Catalog sales

Music catalog sales trend up as artists and investors seek revenue streams

Music catalogs have become more valuable than ever in recent years, and not just for the artists who created them.

For decades, the cardinal rule for aspiring musicians to follow was to “keep your publication”, both to control ownership of the work and – perhaps more importantly – to ensure that they would derive value from it. ‘money. But changes to tax laws, the music industry and the consumer landscape have created new opportunities for artists to sell their catalogs for huge financial gains, creating what many insiders are calling a “rush.” To Gold” for potential investors who may or may not have industry ties.

In December, Stevie Nicks sold an 80% stake in his catalog to New York music publishing company Primary Wave for $100 million, while Bob Dylan sold all of his more than 600 songs. to Santa Monica-based Universal Music Publishing Group for $300 million. .

Three months later, Paul Simon has received around $250 million from Culver City-based Sony Music Publishing for his catalog, which includes everything from “The Sound of Silence” with Art Garfunkel to his 1986 solo hit “You Can Call Me Al”.

The septuagenarians aren’t the only artists raking in big paydays: In August Ryan Tedder, OneRepublic singer and songwriter for Beyoncé, Adele and Leona Lewis, sold his catalog to private equity firm KKR & Co. Inc. in New York for $200 million.

According to Lucas Keller, managing director of Carthay-based music and sports talent company Executioners Los Angeles, which does business as Milk & Honey, artists sell their catalogs for several reasons. Some older deeds may not want their heirs to deal with their work. Others may simply want to guarantee that their beneficiaries will be taken care of after they leave. Or they want to sell in a way that helps them protect their legacy. Meanwhile, their younger counterparts may have lost opportunities to generate income from touring during the pandemic and need a financial stopgap, or they may have decided they no longer want to face the pressure of supporting the infrastructure and personnel that go with managing a catalog.

“Universal Music Publishing, Sony Music Publishing — they’re probably better people to leave your catalog to,” Keller said. “All the areas I’ve had to deal with over the years that don’t have proper administration, it’s an absolute headache, and it totally affects the money, and it affects the opportunities.”

Remaining power

For artists of all ages, Covid-related business disruptions have put their careers in a new perspective. But while high-profile catalog sales have only accelerated in recent years, the path to this explosion began 20 years ago when CD sales began to decline.

CD sales peaked in 2000 at 942.5 million units, according to the Recording Industry Association of America. Paid downloads were still in their infancy as a revenue stream three years later, even though peer-to-peer file-sharing services Napster and LimeWire facilitated huge thefts from industry coffers, resulting in lawsuits from rock band Metallica, rapper and producer Dr. Dre, and record labels A&M Records, Inc. and Arista Records who first drained corporate money through litigation expensive and then shut them down completely.

Nonetheless, the rise of streaming services like Spotify since 2006 has provided industry analysts with new ways to measure not only a song’s success, but also its endurance. Nearly in real time, an artist or label could monitor a song’s success and chart what insiders call its “decay,” or decline from its highest peak in popularity.
Boasting millions of dollars in marketing and promotion, new songs hit explosive highs, but their decline is steeper and faster than older ones that have been around for decades and can maintain their profitability simply by being revisited or rediscovered periodically.

“As a guy who sold a bunch of Justin Bieber songs, sorry Justin, you’re amazing, but I’d bet against Justin Bieber,” Keller said. “Some artists are going to be great artists in their lifetime and probably make more money than anyone else, but I’d much rather own ‘Ventura Highway’ (American) than a Justin Bieber single.”

“Stable” investment

Additionally, in 2006, the Songwriter’s Capital Gains Equity Act became law, allowing artists to treat their catalogs as capital gains when selling them in order to receive a separate, lower tax rate than traditional income. Some artists, such as Def Leppard, Aerosmith singer Steven Tyler and, on behalf of her late husband Kurt Cobain, Courtney Love, immediately capitalized on these industry shifts, negotiating deals with companies like Primary Wave to some or all of their catalogs, paving the way for others to follow in the years to come.

On the other hand, music companies saw a great opportunity to collect some or all of the catalogs from artists who offered ongoing revenue, especially if they controlled or received a portion of the revenue generated from sampling. , licensing or placement of synchronization in advertising and various forms. medias.

But music publishers weren’t the only ones to take notice, and groups of investors from diverse backgrounds soon began bidding against more established companies, and even major players like Sony and UMG.

“One of the things that’s attractive is stability,” said Stephen Sessa, co-chair of the entertainment and media group at Century City-based law firm Reed Smith. “Look at some of the people who are in the space: you talk about hedge funds that are backed by pensions. They want to put their money somewhere fairly stable.

Keller estimates that there are more than 100 companies, from private equity to family offices, currently trying to buy catalogs from institutional equity and other music companies.

“People come in and say, ‘Nobody really knows what the streaming market cap is,’ and that’s exciting,” he said.

This competition has driven prices up, which is why artists like Dylan and Nicks have been able to leverage their legacy into massive deals, and why Bruce Springsteen can confidently ask Sony for up to $415 million for his catalog of albums and his combined publishing rights, as he would have done this month.

But Brian Schall, a partner at Sawtelle-based law firm Wolf Rifkin Shapiro Schulman & Rabkin and a nearly 30-year veteran of the music industry, agrees that the decision to sell can be as personal as the decision to start. record music first.

“There are so many factors that are involved in making the decision,” Schall said. “My clients feel like they’re their kids. Like, ‘This is my life’s work, and this is what defines me. Do I really want to give them up to someone else? to maintain them, or do I just want to own them and have someone administer them where I could still have significant control, so I don’t hear my song in a McDonald’s ad?’ So it all depends on the mentality of the individual and what they want to achieve.