange in exchange for a large lump sum. This provides a larger lump sum in return than any traditional advance could provide. The investor collects 25% of that catalog for the term of the advance. The artist collects the other 75%. When the term of the advance is over, that 25% of reverts back to the artist. And any new work created after the advance is not affected at any time.
This gives the songwriter a larger advance payment than any traditional advance could provide. Enough to completely fund a new album, tour, or other project debt free. The proceeds earned from that new project are not subject to any recoupment or claims by anyone. And this new project could even drive renewed interest in the older catalog, making those royalties worth even more once returned at the end of the advance term.
We’ll still offer permanent sales for those who want it. But we expect this will become our flagship product.
Here’s why this is better than any other advance option out there:
- Highest up-front capital at the lowest relative cost
- Not a loan, no pressure to payback debt, no risk of losing copyrights
- Back catalog only, frees up royalties for future works
- Simple terms anyone can understand
Today, Term Advance will begin with fixed 10 year terms. That’s enough of an incentive to attract investors and generate a meaningful advance that can really move the needle on a creator’s career. But unlike traditional Royalty Exchange deals, it’s not a permanent sale.
Royalty Exchange connects creators with investors. The launch of Term Advance auctions is just another effort to provide more options to accomplish this.
So, ready to advance your future?