Heiche, formerly an executive at a rival firm, came up with the idea to start Sound Royalties. With York’s backing, Sound Royalties became a line of business within Novation, the people say. When Novation was sold off in June, Sound Royalties was separated from the unit and wasn’t offered to SuttonPark Capital, which bought Novation, according to a person with knowledge of the sale. York and Sound Royalties declined to discuss their ties or whether Sound Royalties is still backed by York’s private equity arm. Heiche also declined to comment, according to Sound Royalties.

Heiche, the public face of Sound Royalties, is described on the firm’s website as a “strong and outspoken” advocate for those in the creative world who want to be “fairly compensated for their work.” The firm’s website advertises rates starting at 4 percent on advances up to one year.

In practice, however, the firm aggressively pushed clients to take longer deals, at rates far higher than the norm, two of the people say. (Estimates vary, but they range from 5 percent on bank loans for top musicians to 10 to 20 percent for Sound Royalties’ competitors.)

Longer Deals

Many say it’s no coincidence. Unlike most rivals, Sound Royalties adopted the structured-settlements model and its complex financing terms. The firm set up its marketing specifically to push five-year contracts, the people say, which are much more costly than industry-standard terms of 12 to 18 months.

The contracts were customized, but it generally worked like this. Sound Royalties projects how much money an artist will make over a set period, say three to seven years. It advances a percentage of that, minus an upfront fee that typically equals 10 percent. She pays back the projected amount over the life of the contract with her royalties, which bypass the artist and are sent directly to Sound Royalties.

If her royalties exceed that amount before the term expires, Sound Royalties pays her back. But if the artist falls short, she could incur additional interest until it’s repaid. The overall cost is rarely spelled out in a way that’s easy to understand. Often times, clients aren’t aware of how expensive it can be.

Complex Structure

“They have some complicated deal structures,” says Parviz Omidvar, head of Royalty Advance Funding, a rival firm based in Beverly Hills. “Financial people and hedge fund people might be used to” such terms, he said, “but people in the music world may not be.”

Sound Royalties’ advances, ranging from $5,000 to $10 million, have nevertheless proven to be popular. Backed by York’s deep pockets and, at least until the recent sale, Novation’s large telemarketing team, over 300 people have signed up since mid-2015, state records show. One of them is Aaron Lockhart, a musician who lives in Riviera Beach, Florida, and heard about the firm through a friend. He was matter-of-fact about his high rates and didn’t take issue with Sound Royalties’ terms.