SongVest Reinvents Music Business, Allows Fans to Earn Royalties

"What we've done is we decided to allow you to buy something that's never been bought before off the market. And that is owning a piece of [an] actual song," SongVest creator Sean Peace tells Noisecreep. "And by owning a piece of the actual song, we mean that we loan a portion of the writer's share or -- the artist's share if the artist was also the writer -- which allows you to receive income from that song."

Sean Peace isn't exactly a household name and he really doesn't have a music background, but he's about to change the entire industry. How? As President of SongVest, Peace is letting "super fans" in on a part of the music industry that was once available only to musicians themselves: song rights. In fact, SongVest is the world's first (and only) song-rights auction house. Basically, this means any average Joe can cash in on song royalties - as long as the price is right. But how does winning an online auction translate to a regular royalty check?

"The income is derived from whatever the seller is selling," Peace continues. "It could be based on mechanicals when a CD is sold or it could be based on performance like when it's played on the radio."

While there are definite benefits for fans to buy into SongVest's business model, it's even better for artists. While many writers and musicians see their royalty checks dwindle because of constant theft, SongVest offers another avenue to earning a living from music.

Peace continues, "People are looking at multiple ways in which to monetize the songs that they have. And this is one more way to do it but instead of the avenues that a songwriter or artist had in the past. If they wanted to and if they were successful enough, then they could package up all their songs together into a catalog and sell that catalog to a publisher. There's actually financial investors out there that would purchase this as well. But at the end of the day, more than likely it was to someone within the industry. And they would purely look at that purchase as an all or nothing financial multiple. So there wasn't a whole lot of options for songwriters. [For less successful writers], people wouldn't even look at it because they'd say 'It's too much trouble for me to even look at your catalog, it's not generating enough money.' So even that market was very limited. And when we came along, we really offered the artists something they never had before: the ability to not only just sell one song but to sell only a percentage of the song. So then if it does get cut again, re-sang in a commercial or put in a movie, or re-released, that they would still continue to have all of the upside because they've only sold a small portion of it."

But what about metal bands? Of all the genres of music, heavy metal has some of the most rabid and loyal fans. While SongVest is still waiting for its first big metal band, the company does have a strong relationship with 80s glam rock group Stryper. In fact, a Stryper tune was at the center of the very first SongVest auction three years ago. Now, SongVest is gearing up for another Stryper auction. This time, the company will auction rights to an all-new release plus an in-studio experience with the band. The Christian rock outfit is hard at work on an album of metal cover tunes and will include the original track 'God' on the release. Stryper frontman Michael Sweet will offer a certain percentage of his writer's share for the new song.

While SongVest isn't the most expensive piece of memorabilia you can own, it's not the cheapest either. Songs are set at a reserve price, anywhere between 10 to 20 times the multiple of average annual royalty earned. Auctions need to meet the reserve to satisfy the seller and some titles can easily fetch several thousand dollars. With that kind of financial outlay, does SongVest equal a wise investment move? Not exactly. After all, royalites fluctuate and are not guaranteed.

"Our [sales] ranges are anywhere between $17,000 and below," says Peace. "So I don't think the prices are necessarily high enough for someone to probably really sit down with their financial adviser and go through this. Now, we certainly aspire to get larger and larger songs where at someone point, someone will sit down and say, 'This is an investment as well as a piece of memorabilia.' And I think when we get into the $50,000 or $75,000 or $100,000 range -- once people become much more comfortable with the model -- we could see a lot more of that."

Peace says SongVest has two people considered true employees and a network of sales professionals across the country to create campaigns. While the auctions are exciting and always garner a lot of press, Peace admits getting a musician to that point is "slow." Then there's always the so-called "sell-out" debate. Peace says he and his sales team always argue that SongVest is similar to a traditional publishing deal.

The next SongVest auction starts May 15 and runs through May 22.