For all but the top percentile of musicians trying to make it in the industry, proper budgeting and management of funds are key to avoiding career ruining financial disaster. In this piece Eli Ball explains how to critically analyze an advance, and understand what sort of strings may be attached.
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Guest post by Eli Ball from the Tunecore blog.[Editors Note: This is a guest blog written by Eli Ball, CEO of Lyric Financial. TuneCore and Lyric Financial partnered in April to bring artists TuneCore Direct Advance.]A career in the music industry is like a ride on the steepest, curviest, most unpredictable roller coaster in the world. There are so many moving parts, some of which you can control and the majority of which you cannot. Being involved with the hits and magical moments is amazing, but most of us exchange that for a life of trying to get through the rejections, fair weather friends, politics and dry patches with little or no money. In today’s streaming economy 99.9% of artists, producers, musicians and songwriters make less than 25 grand a year from sales or performances of their recorded music. I am not talking about the one tenth of one percent that hit the lottery here. So budgeting and cash flow management are critically important to keep your head above water.Inevitably you will need some type of financing, be it a credit card, a loan or an advance. No shame here, it’s called LIFE. The problem is, as a self-employed music professional without significant assets (and probably some credit challenges), the banks won’t do squat for you and the finance companies and royalty advance companies will flat out take you to the cleaners. If you’re lucky enough to have a good relationship with your publisher, label, PRO or distributor, it’s still a big hassle to get an advance out of them and it always comes with strings attached.So here are some words of wisdom from someone who’s been there:- Make sure you understand the deal…all of it. The devil is truly in the details. Finance companies are in business to make a high rate of return on their money (25%-50% or higher). Why? Because they are a low volume business and they are not regulated like banks. Oh, and most are EGB’s (egregious greedy bankers), not music people. Rather than tell you upfront what the total cost of your advance will be they hide the true costs with smooth talking salespeople, (wolves in sheep’s clothing), and in the complex language of their agreements. Here’s an example:
- 10% for what term? Every three months, six months, or year?
- Is that a flat one time 10% fee or does the interest rate compound?
- Are there any other fees charged for the advance (administrative, processing or legal fees)? Normally the answer will be yes.
- What happens if the earnings on your catalog go down (which they eventually will)? What rights are you pledging?
- Know who you are taking the money from. Ask your performing rights organization (PRO) (ASCAP, BMI or SESAC if you’re in the U.S., or the equivalent if you don’t) if they know XYZ company. The finance company will say they work with all the major royalty organizations, but that’s not to say that those same performing rights organizations will actually give them a good reference. Your PRO is your advocate and will look out for you. Also, do your homework. It’s as easy as Googling the company and the management of the company. While these finance companies have a great pitch and website, most have no real ties to the music industry. They simply try to look the part. In Nashville, we call them carpetbaggers.
- Don’t be rushed and do NOT sign anything without having your attorney or someone you trust review the advance agreement. Whether you’re dealing with recording or promoting a new album, trying to keep your head above water or some kind of personal emergency your primary concern is getting the money you need as soon as possible. And this is exactly when you are most vulnerable, where emotion can trump reason. It is imperative that you take the time to properly review the paperwork you are signing. If there is anything you do not understand and there absolutely will be then ask your attorney or a professional friend to explain. And for God’s sake, save a copy of everything you sign.
Eli Ball is founder and CEO of Lyric Financial. Founded in 2007, Lyric Financial is a financial services and technology company that provides innovative financing solutions (advances, loans, and more) to the global music industry. The company’s latest innovation, a virtual ATM platform, empowers creatives to tap into their catalog earnings in less than a minute. Lyric Financial announced a partnership with TuneCorein April 2017, offering artists use of the vATM through TuneCores Direct Artist Advance offering. Based in Nashville, TN, Lyric Financial will be announcing more partnerships soon. For more information about advances, loans, and the vATM, click here.
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