Yesterday, Mr Eazi stated in a couple of tweets that he would like to give his fans the opportunity to buy shares of his unreleased songs giving them equity in his sound. This surprised a few as they wondered how this relatively new business model would play out. The norm has been for investments to be done in record labels via debt or equity with profit making from streaming platforms, record sales e.t.c. This means that this time, profit would be made off royalties from the song rather than investing in a record label. Lets dive a little into what all this means, the processes involved and the benefits this rising business model offers both the artist and investing fans.
Equity shares are a means of finance sourcing for companies selling shares to the general public awarding it’s investors with voting rights, profit and can allow them claim assets of the company.
Music royalties are compensatory payments received by rights holders and their respective representatives in exchange for the licensed use of their music. The royalties are paid out by institutions usually Tv stations, radio stations, streaming platforms e.t.c that use the music. Royalties are paid for either Masters or Compositions, that is, the licensed use of sound recording and for the authorised use of sound composition committed to a tangible medium which could be a music sheet, notepad or even a line in a tweet.
There are diverse kinds of royalting; from streaming royalties, digital performance royalties, sync licensing fees to even public performance royalties. People entitled to royalties include; recording artists, labels, songwriters, distributors, relicensing companies and sync agencies, publishers and even collective management organizations. In Essence, Mr. Eazi’s proposed business model seeks to allow listeners into the sect of people who can profit off royalties.
Artists such as Drake, Beyonce,Jay-z, Justin Timberlake e.t.c have sold slices of their catalogues on Royal Exchange. “The premise behind Royalty Exchange is simple: depending on what the seller is offering, you bid for a percentage of a song, the entirety of a song, or a catalogue of songs, and receive quarterly royalty payments based on how much money the song/catalogue earned during that period. Depending on the deal, you will make money every time a song is streamed on Spotify, Apple, or YouTube, anytime it is performed live, anytime it is played on the radio.
You get royalties from use in advertising campaigns, film trailers, soundtracks, TV spots, whenever it is blasted over the speakers at an NFL game. As with any other stocks, you can buy low and take a chance on a relatively unknown artist, hoping they will blow up and fund your first yacht, or buy into a perennial best-seller and look forward to steady, solid returns.”
What’s in it for the artists?
The money generated will be used to cover overhead costs in music production. It allows artists to diversify both their risk (protecting against potential royalty shortfalls in the future) and income stream ( allowing artists use the money to invest in new revenue streams).
What’s in it for the investors?
Low barrier to entry, owning a portion of evergeeen music for life can be one of the paths to financial freedom.
There are however some issues to be clarified. How will IP evaluation be carried out for unreleased music? What happens if a song is taken off streaming sites due to either copyright infringements or artist cancellation due to some offensive behaviour say for example, sexist or racist comments or violent behaviour? What are taxation laws like around profits made this way? Will there be a fixed percentage or does it change with time? How do we ensure that the quality of the music is preserved and not just profit centered streams to ensure investors make back their money? How will people in the equity pool be managed? Will there be an opportunity for shareholders to exchange real-time information with Mr Eazi’s team? Till all these are figured out, it still remains murky waters to be threaded with caution.
Mr Eazi since 2016 has consistently been top 5 most streamed African artist. It is quite a brilliant idea for the artist as his streams are expected to go off the roof with increased retention of subscribers and help gain traction with streaming services, consequently increasing numbers and revenue. If this idea becomes more mainstream in Nigeria, becoming an angel investor finding fresh talent and investing in their songs for cheap before they blow up, if they do, will actually fetch you some serious bucks. It would be amazing to own some parts and make profit from timeless music, music ingrained from childhood . Imagine receiving royalties from Mariah Carey’s ‘All i want for christmas is you’, We would be smiling to the bank every festive season just as she does. Evergreens being a purchasable commodity to be floated on the stock market is sure a welcome development to the Nigerian music Industry. There is the however the possibility that not much profits may be made on some songs which come out as massive hits and dissapear as quickly as they came.
With music no longer physically selling, artist, labels and everyone in the music value chain have been forced to find new ways to make money and because of the rise of streaming platforms, It will lead to increased competition, sophistication and massive growth in the industry. It would also a testament to what can happen when creators and industries are allowed to operate freely without stifling laws and policies from the government. With the rise of platforms like vezt, this might soon become the new normal.