November 22, 2017

Royalty Exchange Lets Musicians Sell Royalty Income to Investors

As a songwriter and producer for stars like Natalie Cole, Aretha Franklin and Whitney Houston, Preston Glass receives a comfortable stream of music royalties. But when he needed to make a substantial investment to embark on the next phase of his career — as a performing artist in his own right — he had few options to raise the money, he said.

“Me and most writers can’t walk into a bank,” Mr. Glass said in an interview from his home studio in Los Angeles. “Banks don’t understand how songwriting works, how the whole business of royalties works.”

So Mr. Glass turned to the Royalty Exchange, a Web site where musicians can sell parts of their royalty income to investors. He put 15 of his songs on the block — including “Miss You Like Crazy,” a Top 10 hit for Ms. Cole in 1989, of which Mr. Glass was a co-writer — and raised $158,000. Mr. Glass retains most of his rights to those songs, but will now share part of the income with an investor whenever they are played on the radio or streamed online.

Since it was founded two years ago, the Royalty Exchange, based in Raleigh, N.C., has held 18 auctions, raising about $750,000. But Sean Peace, the company’s chief executive, envisions it as a robust marketplace where musicians can capitalize on their work and investors can find a somewhat exotic asset that could still bring in steady earnings.

“Most musicians have no idea that they can take their royalties and reinvest in themselves,” Mr. Peace said. “If they could get $80,000 up front for selling 50 percent of their royalties, that can be game-changing.”

The music industry is full of bitter stories of musicians who have given up royalty rights for a fraction of their future value. Eli Ball, the founder of Lyric Financial, a competing service that gives musicians short-term advances on their royalties in exchange for a fee, thinks that musicians should not sell their rights.

“It’s too easy for songwriters to sell off an asset that took you a career to build and is going to be gone forever,” Mr. Ball said.

But Mr. Glass said he liked the Royalty Exchange because he could define exactly which rights to sell and which to retain. His sale involved what is known as the songwriter’s share of public performance; it does not cover sales of CDs or downloads, and it does not involve any change to the song’s actual copyright. (He also is a national artist representative for Lyric Financial.)

The intricacies of royalties can be confusing even to many in the industry. But Mr. Peace said his buyers are told what they will and will not receive, and are given at least three years of back earnings reports. For a collection of songs written for RB acts like Usher and TLC that was up for auction recently, bidders saw that most of the $22,975 in annual earnings was generated by three tracks.

The company takes a 2.5 percent fee from the buyer and anywhere from 5 percent to 12.5 percent from the seller, depending on the size of the deal. It also takes 2.5 percent of future earnings from the buyer, as an administration charge.

Mr. Peace, whose background is in technology, started the Royalty Exchange in 2011 with two others after first trying a similar idea with SongVest, which sold interests in songs as high-priced memorabilia items for fans. But that model tended to work only with big artists, he said, so the Royalty Exchange instead aims at investors with bundles of songs.

The idea of royalties as a salable asset has a mixed record. In 1997, David Bowie raised $55 million by selling a 10-year bond in some of his royalties, with a fixed interest rate. But by 2004 they were downgraded amid industry tumult, and lawsuits over administration fees and other issues marred similar bonds.

The complexity of music royalties is another concern. Michael S. Simon, the chief executive of the Harry Fox Agency, one of the industry’s primary royalty-collecting groups, said that a potential investor needed considerable sophistication.

“You need to understand life of copyright, you need to understand the potential ramifications of legislation that could affect life of copyright, and you need to understand termination rights,” Mr. Simon said. “Those are three things that most people don’t understand, let alone how to predict revenue in the music business.” (Termination rights let authors recover copyrights to their works from third parties after a certain period.)

Martin Diessner, an investor who lives in South Africa who bought about half of Mr. Glass’s offering, said that being an outsider allowed him to spot a good investment where others might see risk.

“The reason why I think it’s less risky is probably because I don’t understand the music industry,” said Mr. Diessner, who is now on the Royalty Exchange’s advisory board. “Everyone who is in the industry sees it from the inside out, while I see it from the outside and maybe don’t have a negative perception.”

Most of the Royalty Exchange’s sales have dealt with the publishing rights of songs, which have to do with songwriting, as opposed to their recordings, which are controlled by a separate copyright. Publishing income has been seen as more stable, but it is also subject to shifts. Last year Ascap and BMI signed a new deal changing the method for how radio companies pay royalties. According to BMI’s most recent annual report, the change has already resulted in a 3 percent drop in revenues.

Mr. Peace said that like any investment, royalties involved risk, and that its buyers were given a significant amount of information for evaluation.

As for Mr. Glass, the sale has helped him buy new equipment for his studio, including a sitar and various vintage instruments, that will help him as he starts a new phase in his career.

“I wanted to be competitive, not only as a producer and writer but as an artist, too,” he said. “I wanted to invest in myself, to be able to use some of the royalties that I have built up, almost like real estate.”

