Are Institutional Investors The Future Of The Music Business?

Q Prime management is experimenting with a new form of investing for its Grammy-winning band Cage The Elephant.

With a co-publishing deal (which includes mechanical, public performance, sync, and print royalty streams), Cage The Elephant is the first to take part in a new offering from Royalty Exchange, which began offering royalty financing opportunities with iconic catalogs today (July 24).

Called Private Syndicates, Royalty Exchange creates Special Purpose Vehicles (SPV) designed to hold music catalogs from those top-tier artists. For Cage The Elephant, Royalty Exchange agreed to purchase the co-publishing catalog of the band’s first four studio albums, including the 2017 Grammy-winning Best Rock Album Tell Me I’m Pretty (2015), the Grammy-nominated Melophobia (2013), Thank You, Happy Birthday (2011) and their self-titled release (2008).

Accredited investors can then buy shares of that entity, which grants them a proportional share of the royalty income it generates. For Cage The Elephant, 40 individual and institutional investors participated, attracted by the potential for double-digit yield (based on the catalog’s five-year compound annual growth rate, industry growth projections, the catalog’s cash flow and other factors).

“We expected strong demand for this incredible catalog, but we were taken aback by how fast investors reacted,” said Royalty Exchange CEO Matthew Smith.

Currently, the band’s catalog is administered and publishing is co-owned by Sony/ATV, which is expected to continue in that role, notes Billboard.

The magazine goes on to explain that the “accredited and institutional investors” able to invest include Wall Street financial institutions (bank, investment bank, insurance fund or investment advisors), a pension fund, a charitable organization, trust, or corporation (with assets exceeding $5 million) or an individual (with a net worth of more than $1 million, excluding the value of that person’s home).