“This company started as my son Chase’s vision,” says industry veteran Jeff Tweel who has had a 40-year, Grammy-nominated music career. “Chase, is an attorney, but grew up in the midst of the music industry. One day he asked me, ‘What about a digital stock exchange for music publishing?’ I thought that could be a game changing idea. Chase and I co-founded the company and he has been instrumental in its success, serving as CEO.”
Jeff Tweel is no stranger to songs and publishing having written No. 1 hits and served as a publishing executive for major companies like Bluewater, Hamstein and Curb.
TweelX is something like Kickstarter, but with a lot more “kick” because clients get actual ownership and equity, not just rewards. For example, Oculus VR a virtual reality company started its crowd funding campaign Aug. 2012 and raised $2.44 million. However, when Facebook announced last week it was buying the company for $2 billion the news, according to Time “…was not received with universal happiness..” The crowd funding backers did not share in the windfall or even get repaid.
TweelX trades shares of song copyrights the same way companies trade shares on the New York stock exchange. Ownership in song copyrights is issued to accredited investors who may receive royalty distributions through online accounts on a quarterly basis. TweelX’s veteran publishing staff manages the song-investments. This includes promoting and licensing investors’ songs, administering copyrights, and collecting and distributing royalties.
According to TweelX documents, “Selling stock publicly in music was not allowed under federal securities laws, but a recent SEC regulation, part of the Jumpstart Our Business Startups Act (JOBS Act) now makes it possible. While the JOBS Act focuses primarily on easing restrictions for small companies seeking to raise capital and go public, it also modifies certain rules with the effect of loosening marketing restrictions of Regulation D under the Securities Act of 1933.”
The company’s unique model, as explained below is different than securitization or crowd funding because it actually involves ownership of copyright equity. Music publishing ownership could be an attractive option for investors looking to diversify holdings by adding assets that do not correlate or fluctuate in unison with investments such as stocks and real estate. Moreover, if successful, this type of platform could substantially increase the number of investors willing to own and support song copyrights which could be a windfall for songwriters, publishers and artists.
Perhaps the company’s biggest challenge, now that its platform is built and operating with about 500 song offerings, will be to successfully connect with the investment community and grow transactions to critical mass.
NEKST reached out to TweelX President Jeff Tweel for a progress update and inside details…
NEKST: Each time a song is offered by TweelX, five shares, each worth 5% of the total song royalties are created and offered for sale at a minimum rate of $500 per 5% share. Investors get to own up to 25% of the equity in the song at a total cost of $2500. How did you decide on these numbers?
Tweel: My history in the business tells me that if you figure the average yearly advance that a publisher pays to a writer plus the demo costs for the average quota of 12-15 songs a year it becomes an investment of approximately $2500 per song. So we started with that as a publisher cost of doing business per song. We are still adjusting our pricing however to fit the demand. For example, one investment advisor suggested we offer more shares at a lower price, say 25 shares at $100 each. Some of the writers offering song shares are unknown, but we also have writers like Will Robinson, Steve Dean and we just added some songs from Billy Montana. When we have hit writers like that we adjust the pricing upward.
NEKST: So if I buy a song share and it gets recorded or put on hold then the price rises?
Jeff Tweel: Yes, those events would adjust the price of any remaining shares and of course if it became a single that would enhance the value even further.
NEKST: Could this site eventually handle other kinds of intellectual property?
Jeff Tweel: In our patent filing we worded it broadly to include any intellectual property which could include masters, movies, books and perhaps even patents themselves.
NEKST: How is this different than the Bowie bonds that made headlines in 1997 and were reduced to junk status in 2004 due to “lower than expected revenues generated by the assets due to weakness in sales for recorded music.”
Jeff Tweel: The Bowie bonds were handled as securitization. Investors were buying an existing income stream. It’s really a glorified artist advance. The artist gets a bunch of money up front and until that money is paid back with some interest the investor gets the royalty stream from the masters or copyrights. But the investor didn’t purchase equity in the copyrights. And that’s the fundamental difference. At TweelX investors are purchasing equity in the songs. Are we like kickstarter, or crowd funding where all you get is a reward for donating and a warm feeling? No, because you get ownership of the actual publishing rights.
NEKST: How does TweelX make money?
Jeff Tweel: We don’t keep any of the equity in our standard model, we simply charge a commission to the writer on the sale of the shares. Our deals are for a two year period at which time any unsold shares can revert back to the owner. It is song-by-song and non-exclusive. So in effect we offer 50% of the publishing or 25% of the total copyright to investors at a total cost of $2500. We also have a tip jar feature which allows investors and visitors to the site who are listening to the music to simply tip a writer they love if they feel inclined to do so. When the site scales larger we feel that it could become a promotion platform and opportunity to showcase new music.
NEKST: Can you give us an idea of gross revenues to date in investor sales?
TweelX: It’s very early stage for us and our results have been dependent upon getting the word out and drawing traffic to the site. For example, we were interviewed by the Tennessean right after our beta launch and the story got picked up by USA Today. We ended up doing about $10,000 of sales in one week.
NEKST: Have you thought about owning equity or shares on certain songs in lieu of commission?
Jeff Tweel: We hope to issue hundreds of thousands of songs and if they are trading, the commission money will be a sustainable revenue stream. As an option we might offer to buy/own some shares directly from a writer instead of offering them to investors. Our next goal is to acquire catalogs and have our own song inventory to offer for sale, too. We are currently writing a new business plan and seeking to raise $5-10 million, enough to get us into the catalog side of things, plus mount a large scale media/marketing campaign. We’d love to find a strategic partner, perhaps a publisher, already in this business. Initially we thought other publishers might see us as competitors, but it hasn’t turned out that way. You can sell shares whether you are a publisher or writer. Some key players have started to realize that this could be a complimentary function for them, that sharing ownership doesn’t have to be a disruptive process. Publishers all have catalog that is gathering dust and by placing some of the rights for sale, they can get some cash back. We have one publisher already who sees this as kind of an asset liquidation opportunity that helps their writers get recouped.