For musicians sitting on beloved and extensive song catalogs, the times they are ka-chingin’.
Bob Dylan rocked the world last week by selling the rights to his entire songwriting catalog to Universal Music Publishing Group for a reported $300 million to $400 million. This may be the biggest acquisition ever of the music publishing rights of a single songwriter, the New York Times noted, as Dylan’s career has spanned almost six decades, and featured more than 600 songs and even a Nobel Prize in literature.
The scope of Dylan’s deal is also in a league of its own because he owned most of his own songwriting copyrights. And only the Beatles, perhaps, could rival this deal in value and influence. But Dylan isn’t the first artist to offload his catalog this year. In fact, artists have been selling parts of their songbooks in droves.
From the archives (Ooctober 2016):Bob Dylan is also a brilliant economist
Last month, Fleetwood Mac singer-songwriter Stevie Nicks sold 80% of her rights to her own songwriting catalog, including hits like “Landslide” and “Edge of Seventeen,” to music publisher Primary Wave for a reported $100 million. Pop/rock group Imagine Dragons sold their back catalog for more than $100 million to Concord Music Publishing in August.
And the Hipgnosis Songs Fund, a British company that buys hit catalogs and then gives investors the chance to make money from the royalties, spent about $670 million from March 2020 to September 2020 alone on acquiring the rights to more than 44,000 songs by Blondie, Rick James, Barry Manilow, Chrissie Hynde of the Pretenders and others. And now Dolly Parton is mulling a catalog sale, too.
‘It’s very possible that, for business reasons, estate planning, and family things, I might sell the catalog I have now. I’ve often thought about it and I’m sure that I could get a lot of money for it.’
While many of these musicians have remained tight-lipped about their motivations, industry insiders note that the time is ripe for many artists to let go of their life’s work — and for a princely sum, at that.
“It’s not a coincidence,” Rob Levine, the industry editorial director at Billboard, told MarketWatch. “There’s a lot of reasons why a lot of people are selling at once.”
So Levine walked MarketWatch through some of the reasons that singer-songwriters are signing over their songbooks right now.
The Spotify effect
“The boom in streaming has caused a boom in the valuations of music, both recorded music and publishing,” said Levine.
Music streaming revenues hit $10.3 billion in the U.S. in 2019, a 21% increase over 2018, according to the Digital Media Association’s 2020 Streaming Forward Report. And Spotify
the world’s biggest music streaming platform by subscribership, grew monthly active users to 320 million as of Sept. 30, and saw its paying subscribers hit 144 million, according to the company’s third-quarter earnings report. The data generated from streams and downloads also makes it easier to value a song’s worth and guess its future earnings, per a recent Billboard Insights report.
What’s more, music has proven to be recession-proof, which makes snapping up songwriter catalogs appealing during the economic ups and downs of the current pandemic. “The legendary publishing executive Marty Bandier once told me that music and booze are the only two industries that flourished when people are both happy and sad,” said Daniel Weisman, a wealth adviser at AllianceBernstein who specializes in working with artists, recently told Billboard.
Now songwriter catalogs are commanding sale prices 10 to 18 times annual royalties, the Wall Street Journal reports, compared with 8 to 13 times in previous years. The buyers can then monetize the song catalogs through streams, public performance rights, licensing for movies and TV shows, and so on. “You can create projects that use the songs — produce a movie, a Broadway musical, etc.,” Levine added.
And older hits are seen as safer bets because they’ve already stood the test of time. Some have even enjoyed a spike in popularity during the pandemic, such as “Dreams,” the 1977 Fleetwood Mac single written by Nicks. After a TikTok video showing a man skateboarding while “Dreams” played in the background went viral earlier this year, the song hit No. 21 on the Billboard Hot 100 in October, when it also saw its best-ever week of streams and download sales in the U.S. despite being almost 40 years old.
Low interest rates
Investors interested in buying music catalogs can stretch their dollars even further right now thanks to low interest rates across the world that have dropped even lower in light of the pandemic. Since the buying power of one dollar today is likely to be similar to that of one dollar tomorrow, buyers are more willing to pay more for a music catalog now than they would be if interest rates were higher.
“Same as when mortgage rates fall, home prices rise. … You can buy more house, and other people can buy more house, so now there’s competition and the price goes up,” Levine said. “In music publishing you’re dealing with investors and companies instead of families, but it’s not entirely dissimilar.”