Article source: http://www.nytimes.com/2013/04/22/business/royalty-exchange-lets-musicians-sell-royalty-income-to-investors.html?partner=rss&emc=rss

Bucks Blog: Looking for Alternatives to Safe Bonds

Paul Sullivan, in his Wealth Matters column this week, discusses higher-yielding, but safe, alternatives to United States Treasuries and other high-grade bonds. Those bonds have long been the favorites of older investors because they were a safe way to guarantee income. At the moment, though, they’re barely generating income.

And most anyone near retirement or already there has been wary of investing in the stock market, given the turbulence there.

So what other choices do older investors have? One alternative, Paul writes, puts aside four years of expenses in safe bonds, leaving the rest of the portfolio to grow. A second investor he spoke with avoids stocks and invests instead in real estate investment trusts, master limited partnerships (most often companies involved in the transportation of natural resources) and annuities.

What has been your investment strategy, given the low interest rates and a volatile stock market?

Article source: http://feeds.nytimes.com/click.phdo?i=5ef3e4b75b223295bc98aad87830009d

Off the Charts: Market Volatility Aplenty, and a Change May Be Afoot

Over the last three months, there has been day after day of wild swings in prices. Stocks soar when it appears that Europe will manage to work out a rescue plan for Greece. They plunge when it appears the world may be entering a double-dip recession.

But the Standard Poor’s 500-stock index has moved almost nowhere. An investor who spent the last three months in private contemplation, without any information about what was going on, could have emerged this week and concluded, from the stock market, that it had been a quiet time for all.

The accompanying charts introduce the concept of “excess volatility,” which is defined as the movements that were not needed to get from one point to another. Rather than focus on how many days had large moves, they look at how much a market backtracked during a 13-week period, or about three months.

Large amounts of backtracking occur rarely, and seem to come when the economy is changing course, confusing investors as to whether the old trend is over. As can be seen in the charts, excess volatility often rises when the economy is entering a recession — or leaving one. But it also can reflect changes in market structure and trading strategies that cause price swings until markets adjust to the new techniques.

The figures shown in the charts are calculated by comparing the net change of the S. P. 500 over a 13-week period to the total of daily moves.

The index closed at 1,260.34 on Aug. 3 and was at 1,237.90 on Wednesday of this week, for a net decline of 22.44 points, or 1.8 percent. But during that period, the total move of the index was more than 1,392 points, as it rose more than 684 points on good days and fell more than 707 points on bad days. That meant that the index traveled nearly 1,370 points more than it had to and that the excess volatility figure was 109 percent, the highest figure since 2009.

There were several violent swings of excess volatility during the Great Depression, but from 1940 through 1987 the figure never got as high as 100 percent. In early 1988, the excess volatility index peaked at 116 percent, largely because of the Oct. 19, 1987, crash, which caused a one-day drop of more than 20 percent in the index but proved to have little lasting economic impact.

The next time the index topped 100 percent was in late 2002, as the market was reaching its lows after the collapse of the technology stock bubble in 2000 and 2001. Then in 2008 and 2009, it climbed to new post-Depression peaks as share prices approached a low after the credit crisis led to a deep recession.

Much of the downward volatility of the last three months came on speculation that a new recession might be starting. Moves upward, meanwhile, came when economic optimism rose. The high level of excess volatility could signal that the economy’s recent slow growth is due to change — but it is not clear what that change might be.

Floyd Norris writes about finance and the economy at nytimes.com/economix.

Article source: http://feeds.nytimes.com/click.phdo?i=b022004bfdb33bc0b6dcc4262c291b9a

Business Briefing | ACQUISITIONS: Interest from Icahn Propels a Gain in Oshkosh Shares

The investor Carl C. Icahn reported a 9.5 percent stake in the Oshkosh Corporation, a specialty truck maker, and said he was seeking talks with the company to enhance shareholder value, setting off a 14 percent gain in the company’s share price on Friday. Oshkosh, which makes tactical vehicles for the military and specialty trucks for construction, is the latest diversified industrial and military company to be the focus of activist investors for a breakup. Stock in the company, which also makes fire and emergency equipment, rose $4.01, to $32.95 a share. Oshkosh said in a statement late on Thursday it was open to dialogue with shareholders, adding that the company believed Mr. Icahn’s investment was “evidence of his belief in the value of the company.” Mr. Icahn held 9.51 percent of Oshkosh shares as of June 20, according to a Securities and Exchange Commission filing on Thursday.

Article source: http://feeds.nytimes.com/click.phdo?i=cab3cf82a21ab6b02565b06b911ae815

Bucks: Tips on Choosing a Financial Adviser

In his Wealth Matters column this week, Paul Sullivan discusses a new firm, Spring Reef Partners, that will screen and select financial advisers for wealthy families. The questions that Spring Reef asks — how does a financial advisory firm handle problems that arise, how much experience does an adviser have, among others — are good questions, no matter the amount of money an investor has.

Paul also discusses the big mistakes that investors make, including listening to friends and family for advice, rushing the process of choosing an adviser and relying on a name brand firm.

Are you happy with your financial adviser? How did you go about choosing that adviser? And do you have any advice for others who may be thinking of getting back into the markets?

Article source: http://feeds.nytimes.com/click.phdo?i=077a78ffe0142fdb76c2e77b39ae1dac