Catalog sales

Music catalog sales soar as songwriters cash in

“We should send a thank you note to the folks at Bob Dylan,” said Charles “Jeff” Biederman, partner at the law firm of Manatt, Phelps & Phillips, which has a thriving music practice. “The day Dylan arrived I must have had four calls that morning,” he adds, referring to Universal Music Publishing Group’s announcement in December of an agreement to purchase the entire Dylan’s catalog of compositions for what some have said was $ 300 million – considered a record price. for the acquisition of the publishing rights of a songwriter.

Hit contracts for songs from superstars Dylan, the Beach Boys, Neil Young, Stevie Nicks – and the last on the list, Paul Simon, who sold his catalog to Sony Music Publishing – and popular hitmakers such as Shakira and Calvin Harris have been announced. so quickly that it feels like hammering those multi-million dollar sales to multiples that seemed impossible a few years ago has become a pro forma process for the players involved. Make no mistake about it.

“There is a tremendous amount of preparation and analysis that goes into these transactions, way beyond everything [other] kind of deal we’re working on, ”says Doug Davis of Davis, whose client list includes Barry Manilow, who recently sold his catalog to Hipgnosis Songs Trust.

Compared to most deals with artists, catalog negotiations are “more intense because you’re talking about a bigger and more valuable long-term asset, which will involve more thinking about intangible and tangible assets.” says Mark Kaplan, partner and West Coast Chief Music Officer for corporate management company Citrin Cooperman. “You’re probably more likely to hire other levels of professionals, like maybe a valuation expert or tax lawyers, because again, that’s just the size of the case. “

Beyond all the numbers, there is an emotional aspect to these sales. “It’s a little tricky, because there is sentimental value and your songs are like your children,” says Eric Custer, another partner of Manatt, who represents Neil Young, the Eagles and the Migos.

Hipgnosis founder Merck Mercuriadis spoke about this when he was invited to Tom Truitt’s ‘Smartest People in the Room’ webinar series on March 16.

“I never sit down with someone whose songs I don’t like,” he told interviewer Ralph Simon. “That’s the important thing to start with, to obviously demonstrate that you care about them, that you’re going to be a good surrogate parent for these kids, and that you care about them as much as their real parents.”

While a large number of artists have already taken the catalog bandwagon, music lawyers expect the pace to continue, especially with bidders going beyond obvious buyers including Hipgnosis, Primary Wave Music Publishing, Round Hill Music and Irving Azoff’s Iconic Artists Group to such institutional investors as Shamrock Capital and Vine Alternative Investments.

“I got a call from a friend of mine who just walked into a small publishing house and he’s looking to outsource a bunch of work,” says Biederman. “Everything bounces back, so one of us is on the sell side one day and the long side on the other.”

Music rights consultant and specialist Vickie Nauman notes that banks have come to view music as a reliable asset class, but for some investors these deals also represent status.

“Investing in music is like the new yacht. You are at the table with all your wealthy peers, and you used to say that you have your yacht in Marina del Rey or in the south of France, but now you want to be able to say that you bought from the catalog of an artist. You get that kind of bragging rights.

A key step in the process is setting up a data room, a secure site where parties can see all the numbers, analysis and contract details. For artists with catalogs spanning decades, a high-level summary will be prepared for release. Davis says these bridges generally cost in the five-figure range.

In addition to lawyers representing buyers and sellers, the cast of characters in these deals includes business leaders or artist directors. Appraisers and investment bankers have roles, and if the artist or writer’s entrepreneur is not in the mix, accountants are hired.

Citrin Cooperman is one of the business management companies that includes an Appraisal Review Team, which may be hired by parties who are not clients.

Another actor who could be involved is what lawyers call a “researcher” or a “broker”, some affiliated with sellers, others with buyers. Davis often appreciates their contributions.

“When you have eight to 10 listings per catalog at a time, you need help handling all the conversations, answering any due diligence questions a potential buyer might ask,” he says. “There are a lot of details that you have to hand in and it takes a long time, so the more people on board the better. “

“There are researchers who are really sophisticated and smart about this,” Custer explains. “They really understand the world of publishing; some of them worked for publishing houses. There are other younger ones who are trying to throw away 10 million emails and hope they make a bite to eat for the bucks. The porch light is on and the moths flock in.

Davis adds, “I’ve been doing this for a few years now, so when I’m approached by a so-called finder or broker and they vaguely say they have access to capital and we need to make some sort of exclusivity deal. with them, but they do not disclose who are the sources of capital, of course, I am suspicious.

Courtney Barnes went from publicist to publishing specialist six years ago. With the Isley brothers and members of the DeBarge family among his clients, he strives to add value to the process.

“I’m going to review the last few years of the writer’s statements from their publisher,” says Barnes. “Based on the quality of the songs and the amount of income for any combination of these assets, I will come up with a value for those assets in the market.”

Biederman cautions that using finders increases customer spending. “Suddenly, you pay twice, because finders are not lawyers. You basically pay the finder 5% and the lawyer 5%, you pay twice for the same service. Then if a business manager or personal manager is involved suddenly all the commissions start piling up and that’s a big part.

Speaking of money, when you read the next headline on a huge catalog deal, Davis suggests that you take those numbers with a grain of salt.

“Everyone lies about the size of their transactions,” he says. “Anyone who’s sold a catalog wants to shop around and say they got a bigger check than they got, so there are some wacky aspirations.

“They all involve NDAs,” he adds. “These are probably the most secure against gossip transactions I have ever made. If someone would call me and ask me if it is true that a customer has a certain number, and the number was so much higher, I cannot confirm that, and if the number is much lower, I cannot can’t deny it.