Music memorabilia with a paycheck

Jeff Richgels — 10/02/2008 3:41 pm

With everything from milestone baseballs to rare trading cards selling for huge sums, sports memorabilia is big business.

It's much the same in the music world, where significant items such as a famous musician's instrument have sold for hundreds of thousands of dollars.

Now a fledgling Madison-based company is betting that devoted fans -- and perhaps investors -- will be just as enthusiastic in buying rights to songs they love.

SongVest has found success with the concept in limited tests and on Saturday, Oct. 4, the company will launch its first major effort: a two-week online auction of the partial rights to 18 songs by famous artists such as Aerosmith, Bon Jovi, Carrie Underwood, Faith Hill, Cher, Ozzy Osbourne, Ringo Starr and the Monkees.

What's being sold is all or part of the "writer's share" -- the royalties the writer of a song (who may not be the performer) gets whenever the song is played, such as on the radio, or licensed for use, like in a commercial. In general, royalties are split evenly between the writer and the publisher.

What isn't being sold is the copyright to the song, which covers control of how the song is used. That stays with the owner of the publishing rights -- usually a large music publisher -- who will continue to collect half the royalties generated by any given song.

"We do hope to sell the whole song some day, but this is the simplest legal way to do it to get us out of the gate," said SongVest co-founder David Prohaska, 41, a Middleton native.

Two small previous auctions have indicated that SongVest may be on to something.

Last December, SongVest sold 50 percent of the writer's share in two songs -- "Always There For You" and "Keep The Fire Burning" -- by Stryper, a 1980s Christian metal band that enjoyed limited commercial success. The bidding didn't reach the reserve price (the minimum sale price) but the top bidders ultimately bought both for $25,000 total. The price was far more than the songs were valued based on the royalties they could generate, Prohaska said.

"It was a pure memorabilia play -- they love the band and they loved the song and they wanted to have the connection," he said.

Then this May, SongVest auctioned 50 percent of the writer's share of the song "Love For Sale," by unsigned Minneapolis artist GB Leighton. Even with no royalties involved yet, the buyer paid $4,600, Prohaska said.

"It was people who loved GB Leighton and it was their favorite song," he said.

In addition to royalties, buyers also receive tangible memorabilia, including actual Recording Industry Assocation of America (RIAA)-certified Gold or Platinum albums and the song's handwritten and signed lyrics. Prohaska said such items might fetch thousands at auction by themselves.

A Sept. 10 Wall Street Journal story on SongVest boosted interest in the auction that starts Saturday, with bidders registering from more than 50 countries, Prohaska said.

"It's resonating all over the world with people who just love Garth Brooks or the Monkees or Aerosmith or Bon Jovi or Faith Hill and just want a piece of it," he said.

Prohaska hopes to gain more attention for the auction with a party Thursday, Oct. 2, at the Hard Rock Cafe in Times Square in New York City that will be attended by many from the music industry.

It's all heady stuff for something that started just a couple of years ago when a Raleigh, N.C., man — who declines to be identified at this point — came to Prohaska with the core of the idea that would become SongVest. Prohaska, who was director of marketing for Madison-based Sonic Foundry back in its Dot-Com Bubble heyday, met the man through GeoAnalytics of Madison, where Prohaska was working at the time and still works part time.

"This guy had a friend who was a songwriter and at a party she was saying she was about to sell her catalog," Prohaska said. "And she walked through the monopoly that exists in the music industry."

Standard practice in the music industry is for songwriters to sell their entire catalog -- duds as well as hits -- in one fell swoop. They also have to accept a standard rate of about eight to 10 times what the catalog earns in a year. Prohaska's soon-to-be partner felt it should be possible to sell songs individually and fans probably would pay much more than the standard rate.

"People spend close to $1 million for Eric Clapton's guitar, so we knew there was a play in memorabilia and (SongVest) is sort of a twist on that," Prohaska said. "Our idea was why buy just the guitar used for your favorite song -- why not buy the song itself? As the owner you get a paycheck every six months, whether it's two pennies or $2 million."

