The music industry has watched its revenues decline for more than a decade. But there are still plenty of people who think you can make money in music.
Here are more of them, backed by one of the world’s biggest financial players: Alignment Artist Capital says it wants to lend money to musicians, using funds provided by BlackRock, the $4.6 trillion asset manager.
But don’t come to them unless you need real cash — Alignment co-founders Howard Lipson and James Diener say they’re looking to dole out $5 million to $20 million per transaction.
Diener used to run Octone Records, the label best known as the home of Maroon 5. Lipson is a music industry deal guy who helped back Diener. They figure they know the business well enough to suss out which musicians have real income revenue streams — from music sales, publishing royalties, touring revenues, etc — that can support a structured finance deal.
Alignment will take 10 percent to 20 percent of the artists’ total income for that period, and figures it can generate a return in the low to mid teens. But it won’t end up with an equity stake in the assets. The company, which will draw on funds from BlackRock’s Alternative Investors accounts, says it hasn’t made any loans yet, but expects to write some checks soon.
Alignment isn’t the first entity to advance money to artists. A couple decades ago, for instance, someone figured out how to securitize the publishing revenue from David Bowie’s songs and kicked off a mini industry. And more broadly, lending money to musicians is one of the core functions of music labels.
But now we’re in a world where the role of a music label is harder to justify for lots of musicians, who might want to create their own label or just sell songs directly to fans. Or perhaps they want to pony up cash to buy their own streaming service, like Jay Z just did.
Lipson and Diener say they can help make that happen. Or the cash they provide can help a musician buy a summer home. They don’t care, and they don’t want a piece of whatever the musician ends up buying or building.
“What we’re certainly not going to say is ‘Here’s the money, we’re now an investor in the record label,’” Diener said. “We’ll give the artist and their entity financing so they can go build a record label.”