\n\tSound Royalties has been <\/strong>a resource for the music industry for 10 years, advancing money to artists, songwriters, producers and other entities against their royalty income streams. And if there is one message that the company consistently emphasizes, it\u2019s that Sound Royalties doesn\u2019t use clients\u2019 music rights as collateral, so it can never secure ownership of those rights.<\/p>\n \n\tIn Sound Royalties\u2019 parlance, instead of loans, the company primarily provides advances, and recipients of those funds are collectively referred to as \u201ccreatives.\u201d<\/p>\n \n\tSound Royalties also makes clear that it doesn\u2019t charge interest; instead, advances come with fixed fees expressed in dollars. The company also doesn\u2019t charge late fees, and a client\u2019s credit rating doesn\u2019t factor into any deals because the advance is repaid from one or more of a client\u2019s income streams.<\/p>\n \n\tContrary to standard music industry practice, Sound Royalties doesn\u2019t require 100% recoupment from the income streams until the advance is fully paid off.<\/p>\n \n\tDepending on the deal, the company may only take some of the royalties of an assigned income stream from one of the creative\u2019s music companies \u2014 labels, distributors, publishers or collection rights organizations, which are collectively known as \u201cpayors,\u201d according to Sound Royalties \u2014 and it will pass through the remainder of income to the client.<\/p>\n \n\tSince 2021, Sound Royalties has been owned by GoDigital Media Group and the investment firm MEP Capital.<\/p>\n \n\tAlex Heiche, with a background in software for high tech and in special finance firms, founded the company in 2014. As he explains, Sound Royalties is not \u201ca label, publisher or distributor. We don\u2019t replace them; we work in concert with them.<\/p>\n \n\t\u201cSo when creatives come to us, we provide the financing, but they stay with these excellent companies that they\u2019ve chosen to work with,\u201d he says. \u201cAnd we\u2019re not taking a percentage of future income. The advance is a fixed dollar amount for a fixed period of time. We\u2019re obsessed with transparency.\u201d<\/p>\n \n\tCompany executives also emphasize their pursuit of a relationship-based business.<\/p>\n \n\t\u201cPart of Alex\u2019s original vision is we really try hard to create relationships,\u201d says Sound Royalties president Michael Bizenov, who joined the company in 2018 after a career in consumer banking and mortgages. \u201cWe\u2019re not here just to do transactions. They are important to us, yes, because it\u2019s a way to grow a business. But we want to do it in a very healthy way.\u201d<\/p>\n \n\tThat\u2019s also why in times of industry turmoil, like during the pandemic, Sound Royalties set up funding pools for cost-free advances to creatives in need.<\/p>\n \n\tAlso, the company believes in helping creatives beyond financing deals.<\/p>\n \n\t\u201cWe [meet] with all levels of creative people, including those who may be starting their career,\u201d Bizenov says. \u201cSo we\u2019re very committed to doing financial-literacy seminars. We also are talking to the most sophisticated creatives and their business teams and helping them meet their financial goals.\u201d<\/p>\n \n\tIn the beginning, how did industry companies react to the advances you were proposing?<\/strong><\/p>\n \n\tAlex Heiche:<\/strong> Sound Royalties was launched with the vision to provide artist-friendly funding using creative-friendly funding solutions. So initially, we did advances from [income streams from performing rights organizations] ASCAP and BMI, and then we slowly evolved from there, adding SESAC, and then we started adding publisher, label and distributor transactions. In 2018, we did our first international transaction with PRS [for Music].<\/p>\n \n\tMichael Bizenov: <\/strong>Today, we\u2019ve expanded to working in 18 countries and on three continents with over 160 payors around the globe that are sending payments to us to service their clients, and we\u2019re onboarding new [payors] every month.<\/p>\n \n\tDid music companies first see you as adversarial to their relationships with their artists and songwriters?<\/strong><\/p>\n \n\tHeiche:<\/strong> Payors see that we\u2019re not taking their \u00adclients. We\u2019re not getting in the way of their business. We don\u2019t do distribution, nor publishing; we\u2019re not a label or a collection society. We stay in our lane, providing financing. We\u2019re there to facilitate something and ease the process, so we have good relationships on the payor side and on the creative side.<\/p>\n \n\tWhat\u2019s the source of your funding?<\/strong><\/p>\n \n\tBizenov:<\/strong> We have bank lines [of credit]. Since early last year, we have more than doubled our access to bank financing. We also self-fund some things out of our profits. And we have access to two additional lines of private capital if we need it.<\/p>\n \n\tDid you have bank lines when you started out?<\/strong><\/p>\n \n\tHeiche:<\/strong> No, it started off with funding [from] the balance sheet and growing from there. We pioneered this type of financing and advances. So it took time to build a track record to be able to walk banks through it.<\/p>\n \n\tWhat kind of income streams do you like to focus on when making advances?<\/strong><\/p>\n \n\tHeiche:<\/strong> Creatives are earning a lot of different income streams, and we work with most of them. As the industry continues to evolve, we expanded beyond sound recording and composition [income] and started doing YouTube [income] financing for advances.<\/p>\n \n\tWe are now even in entertainment production financing. We do tour financing. We even offer bridge financing for creatives looking for a very short-term solution as they\u2019re maybe selling a catalog.<\/p>\n \n\tDo you put together custom deals for each client or offer a menu with options?