Crowdfunding: The Royalty Way

Crowdfunding has become a significant resource for artists, musicians, and filmmakers alike.  Why take out a loan when you can have your fan base fund your projects for you?  Well, with the advent of companies such as Kickstarter, this strategic tactic is becoming a brand new trend within the entertainment industry.  Consequently, some companies are offering unusual incentives for these types of campaigns, and the North Carolina-based company Royalty Exchange is a perfect example of this realization.  This investment company has been providing accredited investors the ability to purchase the royalty rights to song catalogs that are placed on auction by artists and/or songwriters that want to earn quick revenue for upcoming projects.  Though the company is only four years old, they have sold over $2 million in royalties to eager investors that have been looking for investments that are not tied to the volatility of the financial market. 

So, are artists jumping on board with this type of crowdfunding source?  Actually, yes, and so are producers.  Let us look at an example of how one of these transactions work.  Click here to visit the Royalty Exchange homepage and scroll down to the bottom of the page to see examples of auctions that have been conducted via their company.

Let us take a closer look at Tommy Coster, who is a songwriter that has worked with big name artists such as 50 Cent, Dr. Dre, and Carlos Santana.  He is currently auctioning off his BMI songwriter's share for what appears to be his work conducted with 50 Cent.  Let us break this offer down:

For the past 12-months, Coster's share of royalties for this particular song catalog was $57,247.  The auction is set at a minimum sale price of $80,000 for a term of 2.25 years.  The expected rate of return on this investment is 30-33%, which is competitive in today's investment market.  With the previous year's performance of this specific song catalog approaching the $60,000 mark in royalties, this is quite an advantageous investment for any investor looking for something potentially "less" risky. 

Could this be the future of crowdfunding?  For big name artists, I would have to say no.  However, for producers and songwriters who are looking for some quick cash when business is slow?  Definitely!

For further information, check out this article from USA Today, and hear what co-founder Sean Peace has to say about the company's future.