text: UPDATED: Royalty Exchange has signed a letter of intent to purchase at least 15 percent of an income stream of royalties derived from Eminem’s music, with plans to buy other musical assets and take the company public, according to media reports published Monday morning. 
   
   The Exchange has formed a new company for the endeavor, Royalty Flow, which is expected to file with the U.S. Securities and Exchange Commission to raise between $11 million and $50 million via a Regulation A+ crowdfunding effort. The basis of the initial deal will come from brothers Jeff and Mark Bass, who invested in Eminem’s catalog early in his career. They have agreed to sell up to 25 percent of their interest to Royalty Flow, which will buy the stake with money raised an IPO. If the enterprise meets its minimum funding target, it will then file to list list with NASDAQ. 
   
   However, the arrangement has no involvement from the rapper himself. A rep for Eminem sent Variety the following statement: “Eminem is not involved in any deals for the sale of recording royalties and has no connection to this company. The decision to offer the royalty stream for sale or otherwise was made independently by a third party who retains royalties for an early portion of his catalog and Eminem was not consulted.” 
   
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   That being said, the company will allow fans and smaller investors the opportunity to invest directly in Eminem’s business, and could set a model for future endeavors. 
   
   “If you’re a fan and wanna bet on that artist, you’ve got some skin in the game,” Joel Martin, a business partner of the Bass brothers, told Bloomberg. “It takes the average investor and puts them in a position they wouldn’t be in before.” Royalty Flow’s Matt Smith and Jeff Schneider said the company is seeking to raise $11 million to $50 million. The Bass brothers agreed to sell 15 percent of their interest and can receive the first $9.75 million from the stock sale, or $18.8 million if they agree to sell 25 percent. Earnings from the brothers’ Eminem holdings grew 43 percent to $5.07 million last year, Bloomberg said; a press release claims that Eminem’s catalog has sold some 172 million albums worldwide. 
   
   The deal comes in the wake of a wildly optimistic report from Goldman Sachs, which in August predicted that worldwide revenues from streaming will reach a whopping $28 billion in revenue and paid streaming users worldwide will reach 847 million by 2030. By contrast, earlier this year IFPI reported global recorded music revenues of $15.7 billion — of which half are from digital — and 112 million users of paid streaming services worldwide. ||||| Royalty Exchange has formed a new company and signed a letter of intent to buy at least a 15 percent slice of an income stream of royalties derived from Eminem music, with plans to buy other musical assets and take the company public. 
   
   Today (Sept. 25), the new company, Royalty Flow, is expected to file with the U.S. Securities and Exchange Commission to raise between $11 million and $50 million via a Regulation A+ crowdfunding effort. If it's successful in meeting its minimum funding target, it will then list with NASDAQ, provided it meets the exchange’s qualifications. 
   
   Depending on how much money is raised, Royalty Flow will buy either 15 percent or 25 percent of an Eminem income stream based on royalties paid to FBT Productions, the Bass Brothers company that often works with and produces Eminem’s music, from the artist’s studio albums released between 1999 and 2013 via Aftermath Entertainment/Interscope Records. That includes albums like The Marshall Mathers LP and The Eminem Show. The royalties also come from some Eminem tracks on side projects as well. 
   
   According to a press release made available to Billboard in advance of the filing, the Eminem catalog has sold 172 million albums worldwide, while Nielsen Music says 47.4 million of them have been sold in the United States. 
   
   According to Joel Martin, who manages FBT Productions, and Royalty Flow CEO and Royalty Exchange president Jeff Schneider, the plan is to let Eminem fans and investors share in income from royalties for his music through dividends paid by the company, once it is listed on NASDAQ. For its initial offering, minimum investment is $2,250 for 150 shares, which works out to $15 a share. 
   
   A memo on the filing for the SEC stated FBT has been paid $47.2 million since 2011, or an average of $7.9 million a year, although the amounts vary widely: In 2012, the company received $3.7 million; in 2014, $14.5 million. So far in fiscal 2017, FBT has been paid $1.94 million as of March 31, 2017 with the fiscal year ending Sept. 30. In order to meet SEC qualifications, the last four to five years of those royalties have been audited, even though the agency only requires two years of audited numbers for a Regulation A Tier 2 filing. 
   
   The Regulation A+ filing to allow for crowdsourced funding was created by the JumpStart Our Business Start-up (JOBS) Act, signed into law by then-President Barack Obama in 2012. 
   
   While Royalty Flow is using a broker dealer for assistance in meeting the compliance requirements of a Regulation A filing, the offering doesn’t need and will not have an underwriting investment bank. 
   
