Selling future songwriting income for today’s money

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As much as the amended Indian Copyright Act has made an effort to safeguard – and assist in monetising – the rights of composers and lyricists, certain sections of the Act have been presently challenged in the Honourable Delhi High Court by certain record labels.

Under the amendment and, as per my understanding of it, off the revenues generated on the sale of a recording, 12.5 per cent is payable to the lyricist, and a similar amount to the composer. While the pros and cons of this payout can be debated by their creators and by record labels in India, a concept that has done — and is doing — its rounds in the West is raising funds by songwriters against their future income from royalties.
While it is obvious that songwriters — encompassing composers and lyricists — cannot walk into a bank and seek a loan based merely on their creativity, there are a few international agencies, such as The Royalty Exchange (TRE) who, through their website (www.theroyaltyexchange.com [2]), trade the songwriters’ potential future income (be it from online streams/downloads, radio airplay, or any other platform) to investors as against immediate monies payable to these songwriters.
Founded in 2011, TRE commenced its unique business model after identifying the need to create a centralised online platform for royalty owners seeking liquidity and for buyers seeking alternative assets that are stable and, yet, undoubtedly unique. But the operation is not cheap. Apparently, the company takes a 2.5 per cent from the buyer and between 5 per cent and 12.5 per cent from the seller, depending on the importance of the composer, size of the catalogue, current earnings, future revenue potential, etc.
The buyer is provided detailed information about each item placed on auction (including a historical record of royalty receipts) to enable the buyer to make an informed purchase. TRE’s marketplace is formatted in a way that the investor can buy and sell composer royalties when they want, and at a price they deem fit. Not much different from investing in the stock market. While this concept is certainly not by any stretch of imagination a conventional concept for investments, it certainly does appeal to those investors who think out of the box and want to invest in exotic assets. There is another popular entity in the market too, Lyric Financial (www.lyricfinancial.com [3]), which obtains a license from the songwriter, and pays for the usage/income for a limited period of time against making payment as a “loan” or usage fee to the songwriter.
One of the progenitors of utilising the concept of selling future royalties for immediate fund requirements was British musician David Bowie who, way back in 1997, raised an incredible US$55 million then by selling ten-year bonds based on potential income from his songwriting royalties. In fact, Bowie has been fortunate to earn even more monies in the recent past as a video of Canadian astronaut Chris Hadfield singing Bowie’s song, Space Oddity, from the International Space Station was posted online on May 12. In case you haven’t viewed it yet, the five-minute clip features Hadfield singing a modified version of the tune and strumming an acoustic guitar while floating through a space module, more than 200 miles above Earth. Bowie himself acknowledged the video by tweeting: “Chris Hadfield sings Space Oddity in space!”
By May 13, the video had more than 1.8 million views on YouTube, 3,000 comments on Reddit (www.reddit.com [4]), and was being widely shared across social networks. Because Hadfield’s vocals and guitar were recorded on the space station, some observers are calling it the first music video made in space.
While royalties — and its definition — can be intricate and often is, there is no denying that there are domain experts that not only understand the concept of royalties but, at the same time, can “trade” in them based on potential future income.
No doubt, there is no apple to apple comparison between India and the West (which is already a mature market as far as Copyright laws are concerned), but once the existing/amended laws and its rules and regulations are accepted/implemented in India, this initiative of raising funds against future royalties would be interesting not only for the composer, but also from the perspective of investors who look forward to making investments today as against reaping revenues/profits in future. A case of past representing a present for the future…