<\/strong><\/p>\n \n\tHeiche:<\/strong> The beauty of our model is it\u2019s a bespoke, white glove customer service. Every creative and every company entity that comes to us for financing gets to speak with a live person that understands what their needs are and develops options for them to review.<\/p>\n \n\tYou don\u2019t require documentation like tax returns or W2 forms with an application. How else are your advances different from a bank loan?<\/strong><\/p>\n \n\tHeiche:<\/strong> The advance is based strictly on their royalties and projections of those royalties. We provide a one-page summary sheet so they can see the fixed cost in a fixed dollar amount for a fixed period of time. If it takes longer, there are no late fees or penalties. The same if payment comes in sooner.<\/p>\n \n\tWhat are the minimum income streams and maximum advances that you work with?<\/strong><\/p>\n \n\tHeiche:<\/strong> We try to help as much of the industry as we can, and that\u2019s why the bar is as low as it is. Right now, the baseline for both is $5,000 per year per royalty stream. But we go over $10\u00a0million for advances.<\/p>\n \n\tYou\u2019ve said that building relationships is an important part of the Sound Royalties business plan. How does that help grow your business?<\/strong><\/p>\n \n\tBizenov:<\/strong> A big part of our business comes from referrals, and that\u2019s something that we work hard on. \u201cCustomer service\u201d is a mantra in our company because it\u2019s the right thing to do and it also grows the business.<\/p>\n \n\tWe love the referrals that we get from the managers, business managers, attorneys and companies that are out there. It\u2019s very flattering to us and very reinforcing.<\/p>\n \n\tIn making advances, how do you calculate risk?<\/strong><\/p>\n \n\tBizenov:<\/strong> There are probably about 12 or 14 inputs that go into our [analysis]. It\u2019s the things that you would imagine: What is the depth of the catalog? Is 85% of the income coming from two songs \u2014 [which] is pretty risky \u2014 or is it something that\u2019s more spread out? Is [a work] evergreen and out there for a lot of years so you can trace the performance, or is it something that\u2019s relatively fresh? Based on that, we then come up with a risk analysis and a price.<\/p>\n \n\tDoes your recoupment come from all streams, or do you choose to be paid back from one or two streams? And do you take 100% recoupment or only a portion?<\/strong><\/p>\n \n\tHeiche:<\/strong> We can focus on specific streams that make the most sense and help a client achieve what they\u2019re trying to accomplish [in terms of cash flow]. Does the client want to pay us back in one year or five years? If it\u2019s five years, for example, we may take less of their income stream per year, or it\u2019s one year we may take more. Either way, the rest [of the income] we pass through to the creative.<\/p>\n \n\tWhat is the average type of advance deal in terms of timeline and recoupment?<\/strong><\/p>\n \n\tBizenov:<\/strong> We\u2019d rather see somebody do [deals] more conservatively and make sure they get a chance to get their cash flow. That is why we have a very high return rate of customers who come back to us for more than one deal.<\/p>\n \n\tAs for deal terms, the average is three to five years. We can go longer and we can go shorter, but that\u2019s where the median would lie.<\/p>\n \n\tWhat is the value of advances that Sound Royalties made last year?<\/strong><\/p>\n \n\tHeiche:<\/strong> As a private company, there are some limitations on some data that we can give out.<\/p>\n \n\tCan you talk about growth?<\/strong><\/p>\n \n\tBizenov:<\/strong> Our monthly volume is growing by 50%. We\u2019re pretty proud of our level of growth.<\/p>\n \n\tYou have also alerted artists and the industry about royalties that weren\u2019t paid to them. How does that play into your business model?<\/strong><\/p>\n \n\tHeiche:<\/strong> When a creative comes through our door, our royalty specialists say, \u201cOK, so you\u2019re a songwriter. Who do you collect your writer\u2019s share from? Who does your publishing or administration?\u201d We just start to have that conversation.<\/p>\n \n\tAnd quite often we find that creatives aren\u2019t collecting on all the income streams that they should be, so then we point them in the right direction. We\u2019re constantly working with creatives ensuring that they understand the various income streams that they\u2019re entitled to receive.<\/p>\n \n\tBizenov:<\/strong> There are nuances. It\u2019s fractionalized, for lack of a better term, because the incomes come from all different directions. So it\u2019s easy for things to fall through the cracks sometimes.<\/p>\n \n\tYou have said that providing clients with transparency is very important. How else do you show this?<\/strong><\/p>\n \n\tBizenov:<\/strong> The day before the funding is scheduled to take place, we have a separate department that gets on the phone with the end user and walks through the mechanics of the deal. That team is trained so that if they sense hesitation or lack of understanding, they stop the process to make sure that the creative understands every aspect of how it works, what\u2019s coming, what\u2019s owed.<\/p>\n \n\tOur biggest nightmare isn\u2019t not getting a deal; it\u2019s somebody out there saying, \u201cHey, [Sound Royalties] didn\u2019t tell me everything.\u201d<\/p>\n \n\tAre you saying your reputation is more important than doing deals?<\/strong><\/p>\n \n\tHeiche:<\/strong> We\u2019ve developed a reputation through the years of being the good guys, and that\u2019s from things like this independent compliance department having a call with the creative walking through everything to ensure that there\u2019s transparency. If people have great things to say about us, that\u2019s because of our transparency.<\/p>\n![\"Players,](\"https:\/\/www.billboard.com\/wp-content\/uploads\/2024\/11\/players-sound-royalties-billboard-2024-bb17-1-1240.jpg?w=801\")