   Intercope, Emimem’s label, issued a statement on the deal, saying, “Eminem is not involved in any deals for the sale of recording royalties and has no connection to this company. The decision to offer the royalty stream for sale or otherwise was made independently by a third party who retains royalties for an early portion of his catalog and Eminem was not consulted.” 
   
   While the first investment it is making is in master recordings, Royalty Flow will also consider investments in publishing catalogs as well, but expects to remain a passive investor, without control of the assets. The company says it intends to acquire and hold royalties from music catalogs of the world’s biggest music artists. While there are plenty of investment opportunities in music assets, so far not many superstar assets have come up for a partial purchase like this. 
   
   In fact, Royalty Flow may be creating a new business model for other superstar artists, if their approach proves successful. Indeed, the company calls itself one-of-a kind, designed to acquire and hold royalty catalogs of music and other media. 
   
   “Royalty Flow gives investors the opportunity to participate in assets that are uncorrelated with public markets, and directly benefit in the music industry’s growth,” Royalty Exchange CEO and Royalty Flow’s chairman Matt Smith said in a statement. “It also gives artists, producers, labels, songwriters, publishers and other rights holders a powerful new financing option with a level of transparency seldom found in the music industry.” 
   
   Depending on how much it raises, Royalty Flow has the option to buy 15 percent of the FBT royalties from Eminem music recordings or 25 percent. Applied against last year, that comes out to between approximately $714,000 and $1.19 million. 
   
   Thanks to a landmark lawsuit in 2012 in which FBT sued the Universal Music Group claiming they were entitled to 50 percent of money received from downloads and streaming because the music was provided to Apple and streaming services through licensing deals, the ruling said digital deals constituted a license, thus FBT gets a 50 percent percentage in perpetuity. 
   
   If the proceeds from the crowdsourced offering are less than $25 million, Royalty Flow will exercise the 15 percent option and pay FBT $9.75 million. If they raise more than $25 million, they will buy 25 percent of the income stream for $18.75 million. 
   
   While Royalty Exchange executives say they will sell up to 80 percent of Royalty Flow, there are two classes of stock and management will likely retain complete control of the company through its sole ownership of class B shares, which will have 10 votes per share, while the class A shares will have one vote per share. 
   
   Beyond the Eminem investments, the company will pay out some of the income it gets as dividends and re-deploy some of the funds to make additional investments. “We hope to buy assets that will appreciate over time and as that occurs, it could increase the value of the stock prices,” says Royalty Flow CEO and Royalty Exchange president Schneider. 
   
   Royalty Flow will be run separately from Royalty Exchange because they are two different business models. Royalty Exchange is an auction platform that allows investors to bid and buy an asset with one winning bid in the end; while Royalty Flow allows for multiple investors to own a piece of the assets. 
   
   Since its inception, Royalty Exchange’s auctions have sold songwriter royalties for music recorded by Rick Ross, Kevin Gates, Dr. Dre, George Clinton, Britney Spears, Kacey Musgraves and the Bee Gees. 
   
   “We believe Royalty Exchange is the new model for music financing,” said FBT manager Martin. “We’ve supported increased transparency for artists our entire career, and Royalty Exchange is no different. They give investors simple, direct access to royalty opportunities that previously were available only to industry insiders. This changes everything.” 
   
   Martin chose to use the Royalty Flow model because FBT didn’t want to sell their copyrights, just an income stream. “We were approached by many people who wanted to buy our assets, but we are not interested in selling the entire asset,” Martin says. “Now thanks to the Obama JOBS act, you can actually sell an interest in royalty streams.” 
   
   The other difference between the model is the size of assets involved, with Royalty Exchange likely to deal with smaller assets that one investor can afford to buy, while Royalty Flow will buy larger assets. 
   
   Schneider says now is the right time to do this public offering because the music industry appears to be entering a bull market thanks to streaming, similar to the one it experienced when the CD was introduced back in the 1980s and 1990s. 
   
   “We think this one will dwarf what happened with the CD,” Schneider says. But music fans who are investors have no way to participate because the three major companies are themselves not publicly traded, with both Sony Music Entertainment and Universal Music Group part of larger publicly-traded companies, Sony Corp. and Vivendi, respectively, while the Warner Music Group only has publicly-traded bonds. 
   
   Yet, thanks to their participation in buying publishing assets, many institutional investors are familiar with music assets. “Music is an asset class that investors are interested in and understand,” Schneider says. 
   
   This is not the first time the music industry has become involved in securitization. Back in the 1990s, Bowie Bonds were issued against music publishing catalogs from the likes of David Bowie, James Brown, the Isley Brothers and Holland-Dozier-Holland, among others. Also, Continuum, an independent record label that has since gone out of business, was publicly traded. 
   
