Crowdinvesting in music royalties

Crowdinvesting in music royalties

Liveamp, based in New York, enables peer-to-peer investments in music through royalties and other structures. Market situation In 2015, for the first time in last 15 years, music industry globally registered a growth of 3.2%. Total digital sales contributed 45% of industry revenues, overtaking physical’s 39% share. Digital revenues rose by 10.2% to US$ 6.7 […]

Crowdinvesting in music royalties

Liveamp, based in New York, enables peer-to-peer investments in music through royalties and other structures.

Market situation

In 2015, for the first time in last 15 years, music industry globally registered a growth of 3.2%. Total digital sales contributed 45% of industry revenues, overtaking physical’s 39% share. Digital revenues rose by 10.2% to US$ 6.7 billion. But there is still an elementary weakness underlying this recovery. Music is being consumed at record levels; however, this explosion in consumption isn’t returning a good remuneration to artists and record labels. Thanks to a market distortion leading to a “value gap”, artists and labels are being deprived of a fair return for their work.

This gap is particularly acute for young artists looking to establish themselves. Money needs to be spent on marketing the talent before it can start producing returns. The market needs investors who can take the risk of introducing talent to the world. Though patrons have been doing this for centuries, the internet has the power to amplify the process. This opportunity was the driving force behind the inception of Livamp.

Company history

Livamp is headquartered in New York and was founded in 2015 by Andrew Kotliar. Andrew was an investment professional at private equity giant Centerbridge Partners and has had stints with Goldman Sachs and Citigroup. The startup was able to raise $300,000 in seed funding in August 2015 and is planning for a Series A fundraising in the near future. For the investment, it is considering strategic partnerships in media to leverage relationships. It describes itself as a content-driven artist service platform, which is helping the artist all over the world to accelerate their careers. Livamp offers an opportunity to investors for investing in emerging talent by getting a minority share of rights for fixed period of time and with their professional and qualified services they are helping the artist to achieve their career goals. Through their 3 global hubs- London, New York and Lisbon, Livamp is connected with over 20,000 artists annually through 50 curator partnerships.

From record labels on online investing

Long before Livamp was founded, investors have been investing in record labels, publishers or in any other entertainment industry, through direct investment in copyright, publishing deals or other related deals. Livamp amalgamated those different approaches in refined packages and invited people in different organizations and high net worth individuals to invest in it. It provides different types of rights to the investors in exchange for money invested by them.

  • Recorded music rights and royalties
  • Publishing rights and royalties
  • Live music and connected revenue
  • Sponsorship

Traction

As of now, Livamp has $2 million in investment opportunities, out of which 75% has been either completed or in-progress and other 25% are new or unfunded yet. Usually, on average 8 investors are involved and a minimum $500 needs to be committed by an investor. The average size of the deal is $25,000 for 25% rights and for a period of 5 years. For the young artists, the deal size is usually small, ranging from $5,000 to $10,000. The biggest deal by far registered by

The biggest deal by far registered by Livamp is $250,000 for a single artist. It also does portfolio management by partnering with record labels and usually, the deal size is bigger. Depending upon the contract, artists usually have to forego 15% to 40% of their rights. The term of the contract is negotiable as well and it can range from 5 to 10 years. Livamp is not trying to revamp the nature of contracts which are prevalent in the music industry; it is merely copying the structure which is all equity and no debt.

Livamp contracts are no obligation contracts and there is no clause of mandatory repayment. Its business model is similar to that of an online crowdfunding startup but in a different category altogether. It charges admin fees, leads generation fees, and success fee on closing a deal.

Deal structure

Since investors are investing in young unknown artists; there is no surety of returns on their investment. Returns vary a lot, from a total loss to a multi-bagger depending on the artist. A major portion of the money raised by the artist is spent on marketing. Even though Livamp is relatively a new platform and has limited data, but the pool of artist it has are high caliber, passionate and driven, hence a properly constructed portfolio by astute investors can reap rich returns for them. The team at Livamp goes to great lengths to make sure it covers each and every aspect of risks involved with every single investment. As many of the artists are young, they bring in their parents or guardians to initially invest. In most of the deals, 50% is invested by their parents or friends and rest is invested by other buyers.

Livamp online platform is merely used to provide information to the interested investors about the terms and the artist which are available but apart from that all the deals are structured offline. For artists, Livamp plays the role of a guardian. All the finances are handled by Livamp, artists provide the budget required by them, service providers they need and Livamp channel the funds in those areas. This enables transparency throughout the whole process.

The future of the music business

Warner Music Group, one of the biggest music companies in the world, released its quarterly financial statement and it recorded a 10% increase in revenues along with the improvement of other headline financial numbers. Andrew believes this heralds the turning point for the music industry. With crowdfunding and startup investing entering the mainstream, more and more investors will want to invest in raw talent at an early stage and Livamp with their pool of talented artist are well placed to cater to the demand.

Author: Heena Dhir and George Popescu

George Popescu