Online exchange offers shares of songs for sale
Posted January 4, 2013
NASHVILLE, Tenn. -- If you've ever heard a song and known instantly it would be a hit or said you wish you had a dollar for every time you heard a particularly catchy tune, TweelX might be a company after your own heart.
The Nashville startup plans to sell shares of songs, in the form of a percentage of publishing royalties, to individuals, record labels and anyone else willing to part with $100 or more per investment.
"It's kind of like speculating in stock futures," said Jeff Tweel, who created the company with his son, Chase Tweel, and serves as its chief operating officer. "Or, as my Texas friends say, 'Finding oil while it's still in the ground.'"
TweelX, named for its founders and a truncated version of the word "exchange," in its most basic sense operates much like a crowd funding service. Songwriters upload their songs to a website, and people who like the work give them money.
Unique to the TweelX model, however, is that when a song is uploaded, songwriters agree to a nonexclusive, "song-by-song" publishing contract that requires them to relinquish exclusive publishing rights for a particular song in favor of the TweelX shared model, which gives a cut of any royalties earned by the song to the songwriter, along with TweelX and investors.
Fans and others who give cash are not merely supporting a song or artist they like in exchange for a one-time gift such as an album, as is the case with many crowd funding sites - they're getting a stake in the artist's work. If the song makes its way to radio or is played in a television commercial, it could generate continual payments down the line, for instance.
Songs sell for $100 to $250 per share, with a maximum of five shares, or 25 percent of royalties, available for public consumption in any given song. The remainder of ownership is split between TweelX, which receives 25 percent, and the songwriter, who receives at least 50 percent and as much as 75 percent depending on how much public investment is made.
The money invested by individuals is split between the songwriter and TweelX. The idea is to raise $500 to $1,000 per song, "about what it costs to make a really good-sounding demo," said Jeff Tweel, who has more than two decades of experience in the music publishing worlds in Nashville and Austin, Texas.
Songwriters maintain rights to master recordings and are not required to sign an exclusive agreement giving TweelX the rights to all of the songs they write.
About 150 songs by 25 artists have been uploaded to the site since its launch. The startup company has received one investor so far. A fan paid $250 for a share in a song called "Jim Beam, Nicotine" by Justice Adams Band.
"Now that we have inventory, our task is to get shoppers," Tweel said. "Because of my connection in the business, we are providing them with exposure that they would never get on their own."
A risk in a business model like TweelX's one is that some of the traditional functions of a publisher will be lost, said David Israelite, president and CEO of the National Music Publishers Association.
"Getting a song recorded, making sure it's licensed properly, making sure money is collected properly - that all really takes a hands-on effort by a publisher," said Israelite, who had not studied the TweelX business model and was not aware of any similarly functioning companies. "That would be something that I'd be concerned would be lost if you have a bunch of passive investors."
Tweel said the company will pick up those functions, though he admitted TweelX won't have as hands-on a relationship with its roster of songwriters as more selective, traditional music publishers do.
The company is promoting its catalog of songs both online and offline, in an effort to woo investors. A primary goal is to convert into investors the contacts, specifically record label executives, radio station managers and other music industry leaders, Tweel made in more than 20 years in the recording industry. Their investment, by Tweel's estimate, could increase a song's popularity - and by extension its potential for royalty generation - because such investors would have an incentive to promote the music through many channels.
"They have the ability to exploit the song," Tweel said. "Any song that's collecting royalties, people want a piece of it. And anytime anybody owns a piece of a song they already like anyway, they have an emotional investment, and then it creates a partnership."
The company also is trying establish partnerships with companies that can get its catalog of songs played on television shows and in films.
Tweel pitches the company as songwriter-friendly. There is no fee, for example, for writers to sign up and have their songs listed on the exchange.
The service also is easily accessible, Tweel said. In a city like Nashville, home to the Nashville Songwriters Association International, hundreds of aspiring writers and writer-artists are not signed to publishing agreements and are looking for a way to get their lyrics and music recorded and heard. The startup is pitching itself to that segment.
"The barriers to entry for songwriters are so massive and the opportunities to breakthrough are so few that we wanted to find a new way," Tweel said. "The model appeals to those who can't get in the door. Either the doors are closed to them, or they can't even find the doors."
Bart Herbison, executive director of the Nashville Songwriters Association International said he was not familiar with the company and could not comment on it.
Chase Tweel said the business model was born from his observation of a hole in the traditional publishing environment that ignores the lower barriers to entry in the music industry created by the Internet and sites like YouTube.
"The current publishing model really hasn't taken advantage of new technologies in recording," Chase Tweel said. "For instance, it's much easier to produce decent-sounding music at a low cost."
With more people able to produce music, there's a need for more people to publish that music and at a price point comparable to that of the production, Chase Tweel said.
"Traditional publishers in order to build their catalog have to go through time and money to even set up paying advances," Chase Tweel said. "Those are costs that a publisher doesn't have to incur today to take advantage of the wealth of content out there."
TweelX reflects the constantly changing landscape of the music industry, where new businesses have blossomed at a steady pace to answer the question of how to make money in a space where there is less money to be made.
"We're all open for new business models as long as people are compensated properly," said Peermusic Vice President Kevin Lamb, who also leads the Nashville chapter of the Association of Independent Music Publishers. "For the past 15 years, this business has seen all kinds of business models come and go."
"It does sound like a unique idea," said Lamb, who was not familiar with TweelX or any other business like it. "Is it something that's sustainable? Time will tell."
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