   During that time, some industry insiders speculated that a publishing catalog would make the perfect vehicle for a stock offering because they have a predictable income stream investors would appreciate. Yet that never occurred. But if the Royalty Flow gambit is successful, will it serve as the catalyst for a new round of experimentation in the securitization of music assets? Time will tell. ||||| Investors will soon be able to purchase shares of Eminem's "My Name Is," "Lose Yourself" and every other song he released from 1999 to 2013 on an exchange much like the stock market, at a minimum of $2,250. The rapper's former production duo, the Funky Bass Team (aka FBT Productions), signed Eminem years before he turned into a superstar, and will auction portions of his future song royalties in October as part of a new company called Royalty Flow. "If you own any Apple stocks, for instance, it's exactly the same," Matthew Smith, head of Royalty Exchange, the Denver company running the auction, tells Rolling Stone. "Not only do you potentially get to earn along with Eminem's catalog, but you also win the ultimate bragging rights to say 'hey, I own that!' anytime you hear one of his songs." 
   
   The Eminem catalog is among the first of what Smith and others expect to be a new way for fans to invest in musicians and songs. With streaming revenues expected to boom over the next few years, the returns could become substantial. Royalty Exchange has already sold shares of Wiz Khalifa's "See You Again," Chris Brown's "Drunk Texting" and the Ariana Grande-Lil Wayne track "Let Me Love You" as part of investment packages, some for as much as $71,000. The portion of "See You Again," made available by a background singer who owned part of the recording rights, generated $11,372 before it went on sale through Royalty Exchange — and Eminem has far more revenue potential. 
   
   
   
   "With that big growth, there's an opportunity for investors to participate," Smith says. 
   
   Eminem declined to comment for this story, though one of his reps said he was "not consulted" about the upcoming investment package. "Eminem is not involved in any deals for the sale of recording royalties and has no connection to this company," the rep tells Rolling Stone. 
   
   One music-business expert argues tearing apart an artist's catalog and selling it piecemeal, without involving him, is disrespectful. "It starts to look like human slavery," says Aram Sinnreich, an American University media professor and author of The Piracy Crusade. "For Joe Investor, sure, it's no more or less meaningful than any other kind of commodity traded on exchanges — but we need to think about what kind of commodity we want human expression to be. It's very different than iron ore or rare earths or something like that." 
   
   A rep for Jeff and Mark Bass of FBT Productions, though, responds that publishers and record labels constantly profit off artists' work and Royalty Flow is just another way of doing that. Joel Martin, FBT's manager, says the company considered selling its catalog to a bigger company within the music business but ran into roadblocks. "They wanted to buy the controlling rights," he recalls. "This is way more attractive." Eminem worked with the Bass brothers for years, until, as Jeff Bass said in 2013, "Life just moves on. It's not like [Eminem] said, 'Jump! You’re fired.' It was just, 'I'm gonna go in a different direction.' 'Cool, I wish you the best of luck.'" 
   
   Royalty Flow will file for its initial public offering on Monday; after three weeks, the U.S. Securities and Exchange Commission will decide whether to approve the filing, and if it does, investors can buy in for 150 shares or more at the minimum $2,250 price. Later this year, those investors will be able to buy and sell shares on a public exchange. 
   
   When it's all over, investors will own either 15 or 25 percent of FBT's Eminem royalties as part of a broader package that could eventually include other artists' songs. "You're going to find a class of artists that will certainly be looking into this," Martin says. "[They'll] find out the real value of their income streams, as opposed to going to [major labels] Sony or EMI and taking a deal that looks good but may not be the best deal." ||||| Jeff Bass, a former producer and songwriting partner with Eminem, recently spoke about how their relationship has changed since their last collaboration on 2009’s Relapse. 
   
   “I still love him and everything and I’m sure he still loves me,” said Bass, who with his brother Mark is collectively known as The Bass Brothers, the production and songwriting duo who worked extensively with Eminem on his first few releases, during an interview with grantland.com. “But we don’t communicate like we used to. He told me he had to experiment with other writers, other producers. It was very fair. All artists probably do that. We could only have our vision of what he should be. Life happened. Life just moves on. It’s not like he said, ‘Jump! You’re fired.’ It was just, ‘I’m gonna go in a different direction.’ ‘Cool, I wish you the best of luck.’ I can guarantee that we could sit down today and write a song, and we could still put something out that the fans would love. And maybe someday that’ll happen.” 
   
   During the interview, Bass also spoke about what he saw in Eminem’s music when they first met, prior to Em’s fame. 
   
   “When Marshall came into the picture, I wasn’t quite sure about his ability because I couldn’t understand what he was saying,” Bass said. “He was triple-timing, spitting rhymes. I was just trying to comprehend him. Then I started writing tracks for him. And it became apparent that he was amazing.” 
   
