The Next Big Trade, From Yes or No Bets to Security Tokens

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The Patronage of Tomorrow

Artists have long had patrons, but a growing crop of startups is systematizing the process of investing in musicians and athletes via cash advances early in their careers in exchange for a share of future income.

Big League Advance, an investment fund, bets on promising athletes by paying players for each percentage point of their future earnings, relying on algorithms to determine the amounts. For example, the firm might offer a minor-league baseball player $100,000 for 1% of what he earns down the road, but the player could decide to take $700,000 for 7%.

Michael Schwimmer, a former pitcher for the Philadelphia Phillies and Big League’s chief executive, says he sees a future where these agreements will be available for people to invest in a range of high-paying careers, ranging from doctor to musician. “People are way more willing to spend their money investing in others, taking these big risks,” he says.

Critics say such income-sharing agreements persuade people early in their careers—when they may be more desperate and less sophisticated—to sign away money for the rest of their lives.

The concept is starting to make its way to the music industry. Startup Stem Disintermedia Inc. runs an online platform that gives musicians a way to value their album sales and digital streams, collect the money, and then divide it with their prospective patrons, while retaining ownership over their work. The aim is to protect artists from signing away music rights in confusing contracts with record labels or music investors.

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Read More:The Next Big Trade, From Yes or No Bets to Security Tokens