As a songwriter and producer for stars like Natalie Cole, Aretha Franklin and Whitney Houston, Preston Glass receives a comfortable stream of music royalties. But when he needed to make a substantial investment to embark on the next phase of his career — as a performing artist in his own right — he had few options to raise the money, he said.
“Me and most writers can’t walk into a bank,” Mr. Glass said in an interview from his home studio in Los Angeles. “Banks don’t understand how songwriting works, how the whole business of royalties works.”
So Mr. Glass turned to the Royalty Exchange, a Web site where musicians can sell parts of their royalty income to investors. He put 15 of his songs on the block — including “Miss You Like Crazy,” a Top 10 hit for Ms. Cole in 1989, of which Mr. Glass was a co-writer — and raised $158,000. Mr. Glass retains most of his rights to those songs, but will now share part of the income with an investor whenever they are played on the radio or streamed online.
Since it was founded two years ago, the Royalty Exchange, based in Raleigh, N.C., has held 18 auctions, raising about $750,000. But Sean Peace, the company’s chief executive, envisions it as a robust marketplace where musicians can capitalize on their work and investors can find a somewhat exotic asset that could still bring in steady earnings.
“Most musicians have no idea that they can take their royalties and reinvest in themselves,” Mr. Peace said. “If they could get $80,000 up front for selling 50 percent of their royalties, that can be game-changing.”
The music industry is full of bitter stories of musicians who have given up royalty rights for a fraction of their future value. Eli Ball, the founder of Lyric Financial, a competing service that gives musicians short-term advances on their royalties in exchange for a fee, thinks that musicians should not sell their rights.
“It’s too easy for songwriters to sell off an asset that took you a career to build and is going to be gone forever,” Mr. Ball said.
But Mr. Glass said he liked the Royalty Exchange because he could define exactly which rights to sell and which to retain. His sale involved what is known as the songwriter’s share of public performance; it does not cover sales of CDs or downloads, and it does not involve any change to the song’s actual copyright. (He also is a national artist representative for Lyric Financial.)
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