Neil Diamond, iconic songwriter and king of blue jeans, is the latest artist to announce the sale of his back catalog, after striking a deal with Universal Music Group for an undisclosed amount for his song catalog and rights recording.
It’s the latest high-profile and likely high-value (although details weren’t disclosed) deal for a veteran artist in recent months.
Universal (UMGP) recently bought the rights to Sting’s song catalog for around $300 million, Sony (END) – Get the Sony Corp report. bought the rights to master recordings and music publishing rights from Bruce Springsteen for an estimated deal of over $500 million and also purchased Paul Simon’s catalog for an undisclosed amount.
Funk Gods the Red Hot Chili Peppers have sold their catalog of songs to Hipgnosis Song Management for a deal estimated at over $140 million. Stevie Nicks, the White Witch herself, sold her catalog to Primary Wave for $100 million. Mötley Crüe sold its rights to BMG Rights Management for $150 million, which is certainly something to cry the hell out of.
John E. Seay spent 10 years as a touring musician, tour manager and music writer before going to law school “specifically for entertainment law,” he says. “I was mostly doing music at that time, probably 80-85% music-based.” Last year, he formed Carter Woodard with two other entertainment lawyers.
He’s seen a lot of offers in his time, and says “it’s an interesting time right now with very strong speculative valuation of music. It’s a good time to cash in on those evergreen copyrights,” he says. “And it’s relatively low-risk, because these catalogs generate income, and it’s a fairly stable income.
“And it won’t be as affected by market forces,” he adds, “which is why some venture capital firms or pension funds are buying interests in some of these assets right now.”
What exactly is purchased?
For most of this century, the music industry was largely in tatters, as Napster and the rise of digital piracy devastated the record companies’ profit base.
While artists were able to make money from touring and merchandise sales, it was a much tougher time for record labels, who had to resort to maneuvers such as 360 Deals, in which record labels get a portion of an artist’s entire revenue stream, including merchandise and touring revenue, in exchange for increased promotional support, or in the case of the legendary record executive and founder of Interscope Jimmy Iovine, they started selling headphones.
It’s worth noting, of course, that many music fans and artists didn’t really feel sorry for the record labels’ misfortunes. But anyway, once Spotify (SQUARE) – Get the Spotify Technology SA report and Apple Music (AAPL) – Get the Apple Inc. gained a foothold in the market, the music industry slowly returned to profitability.
Artists continue to complain about Spotify’s low royalty rates, and while it’s certainly safe to argue that the services aren’t ideal for younger or “middle-class” artists, streams for veteran artists very prominent have increased, seeing a big boom during the pandemic. According to The Atlantic, old songs now make up 70% of the US music market, and radio stations are putting “fewer new songs in their rotation” and “completely ignoring new music in favor of old hits”.
While this isn’t exactly good news for newcomers, it does represent an opportunity for both investors and classic rock types. “I’m not convinced that the artist selling their catalogs and getting attention for it isn’t making money from streaming,” Seay says. “I would watch the Beatles. They haven’t been on Spotify that long, and I’m sure they have hundreds of millions of streams.
Seay says the first big sale that started this trend was Bob Dylan’s sale of his songwriting catalog of over 600 copyrights to Universal Music Publishing Group in late 2020 for an estimated deal of between 300 and 400. millions of dollars. In January, Dylan also sold his catalog of recorded music to Sony Music. “It was quite eye-catching because he was someone who obviously has a huge catalog that’s worth a lot of money.”
The main way new catalog owners will make money over time is through performing rights organizations such as ASCAP and BMI, which monitor circulation and collect payments.
Once a catalog is purchased, the new owner can potentially, with the artists’ permission, seek commercial placements and syncs in film and television, though Seay says that’s likely a secondary concern.
What’s in it for artists?
Some artists choose to sell only the copyrights to their songs, so in that case they could still receive publishing royalties if one of their songs was used in a commercial, even if the new owner would get most of the profits. When an artist also sells their publishing rights, they potentially sacrifice future royalty payments, but they don’t necessarily have to sell 100% of their royalties, as many investors are eager to work with artists and can to conclude an agreement.
Prince changed his name to an unpronounceable symbol because he felt he had no control over his music. Taylor Swift is currently re-recording her back catalog, in part to protest that record executive Scooter Braun acquired and then sold her masters without her permission. But Seay says that for artists of a certain age, who once zealously kept their publishing and catalogs behind, thinking has changed in recent years.
“Sometimes you have twin forces at play. On the one hand, there are artists talking about their copyright ownership and the importance of that. But on the other hand, some artists are cashing in, which is mostly older legacy acts, because to get that level of money, you have to have evergreen copyrights that make money year after year says Seay.
Seay also notes that there are tax benefits for the artist to sell early, as tax laws can change over time and it could be a way to not pay a higher rate down the line. “I had a business owner tell me that there might be a loophole that could be closed when it comes to capital gains versus income tax, but that goes beyond really my reach.”
Artists retain some control
Springsteen rarely does commercials, and the Red Hot Chili Peppers do not allow songs for commercials. Many artists, such as Springsteen, Dylan and Peppers, have an openly progressive politics and may object, for example, to their songs being allowed for certain political causes or certain politicians they oppose. According to Seay, artists can negotiate a veto over how their music is used.
“It’s really just negotiation and bargaining power. I’ve always, in every publishing deal I’ve entered into, set up approvals for certain categories of stuff,” Seay says. “We call them the vice category, like alcohol, cigarettes, Triple X movies, you know, M-rated video games. We do women’s products, political campaigns, things like that. And I think sometimes we can get full approval, whatever it is. So I’m sure those artists have them in their contracts and those that are also made in those big catalog sales.
Besides endorsement, Seay says the main concern for artists is to make sure they get what they’re worth. “I mean, they’re losing the ability to resell the catalog down the road or at least not for many, many years.
“So, you know, some artists may regret not getting those rights back. For nostalgic reasons, maybe they don’t want some retirement fund or some big corporate conglomerate to own those compositions that they’ve written,” he said. “But I don’t really see any downside provided you get market value.
The Red Hot Chili Peppers are known for “not stopping,” as they have a new album on the way as well as a summer stadium tour, and Springsteen and Dylan continue to keep busy. (Springsteen’s fans are begging him to tour with the band E-Street again.) So these deals don’t necessarily indicate that these artists are looking to hang up the guitars right away, just that they’re making plans for it. future and enter when the obtaining is good.