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Illustration by Sean Parsons.

Royalty Exchange Wants to Make Music the Future of Smart Investing

Will the Denver company's new web portal make buying music royalties mainstream?

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A Grammy-nominated producer who’d worked with artists such as Ariana Grande, Rickey “Slikk Muzik” Offord appeared to have a fruitful music career ahead of him. Then, surgery complications left him in a coma for 33 days. When Offord awoke, he faced a long recovery and a mountain of medical bills with no obvious way to pay them—until a fellow producer mentioned Royalty Exchange.

The Denver company is essentially an online marketplace for musicians, producers, and managers hoping to sell or get advances on future royalties. In Offord’s case, Royalty Exchange calculated his catalog’s projected 10-year earnings and helped him auction a portion of it to investors. While it might sound as if Royalty Exchange took advantage of Offord, especially because the company typically keeps 15 percent of the final sale price, the producer doesn’t see it that way: “Not having to worry about money let me focus on getting better.” After recovering, Offord went on to produce music for the Emmy-winning television show Atlanta.

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Royalties have long been bought and sold, although such transactions typically required industry connections. “The deals can get complicated,” says Antony Bruno, director of communications at Royalty Exchange. “Investors have usually needed a ‘guy’ with insider knowledge to guide them.” (Artists typically didn’t have a good understanding of the complex web, either, and had little control over the transaction.) But when investors do get their hands on profitable royalties, they can represent a safe investment. After all, if the stock market tanks, people are still going to stream Nathaniel Rateliff & the Night Sweats’ “S.O.B.”

$230,000: The biggest royalty catalog sale to date made through Royalty Exchange (the cheapest went for about $7,000)

Royalty Exchange, founded in 2011, says it’s one of the first companies to simplify the transaction: Beyond what it does for sellers like Offord, the firm also helps the winning bidder close the deal with the artist, even handling the paperwork. Over the past three years, Royalty Exchange has facilitated more than $53 million in sales. That includes deals for songwriters (like Tiffany Fred, who’d penned tunes for Jennifer Hudson) trying to start solo careers as well as industry veterans (such as Ed Bicknell, a former manager for Dire Straits who unloaded his royalties).

In February, Royalty Exchange streamlined the process further by launching the beta version of Order Book (it’s currently available to any seller; investors must be invited). Think of it as E-Trade for the royalty business. Musicians add their work to the web-based platform, and invited investors can filter their searches using certain details—like the price, average age of the songs, and how the catalog performed in the past—before clicking a button to make an offer. If the artist accepts, the platform facilitates the sale. Investors can even input the type of catalog they’re after and Order Book will alert them when such work becomes available—a notification almost as exciting as news of your favorite band dropping a single. Almost.

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