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Discussion in 'ProgPower USA' started by mel_progson, Sep 2, 2012.
This actually isn't the first time a musician or band have sold stock in their art. David Bowie and David Pullman pioneered this idea when they issued celebrity bonds. In exchange for a hefty investment, folks would receive a percentage of future royalties to any works covered by the intellectual property rights listed in the bond. Bowie ended up making 55 million dollars as a result of the move. Now, here's a guy who probably didn't need the money making even more. Instead of being considered a douche, he's seen as a visionary. James Brown, the Isley Brothers, and others followed suit and made serious bank.
Queensryche may not be in the same league of hit-making as the aforementioned artists, but they certainly have a recognizable name in the heavy metal field. In addition, compared to what these other artists were asking in exchange for a stake in their corporate holdings, the amount to invest in Queensryche is considerably lower. In an economy where artists are seeing a tiny fraction of the record sales they once had, I can't fault the band for taking this plunge. I don't think they expect just anyone to part with this kind of money. They're looking at the types of folks who regularly pay hundreds of dollars for VIP tickets. I think that they would like to be able to present their music in a similar fashion to how they used to do it, and that costs money. They certainly won't make that money from the sales of their newer material, so how else can they do it?
Stay metal. Never rust.
I wonder if Queensryche has enough big name fans to even pull this off. I hope they do, if only because I'm interested in this as an experiment if nothing else.
Which is part of the issue. But more to the point, when Bowie did this recorded music was actually worth something. Even still, Bowie issued bonds which paid a higher interest rate than a Treasury note. Queensryche seems to be offering a percentage of the pie. But it's a pie that's very unlikely to yield a profit.
Then we can respectfully disagree. I can't wait to read this prospectus. But let's assume for a moment they're not going to sell the controlling share of the band to the fans. And let's assume they're selling something less than 50% of the band's value. If they're selling 40% of the band's value for $2M, they would need to make $5M in profit (not revenue), just for the fans to break even. Does anyone think QR is going to make $5M in profit before they hang it up? And really, once you start to factor in the time value of money, they would need to make more than $5M in profits.
I agree with you on the target. No one actually looking to make an "investment" would consider this. Which is precisely why I find it so offensive.
I'm sure they would. I'm sure every single irrelevant artist would love to go back to the days when people cared about them and they could play big venues, with a great light show and spectacular sound. But that's just not the reality of the market.
And that's my point; if they're out of ways to generate revenue, how will these fans recoup their investment? If you're selling something as an investment, you're selling the idea that the money is going to grow over time. Under what circumstances is that realistic with this band?
I think Zod is siding with Shark Tank's Kevin O'Leary on this investment...
LMAO. I like his haircut.
They couldn't use Kickstarter like a normal band?
There is no fucking way this is legal
Selling bonds through a bank isn't the same thing as offering equity a band's company to the general public. There's actually been quite a lot of legal precedent against stuff like this in the US - which is why many crowdfunding sites over here don't allow for equity share deals. A few sites in particular a few years ago tried it and I'm almost certain weren't allowed to expand to the US because it technically constituted as unregulated gambling.
It also opens the doors for a fuckton of problems, including "insider trading" issues. Since Queensryche isn't a publicly traded company, it doesn't have to report its earnings to the public, which means with a deal like this it could very easily over inflate the value of its worth without regulation or protection and basically scam people of money in the event of somehting like a member leaving, management changeovers, etc - things that would ordinarily affect the stock of a public company. The whole thing is shady as hell and I hope the police get involved.
I don't doubt that using the term "investment" is problematic to say the least, but...
Am I the only one reminded of patronage here?
You certainly make some valid points. To ask fans to invest that kind of money is pretty outrageous when the chances of the band making a large enough profit are extremely slim.
Thank you for clearing that up. The band isn't exactly approaching this in the same way as those artists who were selling bonds. Between yours and Zod's points, I see how this whole affair looks pretty shady.
Oddly enough, to touch on The Longshot's point, the band is using a crowdfunding site (PledgeMusic) to raise funds as well. It just turns out that the $50,000 "investment" deal is one of the many options available.
Stay metal. Never rust.
Patronage equated to employment or servitude, depending. So...not for me. Also there's Patreon if they just want patrons.
Not sure what the outrage is here. I would guess it is certainly legal. It would not have gotten this far unless attorneys had reviewed it.
As far as investing the money, there is no 'giving away' money here. An investor would go into this knowing a. this, as all investments, is a risk. you may never recoup your investment and b. the investor expects to make money. An investor expects a return on their investment / risk. More than the 50k they put in or they would not do it.
No one is being coerced into investing here. Me personally, I am not sure it is worth the risk investing 50k (not that I have it to invest anyways). However, more power to others if they see it as a way to make money and support a band they love.
Personally, I like the KickStarter approach better. Not actual equity but flexible price points and interesting goodies. Regardless, I hope their approach works out for them.
I think that's where the "outrage" comes in; this is not an investment, but a way of fleecing exuberant fans of their cash. Yes, all investment comes with risk. However, one of the cornerstones of investing is, as risk increases, so does the the level of reward. With this "investment", the odds of losing your money is very high, but the odds of tripling or quadrupling your money is almost zero. This is an exceptionally shady way of exploiting their most loyal and dedicated fans.
Yeah, the problem is that this seems to be directed at fans. To be honest, this is venture capital territory. It also has me questioning if the band is realistic about who they are nowadays.
BTW, reading the original article, it seems they are still doing the crowdfunding thing with the new album, but this is for touring and being able to present ourselves in bigger ways. (Quote from Rockenfield.) Seems kinda risky to me.
I think it is difficult to judge the risk from what has been presented. For example, if I invest $50k and own 2% of all future band revenues. If the band can generate $500k/yr from shows, merch, album sales, etc, I would get $10k/yr and recoup my investment in 5 years. Not a bad deal. Plus, as a fan, I am an insider who has a relationship with the band.
It's unclear since the 'fixed percentage' you would own is not declared and the forecasted revenues are not known. I guess their prospectus would outline this.
No one should be exploited here. The investor walks in with eyes wide open based on a defined equity percentage and forecasted revenues. The savvy investor will determine if the forecasts are realistic or not.
Regardless, as someone who cannot invest $50, let alone $50k, it is all irrelevant. But, more power to those who can.