Want To Invest In Eminem’s Music On The Stock Exchange?

25 Sep, 2017

In a potentially pioneering venture, shares in Eminem’s entire hit catalog will be going public, as the Bass Brothers production team offers part of its multimillion-dollar royalty stream for investment.

Those involved in the arrangement say it’s first of a kind — a chance for investors, including everyday fans, to buy stock in one of the 21st Century’s most valuable music catalogs.

A filing today with the Securities Exchange Commission will get the ball rolling as the Bass Brothers and their partners head for a spot on the stock exchange.

Mark and Jeff Bass, who helped develop the Detroit rapper, hold a substantial interest in every Eminem recording since 1999, when The Slim Shady LP propelled the artist born Marshall Mathers to global stardom.

Their Ferndale-based FBT Productions signed Eminem to a local record deal in 1995, transferring that contract to Dr. Dre’s Aftermath Records three years later. Since then, FBT has enjoyed a royalty payout for all Eminem music sales, downloads, streams, and licensing of tracks for films and commercials.

The company says those earnings have grown significantly since FBT successfully sued Aftermath for royalties in 2011.

As Eminem hit big on Dre’s label, the Bass Brothers kept working with the Detroit rapper for several years, producing and co-writing hits such as Without Me, Cleanin’ Out My Closet and the Oscar-winning Lose Yourself.

Eminem continues to earn his own money from his songs and recordings, and he’s not involved in the new royalty sale.

The Bass Brothers’ move comes amid the digital-streaming boom via services such as Spotify and Apple Music. In the first half of this year, streaming revenue was up 48% over 2016, according to the Recording Industry Association of America, totaling $2.5 billion.

Despite no new album since 2013, Eminem is one of the year’s biggest streaming successes, ranking No. 11 among all artists, according to data from the tracking service BuzzAngle.

The Bass Brothers’ deal calls for them to sell up to 25% of their royalty rights to Royalty Flow, a start-up that will file today with the SEC for a capital-raising “mini-IPO.” The minimum investment is expected to be $2,250 for 150 shares, and the company has set a fundraising target of $11 million to $25 million.

After acquiring its portion of the FBT royalty stream, Royalty Flow would apply for listing on a public stock exchange such as NASDAQ — meaning anyone could buy and sell shares in Eminem’s music catalog while potentially earning dividends.

Last year, 25% of FBT’s royalty income amounted to $1.3 million, according to Royalty Flow.

With music, “there’s an emotional connection that doesn’t exist in a lot of other investments,” says Jeff Schneider, CEO of Royalty Exchange, the start-up’s parent company. “It’s a unique opportunity for that person to have the pride associated with it when they listen. They can associate it with the fact that they’re earning a little bit when it gets played.”

The Bass Brothers’ offering will include royalties for all tracks on Eminem’s eight studio albums — from 1999’s The Slim Shady LP to 2013’s The Marshall Mathers LP 2 — along with the greatest hits compilation Curtain Call. That 2005 release sits at No. 46 on this week’s Billboard albums chart.

The deal also includes a host of other Eminem-related material, such as music from the 8 Mile soundtrack, select tracks by the groups D12 and Bad Meets Evil, and his collaborations with artists like Jay Z (Renegade), Akon (Smack That) and Trick Trick (Welcome 2 Detroit).

FBT’s stake in Eminem music has significantly increased in value since 2011, says company manager Joel Martin. That’s when the Supreme Court let stand a lower court’s decision favoring FBT in its lawsuit against Aftermath over download royalty rates.

“What we got out of that was tremendous,” Martin says, adding that the lawsuit “was a gamble, but it paid off, and now we’re in a position to treat this as some kind of commodity.”

“We now have a segregated (royalties) portion in perpetuity,” he says, and investors will be shown a five-year earnings history demonstrating yearly growth.

There’s long been a bustling business in the transfer of intellectual-property rights. But traditionally it’s been an arcane, high-money game involving tuned-in hedge funds and other insiders.

Royalty Flow is a new twist on the venture created by the Denver-based Royalty Exchange, founded in 2011. To this point, the company has specialized in auctions that it says brings transparency to the transfer of copyrights, enabling anyone with a royalty stake — from songwriters to producers to background singers — to put their rights up for public bidding.

About 180 auctions have been held since 2011, involving music by Barry White, Taylor Swift, Wiz Khalifa and others, along with film scores and TV theme songs.

In one well-publicized case, the estate of the songwriter behind Sesame Street tunes such as Elmo’s World auctioned his credits for $580,000.

“There’s been smart money for a long time buying an interest in songs and recordings,” says Martin. “We’re taking the middle man out of the equation now. It’s going directly to the market instead.”

Royalty Flow aims to ultimately expand beyond Eminem and acquire rights in other music catalogs.

“I think Joel and the FBT team have been fantastic stewards of the asset,” says Schneider. “You go back to the lawsuit FBT v. Aftermath — that really solidified the value of this catalog forever in the streaming world. And this catalog has been one of the biggest beneficiaries of streaming. The production team is an artist-friendly team, and they haven’t been shy about following that up and protecting it.”

USA Today

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