I tried searching around online but I couldn't figure out if anyone really does this today or not. Is there a market for this?
For discussions sake, let's say my books bring in $100 a month today. As a self published author, I keep 100 percent of my royalties. I take 10 percent, and create 10 shares, offering each for sale for $100 a piece, each entitling its owner to 1 percent of my future monthly royalty payments for as long as they own the share. Right now each would be paying a monthly royalty of 1 dollar, assuming my sales stayed at the same level, more or less. As my stock as a writer grows, and I get more sales, those shares pay more, and maybe the original buyer resells them to someone else for more than they bought them for.
I think there is a market for it. I'd sell some of my future royalties for some cash to live on while I grow my author platform. I think a lot of authors would.
I've got this amazing author offering a 1 percentage ownership stake in her future royalties for just a hundred dollars, to get the ball rolling and create the need for what needs to be built. As for taxes, I'd get some help on that for sure, but I cut you a check for your earned royalties, you pay taxes on it, no different than the writer themselves would. I would think.
1) Are we talking royalties for (i) a single produced work? Ex. I get 1% of a particular book that you're writing or publishing. Or (ii) is it 1% of all future royalties from any written work that you publish? In the latter case, the legal framework will get rather convoluted because you'll need to define the exact scope of what is and is not covered (what about monetized blog posts? what if you shadow write for another author? what if you write a screenplay? etc.).
2) Have you looked into SEC regulations regarding setting up such a structure? I'm not 100% sure how it works for films, which often option off royalty rights to all kinds of people, but (i) above would be a bunch of individual contracts in a similar manner. However, in case (ii) above it seems you would essentially be setting up a corporation for yourself that contractually owns your IP and receives royalties on it while issuing shares to others.
3) How much creative control do shareholders get in exchange for shares? Basically, are all shares non-voting, or if I own rights to 51% of your royalties do I get to tell you to stop writing alternate history novels for adults and hop on the sappy YA train instead?
In any case, I like the idea since it takes the concept of Patreon beyond the "well-intentioned benefactor" level.
I appreciate your interest, and stake in my case (ii) is on a firesale if you would like to become investor zero and help me work out the kinks on the fly =)
Also: I'd be hesitant to invest if I thought there might be the possibility of "hollywood accounting", i.e. if I own a percentage of all of of your future royalties, you could potentially structure a deal with a publisher where you get large "appearance fees" for book signings, and the royalties are basically zero.
Overall, I like the idea.
As for being worried about Hollywood accounting, you won't have to worry, as the company will act as the exclusive publisher and copyright holder of the works belonging to the authors that want to join. It's the only way to insure against authors offering their works on other platforms behind our backs such that investors are defrauded of their cut (aside from costly monitoring and litigation), also, I can't depend on them to get their royalties direct deposited in their accounts, and then send us that portion belonging to their investors to disseminate it, rather, we need to receive said deposits, then distribute as needed. This limits the sort of authors who would be willing to join the platform to a certain sort of upstart writer, one with a small but growing catalog, and a small but passionate reader base, right at the cusp of getting on the radar of the mainstream publishing world due to their ebook sales. At least those are my thoughts at this time. I'd love to just trust authors to do right by their investors, but I can't ask the investors to be so trusting, and one author deciding to betray the company, if I leave the power in their hands, can tank the whole thing. I'm thinking owners transfer copyright of their works thus far and sign a contract to publish exclusively with us all works in the future, and in exchange they get 95% of the asset backed securities created for their books/future ten years of work, at which point they can then offer any amount up for sale like any other anonymous seller. The firm retains the other 5% for itself for its fee, and does the same. After ten years they are free to renew, or leave the firm to publish with others, but the firm retains the copyrights it paid for until they enter the public domain. Anything an author can make outside of royalties resulting from sales of their works either transferred to us or written under contract to us is their business, and in this case royalties refers to both royalties from sales, and royalties from kindle edition normalized pages read, as we're looking to have a special relationship with Amazon moving forward based on talks with them thus far.
What are the legal needs in order to sell these? what kind of investment instrument would it be precisely?
I don't think the legal needs to sell these are too complicated. A simple contract would look like "The holder of this contract is entitled to x percent of the monthly royalty payments paid to y author" and the investment instruments are instances of said contract.
