The Pandemic Has Changed the Way Musicians and Investors View Royalties
Steve Jordan is a drummer who started his career as a studio musician in high school during the 1970s. He was already performing with “Saturday Night Live” and touring with The Blues Brothers at the age of 19.

He said that he realized quickly that music was not enough to make him financially successful. He would have to be in control of that music.

Mr. Jordan, now 64, said that he knew from an early age that he couldn’t have it all and still be a successful musician. Many musicians don’t get paid the right amount. They don’t get royalties if they are just being hired to perform on a song. They are not composers and don’t receive royalties, even though the songs they played were their contributions.

In 1989, he signed a copublishing deal with Warner Chappell Music. This is a music publishing company. He said, “That allowed me to get better royalty streams.”

When the pandemic decimated live performance and most in-person collaboration among musicians, Mr. Jordan had an advantage — his publishing rights, other royalty payments, and he was able to borrow against them, which allowed him to continue investing in his music production company.

Musicians have been paying royalties for years. The majority of royalties paid to record labels were taken by the majors. The shift to streaming, which increased audiences but severely reduced revenues, further reduced the earnings of many musicians.

The Pandemic Has Changed the Way Musicians and Investors View Royalties

Further chaos was caused by the pandemic. Artists were forced to rethink their financial management after losing live performances. Some artists came up with new strategies for controlling their royalties. Investors have also embraced royalties as an asset, recognizing them as a new type of asset. They’ve been buying the rights of artists who would rather not be a part of the streaming royalty world.

Mona Manahi (managing director and chief financial officer services) at Geller Advisors said, “We have clients that have been looking at royalties in different manners.” “We have artists looking to buy back their masters to retain rights that were previously owned by record labels or publishers. Some clients are also looking to sell their music rights.”

There are large funds like Hipgnosis that pool capital to purchase entire music catalogs. Companies like Lyric Finance can advance artists’ cash to cover a few years of their royalties while allowing artists to keep ownership.

Mathew Knowles (music executive, father of Solange Knowles and Beyonce), said that Hipgnosis has made a significant impact on the industry in the past 24 months. “That company changed the industry around selling royalty rights.

Hipgnosis was able to invest money before the pandemic. This gave it the flexibility to purchase rights to songs from musicians that suddenly were not making any money.

“Touring is the No. 1 income for artists,” Mr. Knowles stated. “Touring is the No. 1 income for artists,” Mr. Knowles stated. “No one predicted an end to performing, and it would be 18 to 2 years before it came back.” Even A-list performers and big acts with huge overhead are having trouble.”

The artist will determine the number of royalties. It also depends on the type of royalties. According to Mr. Knowles, selling master recordings can fetch between 10 and 14 times the annual royalties stream. However, publishing rights can go for 18 to 22 times. A two-fold advance is typically paid back.

He said that the music genre is also important, with artists from rock fetching higher than artists from hip-hop or R&B due to the larger audience they draw.

It can be difficult to figure out what to do as an artist or to value royalties. Streaming has changed the economics and value of music royalties.

Lyric Financial’s chief executive Eli Ball said that artists would get $1.50 to $1.50 for each record when they used to sell them. Streaming only a fraction of this amount. Another way to put it, an album selling one million copies earned an artist between $1 million and $1.5 million in royalties. However, one million streams of songs from that same album earn the artist around $3,500.