Turning the concept into a business took a couple of years, because they had to build the business model and convince people it made sense, then test it. SongVest makes its money the same way as auction houses like Sotheby's or Christie's, taking a commission from the seller and a premium from the buyer. In addition, the company is paid for acting as the administrator for royalty payments to those who buy the song rights.

"There's a legal infrastructure behind all of this that really needed to be ironed out because the music industry had never heard of anything like it before," Prohaska said, even though the concept essentially is nothing more than royalty reassignment.

For that task, they hired major entertainment law firm Manatt, Phelps and Phillips, which has a client list that includes the Rolling Stones and Steven Spielberg, Prohaska said. And, of course, they had to go out and find songwriters willing to sell the rights to their songs.

One of their first contacts was Bart Herbison, president of the Nashville Songwriters Association.

"He nearly fell off his chair," Prohaska said. "He said, 'I can't believe no one's ever thought of this before. You won't believe the writers you're going to help here.'"

"Rock stars live in mansions because they're the performers," Prohaska added. "But most songs are not written by performers. They're written by songwriters who are getting royalty checks but they're not making millions of dollars."

SongVest cautions buyers that there's no guarantee of making significant money, although it's possible if, for example, a song is licensed for a movie.

"We're careful to say that this is about love -- buy it because you love it and if you end up making money, great," Prohaska said.

SongVest has a patent pending, but said its best protection against copycats is being first to market with the idea.

"If somebody wanted to start this tomorrow, you've gotta go find a lot of songs and there's a whole systematic approach legally that would have to be ironed out," Prohaska said. "Our hope is that we can get some level of a run in before someone tries to nip at our heels."

Local songwriter Robert J., who was the lead singer and guitarist of the Madison-based Moon Gypsies, said his first reaction to SongVest was that it sounded "kind of fishy," as the ownership of a song is "somewhat sacred."

"But after thinking about it I thought it's just another possible stream of income for a songwriter," he said. "If I wanted to give up some of the rights to my songs and make a little dough, maybe it's not such a bad thing."

Robert J. said being able to retain the copyright helped sway him.

"You have control over how that song is used," he said. "I certainly wouldn't want to see my songs exploited in ways that are not in line with my beliefs."

Robert J. also liked the ability to sell individual songs rather than an entire catalog. "You don't have to give away your whole soul to get a little economic benefit," he said.

None of Robert J.'s songs bring in big royalties — he still has his first uncashed $4.95 royalty check as a piece of memorabilia.

He said he would be watching to see how the Oct. 4-18 auction goes, with an eye to going for the kind of "delightful" surprise GB Leighton got with his $5,000 sale.

Two with potential would be "A Million Miles Away," which took 1st Place in the 1999 Billboard Songwriting Contest, and "I Ride a Hog," which is a Harley-Davidson themed song.

"I don't know whether my songs would bring in that much, but I would be inclined to check into it as time goes on," he said. "I've got little kids and I want to make sure they get to college and everything."

SONGS FOR SALE IN OCT 4-18 AUCTION

Song - Performing artist - Songwriter/seller

"(Theme From) The Monkees" - The Monkees - Caroline Boyce

"Two Story Town" - Bon Jovi - Mark Hudson

"Gotta Love It" - Aerosmith - Mark Hudson

"Denial" - Ozzy Osbourne - Mark Hudson

"Never Without You" - Ringo Starr - Mark Hudson

"My Song (Too Far Gone)" - Cher - Mark Hudson

"Friends in Low Places" - Garth Brooks - Earl Bud Lee

"I Ain't in Checotah Anymore" - Carrie Underwood - Trey Bruce
"I Got it Bad" - LeAnn Rimes - Trey Bruce

"Someone Else's Dream/You Can't Lose Me" - Faith Hill - Trey Bruce

"I Don't Paint Myself Into Corners" - Trisha Yearwood - Trey Bruce