Granted, consumer finance by all accounts contributes just a fraction of the profits for these Wall Street firms. Nevertheless, outfits like Sound Royalties are primed for growth. After starting a $10 million pilot program in 2016, according to Billboard, Sound Royalties said in February 2017 that it would extend at least $100 million of cash advances over the next 24 months. That’s helped bring royalty financing from the fringes into the mainstream.

A spokesman for York and Dinan, who also co-owns the Milwaukee Bucks, declined to comment. Pamela Armstrong, a spokeswoman for Sound Royalties, says the firm fills a need. Its service lets artists get paid without having to cede ownership of their work, which has historically been the case.

“Traditional bank financing is largely unavailable to the creative community,” Armstrong said in a statement. “Sound Royalties proudly provides valuable access to a broad spectrum of customized funding solutions which ensure that creatives retain their copyrights.”

Tough Business

The music industry lends itself to such non-traditional financing. Typically, performers must wait up to nine months to receive royalties. Organizations collecting money on their behalf pay out quarterly.

The type of financing offered by Sound Royalties is a “close-to-last-resort” option for artists often struggling to make ends meet, says Derek Crownover, a Nashville entertainment lawyer who reviewed one contract. Crownover says the terms certainly aren’t the worst he’s seen in his 25 years in the music industry, but they’re emblematic of how tough the business can be. And the high rates can be partly explained by the risk an artist declares bankruptcy.

“This could be ‘artist friendly’ in our world,” he says. “That’s the irony.”

While Sound Royalties has gotten a lot of buzz in the music industry of late, the firm’s Wall Street ties aren’t widely known.

York’s involvement with the niche business of royalty financing can be traced to 2015, when its private equity arm brought in Alex Heiche to help run its structured-settlements firm called Novation Ventures, according to people familiar with its dealings, who asked not to be named because the details aren’t public. Structured settlements, a frequent target of consumer advocates and regulators, offer lump-sum payouts at steep discounts to lottery winners, disability recipients and annuity holders, in return for their ongoing payments.

Lump-Sum Payouts