Law gives investors entry into music royalty world

Despite recent industry turmoil, music royalties have been creating local millionaires for decades. Now, you don't have to be a talented writer or a music power broker to have access to the action.

Nashville Royalty, a new music catalog company, is looking for investors in the form of everyday Tennesseans. The state passed a law in 2014, Invest Tennessee Exemption, that makes equity crowdfunding possible.

“We have had the idea to do crowdfunding for this particular item for a long time," said Jeff Tweel, music industry veteran and Nashville Royalty founder. "It’s a new spin on how people, the average citizen, can invest in the music business, buying shares in songs.”

Nashville Royalty is selling stakes of its catalog on its site, starting at $100. The catalog includes hits by Conway Twitty, Reba McEntire, George Strait and Martina McBride, and more songs are being acquired.

Tennessee residents interested in owning a piece of Nashville Royalty’s songs can visit the company’s website, create an investor profile and buy units of the Nashville Royalty catalog. Based on the number of units a person buys, they own a certain stake of the catalog. When songs from the catalog are played, the investor is paid. Tweel said investors can expect to earn a 12 to 15 percent yield on their investment, and the catalog is currently generating more than 15 percent.

New crowdfunding law offers hope, not magic

"A lot of people just like the excitement or the joy of owning a little piece of the music business," Tweel said. "The average citizen has no point of entry into the business."

Music catalogs typically are sold in large volumes, which makes for a large financial barrier of entry. Even figuring out where to start is another hurdle for the general population, he said.

Nashville Royalty is the first known Tennessee business to pursue the Invest Tennessee Exemption. At least 11 other states have similar laws in place, which were designed to boost funding for small businesses. Companies can raise as much as $1 million from in-state investors, and those investors can allocate as much as $10,000 to these early-stage businesses.

Nashville Royalty is an outgrowth of TweelX, a similar concept created by Jeff Tweel and his son, Chase Tweel, in 2013. Because of inaction by the Securities and Exchange Commission, only accredited investors, or those with a high net worth, have been eligible to participate. Now called MusicStockExchange, investors can buy stock in a song.

Royalty revenues have been under pressure amid the popularity of music streaming sites Pandora and Spotify, which pay significantly less to publishers and writers than traditional models. Tweel said, given the significant declines in recent years, he is optimistic that the business model will be improved, either through courts or legislative action.

"The curve is going to start to curve upwards, so we think its an excellent time for investors to be investing," he said. "We can only go up from here."

Reach Jamie McGee at 615-259-8071 and on Twitter @JamieMcGee_.