The Truth About Advances In The Music Business

As with all entrepreneurs, songwriters are likely to run into issues with cash flow, to which getting an advance is one solution. Unsurprisingly such advance payments, while they do provide much needed cash on hand, come with a number of strings attached, and aren't always the best option.

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Guest post by Frances Katz of Soundfly's Flypaper

Like any new entrepreneur, songwriters may themselves experience cash flow problems and look for additional financing to keep the lights on. However, unlike businesses that have inventory to put up as collateral, songwriters have only their intellectual property and the royalties that property can earn. This limits the options from traditional banking sources and requires songwriters to seek out alternative funding that’s available as an advance against royalties or from selling some rights in exchange for quick cash.

As tempting as an advance offer might be, though, it is not free money — advance deals all come with strings attached that could be harmful to your professional career and financial life if you’re not careful and clear-eyed about the process. Here’s some info to help you decide whether an advance is worth it for you to take.

Music Publisher Advance

It used to be that the only way for songwriters to get financial support for their craft was via a music publishing deal. Advances were offered as part of a deal that required the songwriter giving up a percentage of their royalties in exchange for industry support, royalty collection and financial assistance.

Beginning songwriters should be aware that the advances they receive are an advance against future royalties. The publisher won’t pay any additional royalties from your songs until the advance has been recouped. Songwriters who have or who are considering a music publishing deal should know that not all advance arrangements are created equal. Consult with an attorney or a qualified professional you trust to help you negotiate the best possible advance.

Private Advance

Another option for struggling songwriters is a private advance company. These companies offer advances to songwriters who have a threshold amount of annual royalty income with the promise of returning their rights when the advance is repaid. However, this type of loan typically comes with high interest rates and stiff penalties for non-payment. This can lead to many financial problems in the future and saddle the songwriter with debt for many years.

Back Catalog Auctions

Even though the music industry is littered with cautionary tales of legendary songwriters who signed away their rights, it still exists as an option for songwriters with a back catalog of valuable songs. Songwriters in need of quick cash can contact companies like Royalty Exchange who will auction off some or all of their songs to the highest bidder. Publishing companies also often purchase portions or entire catalogs from writers for large sums of money.

Some songwriters say they have received amounts equal to a ten-year advance on royalties. The money has been used to take their career in a new direction, buy new equipment or fund a tour or music video. However, not everyone may have a roster of songs that will sell for enough money to pay the electric bill. Keep in mind that once you sell your rights to your intellectual property, you waive your right to collect any future royalties it may generate.

Crowdfunding

In an increasingly DIY industry, crowdfunding is also talked about as an option to raise money for working capital to fund new projects. Songwriters and musicians have used platforms like Kickstarter or Patreon to promote projects they believe in and offer incentives, such as a thank you in the liner notes to a copy of the finished album to fans and investors who donate to make their vision a reality.

Kickstarter says over 26,000 music projects have been funded through their service from the not so famous to the extremely famous such as Amanda Palmer. It’s also an option for DIY artists who don’t necessarily want to be tied to a record label or music publisher and you don’t have to sign away your rights in exchange for cash. But unless you have a loyal fanbase or are willing to commit yourself to a marketing and publicity campaign to draw attention to your project, the odds of success are variable. And while you can fund new projects, it’s not a platform for raising quick cash. [If you want to improve those odds, check out our free course, Crowdfunding for Musicians.]

The Truth

The truth behind advances is simple — they’re situational and the pros/cons should be heavily considered before making a decision. As alluring as they may seem, and as much of a fix as they might bring to your financial situation, the fix is short-term. Be sure to weigh the need versus the want so you’re not stuck in an even trickier financial situation in the future. If taking an advance makes sense for your situation and career, go for it!

Songtrust does offer pipeline advances, on a case-by-case basis. If you’d like to request a royalty advance consultation, submit a request here. Note this is not a publishing advance, but instead an advance on royalties in your account. Click here to register for Songtrust, and use promo code STSoundfly for 10% off!

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Frances Katz began her career writing about MTV and Napster. Now she writes about technology, music, business, and culture for a variety of publications including The Week, The Atlantic, Paste, The New York Times, Ploughshares, and others. She lives in Atlanta, but you can keep up with her on Twitter.