And this drives up the cost that a catalog can command, which becomes appealing to artists who have been considering selling their work.
COVID-19 canceled touring
While the Food and Drug Administration has issued an emergency-use authorization for BioNTech
COVID-19 vaccine candidate, and American health-care workers have just started getting vaccinated against the novel coronavirus, that doesn’t mean life will be returning to “normal” anytime soon. So it may be some time before musicians will be able to go on tour — and the bulk of many artists’ income today comes from touring, according to a 2018 Citigroup report. It found that U2, for example, made 95% of its $54.4 million income in 2017 from touring, and less than 4% came from streaming and album sales.
“Some people say, ‘You’ll be going to concerts next summer’ … but it could take touring a while to come back. Are you going to be able to get on a bus and drive around and play 40 dates?” Levine said. “So some people could use the money.” And that could mean selling their catalogs.
In fact, David Crosby of Crosby, Stills and Nash and The Byrds tweeted that he plans to sell his catalog because he can’t work right now, and because “streaming stole my record money.”
“The one thing that I have, the one asset that I have, is the publishing rights,” he told NPR. “And selling my income stream that way allows me to — God, I hate the word even — retire and take care of my family.”
The capital-gains tax could go up
Capital gains are taxed at 20% right, but President-elect Joe Biden wants to lift that rate to 39.6% for people who earn more than $1 million a year. The prospect of a rate increase is spurring some wealthy Americans to accelerate making high-priced deals — like, say, selling a music catalog.
”Royalties are income, but the sale of a self-penned catalog is capital gains, and capital-gains tax is much lower” than income tax generally, Levine explained. (Indeed, artists can owe ordinary tax rates of up to 37% each year on royalty income from streaming and licensing their work, the Wall Street Journal notes.) “Every percent matters when you’re talking about $200 million, $300 million — that adds up to real money.” He doesn’t think a potential capital-gains tax increase alone has been pushing anyone to sell —- but if an artist was already considering selling a catalog within the next five years, a potential tax increase could be a catalyst for closing a deal now.
Alan Epstein, who chairs the entertainment and media group at law firm Venable LLP’s Los Angeles office, shared a similar sentiment with the Journal. “Many of these deals are not tax-driven, but some have a significant tax flavor,” he said.
Artists don’t want their catalogs fought over in court
Prince. Aretha Franklin. James Brown. Tom Petty.
Besides being beloved music legends, what do these icons have in common? They died without leaving wills to dictate how to manage their estates, and so the rights to their songs and other assets got tangled up in lawsuits.
“A lot of singer-songwriters of rock’s golden age are getting to an age where they are doing estate planning. What happens to this stuff?” Levine said. “Rock stars, some of them, have complicated lives, and the last thing you want to do is have everyone suing each other. There’s a personal connection to these songs. You want to protect them, but you don’t want them to drive people apart.”
In fact, Dolly Parton recently dished to Music Week that she’s also mulling a sale of her back catalogue of 3,000 or so songs, which include “I Will Always Love You” and “9 to 5.”
“I’ve owned my own publishing company for years and years,” said Parton. “It’s very possible that, for business reasons, estate planning, and family things, I might sell the catalog I have now. I’ve often thought about it, and I’m sure that I could get a lot of money for it.”
And while Levine noted that he can’t speak to what’s actually going on in Dylan’s head, the legendary artist is 79 years old. And selling your entire catalog, or deciding whom to leave it to, is a complicated transaction at any age, at any time. “It’s not the kind of thing you want to wait to do when you are not in good shape,” Levine said.
As noted, Dylan is in a league of his own when it comes to his catalog sale — except for the Beatles, of course. But the Beatles’ situation was also more complicated because one person didn’t own the rights to all of the songs, the way Dylan owned the rights to most of his work.
“A lot of creators are known for two big songs or three big songs … with Dylan, there’s ‘The Times They Are A-Changin,’ ‘Blowin’ in the Wind,’ ‘Like a Rolling Stone,’ ‘Knockin’ on Heaven’s Door,’ ‘Forever Young,’ ” Levine observed. “Universal bought everything, all the rights, all the songs — it’s incredible.”
“It’s a win for Universal, and I think it’s a win for Dylan, too,” he added. “I can’t imagine he needed to sell this; I think he wanted to sell it, and he wanted his songs owned by somebody who would take care of them.”