   Bass also said he and his brother coached Eminem through compositions. 
   
   “In between Infinite [Eminem’s independently released first album] and The Slim Shady EP, we figured out how to communicate with him,” Bass said. “Because he doesn’t come from a musical background. We had to figure out a way emotionally to get through to him. So how I approached it is, any song that had a happy feel we’d call a happy tune. Angry, sad, violent — we’d use adjectives to get through to him. So that he could write the type of lyrics that’d go with the track.” 
   
   Jeff Bass Details Dr. Dre’s Discovery Of Eminem 
   
   During the interview, Bass also speaks about Eminem’s journey to being signed. 
   
   “He was doing the Rap Olympics, and he was winning all over the place,” Bass said. “And then he lost in L.A., but when we were there we had a bunch of The Slim Shady EPs. At that particular show, there was somebody in the audience watching. A young kid, 17 years old, and he saw all the passion that Marshall was putting into his show and his lyrics. And he came up to us after, ‘Can I get a CD?’ Little did we know, he worked in the mail room at Interscope Records. And he loved Eminem. And what he did for us, on his own, is slip the CD in Jimmy Iovine’s listening bag that he used to take home every Friday. And Jimmy actually listened to it, and said ‘Whoa, whoa, whoa. What is this?’ And he called Dre, and then Dre came and listened to it. It’s not like Dre found it on the floor in his garage. The true story was that he was called by Jimmy. And then it all snowballed from there.” 
   
   Bass also talked about Eminem’s emotions during this period. 
   
   “He was really excited, first of all, that Dr. Dre was gonna be involved,” Bass said. “[Dre] was a big star in ’98. He was freaked out. ‘Oh my god, I can’t believe it!’ Me and my brother were excited. ‘Dr. Dre wants to talk to us!’ And Marshall went out to L.A. with my brother first. They got there a week before me. And it started immediately. Meeting Dre, talking with Jimmy, meeting all these people, this whole crazy period. I think it was February of ‘98.” 
   
   Jeff Bass Discusses Eminem’s Marriage With Former Wife Kim 
   
   During the interview, Jeff Bass also spoke about Eminem’s marriage with his former wife Kim and the long-standing friendship he built with the rapper. 
   
   “He’s been with me since ‘95,” Bass said of Eminem. “When he was a young buck. I was with him when Hailie was just born. I knew Kim. She used to come into the studio with us all the time. We used to take Marshall out to the different clubs in Detroit. She would come with us, be her crazy self.” 
   
   Bass was also asked if the couple was dysfunctional. 
   
   “It was always obvious,” Bass said. “He basically lived with us in the studio on 8 Mile road. And you got to know the person. We had to deal with his mother. We had to deal with Kim. We had to deal with uncles and friends trying to be hangers-on. You really get to know a person. And it was amazing. As he would come up with the stories [on the songs], those of us who were close to him working on the project, we knew there was so much truth in what he was saying. That’s pure emotion. That’s realism. And he told it like he was speaking to every kid out there that was going through the same thing. He was their voice. It was quite incredible.” 
   
   In addition to his songwriting and production credits on various Eminem albums, Bass also appeared on various Eminem skits, including “Soap,” “Lounge,” and throughout “Bad Meets Evil,” off The Slim Shady LP. 
   
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target: – Between 1999 and 2013, Eminem released some of his most famous work, including 1999's The Slim Shady LP, 2000's The Marshall Mathers LP, and 2002's The Eminem Show. Now a new company has formed to nab the royalties income stream from his songs from that period, and fans may eventually be able to fatten their wallets by investing via a rather unusual opportunity. Per Billboard, Royalty Exchange has created a new business called Royalty Flow and inked a letter of intent to buy either a 15% or 25% portion of the performer's income stream (depending on how much money it raises via crowdfunding efforts) and then allow fans and investors to share in income from those royalties via dividends if and when the company becomes listed on NASDAQ—a template that Billboard says may prove to be "new business model for other superstar artists." Variety notes the deal comes via brothers Jeff and Mark Bass of FBT Productions, who invested in Eminem's catalog early and are now said to be estranged from him. Although Royalty Exchange's CEO says in a statement the plan offers "a powerful new financing option with a level of transparency seldom found in the music industry," one industry expert tells Rolling Stone that selling an artist's catalog piece by piece "starts to look like human slavery." Meanwhile, Eminem's statement, via a rep: "Eminem is not involved in any deals for the sale of recording royalties and has no connection to this company. The decision to offer the royalty stream for sale or otherwise was made independently by a third party who retains royalties for an early portion of his catalog and Eminem was not consulted." Billboard dives deeper into the financial and legal complexities of this setup.