Usually only artists that are already quite successful can access an advance on royalties, but Swedish startup Amuse wants to help level the playing field
In 1997, David Bowie partnered with an insurance company to create Bowie bonds – a kind of asset-backed bond that gave him (and investors) a share of the current and future royalties of his music. Bowie correctly predicted that his music would only become more popular, but he didn’t want to wait years into the future to reap the rewards.
But maneuvers like this are pretty much only open to superstars, like Bowie. For a struggling musician hoping to break into the industry, the way that it’s all set up can be a massive headache. When musicians get signed to a record label, they can get an advance on future royalties, in order to finance renting equipment or studio space, or even shooting music videos. An advance effectively functions as a loan – financed by revenue from other, successful artists – and the artist has to pay it back if and when their music starts to bring in money too. But this is only open to comparatively few artists.
Amuse, a Swedish music distribution startup founded by former Universal Music Group label heads and other industry experts, is trialling a new service that aims to let more artists access future royalties before they earn them, using machine learning to predict what those royalties could be. Here’s how it works: artists upload their tracks onto Amuse, and those tracks are distributed onto streaming platforms such as Apple Music and Spotify. Then, a team of experts at Amuse analyse where the streams are coming from, what kind of stream they are (for example, if they come from premium users), and how many streams different artists get.
A program that Amuse has developed in-house assigns each of those characteristics a value. It then calculates how much an artist could expect to make in future royalties and offers a corresponding upfront payment, called a Fast Forward Advance. An artist who has 300 followers, all of whom are from Brazil, will be offered a lower Fast Forward Advance than someone who has 5,000 followers that are spread out throughout the world or are in the country the artist comes from (so far, the bulk of the artists that use Amuse are Scandinavian, partially because Amuse is headquartered in Stockholm).
Although Amuse is also a record label with some artists signed to it, the major difference is that it’s also a free distribution service, so an artist simply has to sign up to use it (without signing to the label) in order for their data to come into Amuse’s hands and for them to be offered an advance. In order to finance the system, Amuse charges a fee between 10 to 20 percent of the payment it offers. In terms of risk, the artist only pays back the royalties that they are expected to make.
Currently, the commercial music industry works on a large scale – moving big sums of money around to advance artists, but keeping them in debt for years if they fail. Amuse envisages its tool being used for something more quotidian – a smaller artist might use it to finish filming a music video or to rent some equipment for a last minute gig, for example. The company says that the smallest advance it has given out so far is $400 dollars and the largest $100,000.
If an artist becomes more popular while using the service, then that’s factored in and they get a new offer from Amuse. “If they become more popular, then they earn back that money much quicker, and then we’re done with that transaction,” explains Diego Farias, one of the founders of Amuse. “Then, they’re eligible for a new Fast Forward advance, and then their valuation has increased.” If they don’t make the money that they were predicted to, then nothing happens – they don’t have to pay it back.
Although it’s early days, Amuse says that nearly 100 artists offered the Fast Forward Advance have so far accepted, out of roughly 400. Paul Allen, who is the head of Data and Insights at Amuse, says the Fast Forward Advance was a natural move as the company was already using similar streaming data and tools to identify artists it might be interested in. “Now, we’re just taking it one step further.”