Catalog sales

Glory days for catalog sales after $550 million Springsteen deal

In 1972, a struggling musician from New Jersey rushed to Manhattan for an audition at Columbia Records, using an acoustic guitar borrowed from his old drummer.

“I had to wear it ‘Midnight Cowboy’ style over my shoulder on the bus and on city streets,” rocker Bruce Springsteen later recalled in his memoir.

Half a century later, he can afford plenty of guitars. Last week, Sony, which now owns Columbia, announced that it had acquired Springsteen’s entire body of work – his recordings and songwriting catalog – for what two people briefed on the deal said. estimated at around $550 million.

The prize, which is perhaps the richest ever paid for the work of a single musician, has made jaws drop across the music industry. But that was just the latest mega-deal in a year in which many top artist catalogs were sold, at eye-popping prices.

The catalog market was already bubbling a year ago when Bob Dylan sold his writing rights for over $300 million, but since then it has maintained a steady boil. The list of major artists who have recently sold their work, in whole or in part, includes Paul Simon, Neil Young, Stevie Nicks, Tina Turner, Mötley Crüe, Shakira and the Red Hot Chili Peppers, many for eight-figure payments or more. . The industry is in turmoil over impending deals for Sting and David Bowie’s songwriting catalog.

“Almost everything is now transactional,” said Barry M. Massarsky, an economist who specializes in calculating the value of music catalogs on behalf of investors. “In the last year alone, we completed 300 appraisals worth over $6.5 billion,” he added.

Not so long ago, music was seen as a business in decline, with rampant piracy and declining sales. Not anymore.

Streaming and the global growth of subscription services like Spotify, Apple Music and YouTube have turned the tables on the industry. One of the results is soaring prices for music rights catalogs on recordings and on the songs themselves.

New investors, including private equity firms, have poured billions of dollars into the market, viewing music royalties as a kind of safe commodity – an investment, much like real estate, with predictable rates of return and relatively low risk.

For big music conglomerates like Sony and Universal, which bought Dylan’s songs, these deals help them consolidate power and gain bargaining power with streaming services and other tech companies, like social media. , exercise services or gaming platforms, which often enter into general agreements to use. music.

Despite the popularity of young artists like Drake and Dua Lipa, older material dominates online. According to MRC Data, a tracking service that powers the Billboard charts, around 66% of all music consumption – of which streaming is by far the largest portion – is for material over 18 months old, and that number has been growing. quickly.

And for artists, the sale can bring tax advantages. Royalties are generally taxed as ordinary income, while a catalog sale may be considered a capital gain, which generally has lower rates.

Artists like Springsteen, 72, are part of the generation of music stars who, from the 1970s, took control of their work in large numbers, unlike previous generations.

“A lot of artists were exploited in the 50s and 60s,” said John Branca, Michael Jackson’s longtime attorney, who is now one of the executors of Jackson’s estate. “With the emergence of better legal and managerial representation in the 1970s and 1980s, artists were pushed to gain more power, more clout, and ultimately own their own work.”

Many of these stars are now pulling the last lever of that control by deciding to sell, in numbers unthinkable just a decade ago, say many executives and artist advisers.

The desire for control is now reflected in young stars like Taylor Swift, who has campaigned publicly on the importance of artists owning their work and criticized the market in which catalogs of songs are bought and sold without the participation or creators’ approval. In Swift’s case, she went so far as to re-record her own songs, in part to control the revenue from those tracks.

“Part of the power of owning your assets is that you decide when to withdraw and how to withdraw,” said Bill Werde, director of Syracuse University’s Bandier program on the music industry and a former editor of Billboard, the music trade publication.

In general, selling means giving up control, and buyers usually want to fully exploit the assets to recoup their investment.