Now There’s a Way for Digital Distributors to Fund Indie Labels

Artist Royalties
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Sound Royalties wants to give indie labels some advanced cash —based on the anticipated earnings of their catalogs.  That could make sense for certain indies.

This is a potentially interesting concept that’s already being used by at least one digital distributor.  And it’s an option that could make sense for indie labels trying to get better cashflow or financing.  A lot of it depends on expected cashflows and the deal terms extended — though maybe it makes sense for the right situation.

The idea is coming from Sound Royalties, LLC, a specialty music finance company.  Their latest push enables distributors to provide advances to existing labels.  The company would provide the funding for the advances through the Edge Funding Program, while the distributor gets a little edge over the competition.

This is basically a three-party deal, with hopefully everyone winning.  Sound Royalties fronts the cash, the distributor packages the deal, and the label gets an advance to keep the lights on, beef up their catalogs, or bolster operations.  Sound Royalties works with music distributors to forecast royalties and provide the advances.

The presence of a digital distributor might be a little awkward, given that the actual deal is being made between the indie label and Sound Royalties (basically, your bank).

But Sound Royalties probably needs a better way to get in front of lots of indies, and distributors offer that.  Symphonic Distribution is one of the early takers here.  So let’s see how this goes.

And if all goes well, the indie captures greater marketshare, while Sound Royalties gets a nice return on capital.   The distributor wins by facilitating the handshake and hopefully luring more interested indies.

The basic mission of Sound Royalties is to help professionals in the music industry fund personal and professional projects.  These are financial guys that have tried to strip out the bad aspects associated with conventional financing.  They don’t rely on the credit of the label or musician, only the likely royalty earnings of the catalog.  And they let the rights owner retain control over their music copyrights and royalties.

Sound Royalties advances artist, producer, and songwriter royalties paid through music labels, distributors, publishers, and performance rights organizations like Sound Exchange.

The company also finds unpaid royalties, including digital and international royalties.

Of course, this won’t make sense for everyone — and there are plenty of other ways to raise funds.  And of course: definitely read all the fine print.  But for indies looking for some capital, it might be worth checking out — especially those with recurring royalty flows.



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