Paul Simon performs on stage during the Nearness Of You benefit concert at Frederick P. Rose Hall, Jazz at Lincoln Center on January 20, 2015 in New York City.
Ilya S. Savenok | Getty Images Entertainment | Getty Images
From Bob Dylan plugging his electric guitar on for the first time to Super Bowl commercials, there have always been moments in music history when die-hard fans accuse their idols of doing the unthinkable: selling out. But right now, “sell out” has a new connotation and it’s a booming market for both investors and superstar recording artists.
A wave of boomer rock icons are selling out their song catalogs. The moves the last of which was made by Paul Simon Point out a clear truth about the intersection of art and money last week: Music has always been a business where creative genius deserves to be rewarded with wealth. And it’s a business that is currently going through big changes from streaming and further disruption from the pandemic. Paul Simon’s offers, Bob DylanNeil Young (in Young’s case a 50% stake) and Stevie Nicks (80% of the rights to their songs), highlight key trends in the entertainment industry, capital markets, and wealth management.
Music publishers such as Hipgnosis Songs Fund and Primary Wave Music as well as conglomerates such as BMG, Sony, Warner Music Group and VivendiUniversal Music Group is buying top-notch song catalogs in big deals fueled by record low interest rates, with the belief that selling the rights to those songs through entertainment platforms will generate more lucrative returns in the future.
Larry Mestel, CEO of Primary Wave Music, the company that just acquired a controlling stake in the catalog of two-time Rock and Roll Hall of Fame candidate Stevie Nicks, told CNBC the economic environment that the coronavirus pandemic created have had a positive impact on companies looking to acquire large assets. This low interest rates Make borrowing easy, and high returns have created a perfect opportunity for buyers.
“They talk about a low interest rate environment and they can get 7% to 9% … and then increase that through marketing and get returns for teens. This is a very attractive place for people to invest money,” he said.
Music catalogs have also proven recession-proof, and the pandemic has only increased the number of deals done as the music industry goes through a massive disruption caused by the closure of live venues and touring.
The deals also come at a time when streaming music – despite all the controversy and skepticism of the musicians themselves about getting a raw deal – has proven to be an economic juggernaut, at least for the record companies. In 2020 Goldman Sachs forecast Global music sales would hit $ 142 billion by the end of the decade, an 84% increase from 2019’s $ 77 billion. Streaming will hit 1.2 billion users by 2030, four times what it was in 2019, and mostly benefits companies like Sony, which bought Simon’s catalog, and Universal, which acquired Dylan’s songs.
Worldwide streaming music revenue hit an all-time high as a percentage of the industry last year (83% according to a recent report) and it also favors the superstars. Spotify said it is mission is “giving a million creative artists the opportunity to live from their art”, but more recently Analysis of the New York Times Spotify’s data only shows about 13,000 generated $ 50,000 or more in payments in the past year.
It’s not just streaming, however. Once purchased, the rights to larger catalogs of acts can be used for dubbing placements that license music for a variety of media such as movies, television shows, advertising, and video games.
“From a publisher’s point of view, having the rights to a particular catalog that we can make available for dubbing is extremely valuable,” said Rebecca Valice, copyright and licensing manager for PEN Music Group. “A catalog can pitch its own just because of its legendary success.”
The more recognizable a catalog is, the more valuable it becomes for businesses to buy and use films or television. The best catalogs “pay off over time,” she says, as syncing helps win back the money spent, “and then some over time”.
“I think the icons and legends are worth more than the other artists,” said Mestel. Primary Wave owns the catalogs of stars like Whitney Houston, Ray Charles, Frankie Valli and The Four Seasons.
Some famous boomer-era musicians have grappled with the situation the industry has put them in, like David Crosby, who said in a December tweet, “I’m selling mine too … I can’t work …” and streaming stole my record money … I have a family and a mortgage and I have to take care of them so it’s my only option … I’m sure the others feel the same way. “
He sold his entire catalog to Irving Azoff’s Iconic Artists Group in March, which also recently acquired a controlling interest in The Beach Boys’ intellectual property, including part of the song catalog.
“Given our current inability to work live, this deal is a boon to me and my family and I believe these are the best people to do it with,” Crosby said in a statement setting out the deal was announced.
For the musicians themselves, there is a megatrend: the estate planning needs of America’s richest generation. Boomer musicians (and those who, like Simon and Dylan, were born just before the dawn of this generation in 1941) age, as do their fans. “Artists are getting older now so they can use cash and make estate plans,” says Mestel.
The downside, of course, can be the loss of control over an artist’s most valuable asset: the creative genius who made his career.
“These aging rock stars may want to cash out to care for their estates … but you lose some control of your brand and heritage depending on the protections you’ve put in place as part of the business,” said John Ozszajca , Musician and founder of Music Marketing Manifesto, a company that teaches musicians how to sell and market their music.
Crosby and Azoff have been friends for a long time, a point Azoff addressed in the deal’s disclosure.
Some fans aren’t particularly happy to hear hits like Nicks’ “Edge of Seventeen” or Dylan’s “Like a Rolling Stone” selling cars and clothing – although Dylan has made several Super Bowl commercials for GM, IBM and his has songs featured in others alone – but choosing to sell catalogs can also help musicians avoid posthumous litigation like Tom Petty’s estates. prince, and Aretha Franklin had to endure.
BMG acquired the catalog interests of Nicks’ bandmate Mick Fleetwood of Fleetwood Mac earlier this year, and in its announcement noted some stats that show that, as old as boomer acts, they can get a new lease on life from streaming viral hits . The Fleetwood Mac song ‘Dreams’ generated over 3.2 billion streams worldwide (in a period of eight weeks from September 24 to November 19, 2020) based on a video with a cranberry juice-loving fan and introduced a new generation who is used to TikTok to Fleetwood Mac. The band’s album “Rumors” peaked at number 6 on Billboard’s Streaming Songs chart 43 years after its release.
Dylan’s deal is the largest to date, valued at $ 300 million, although no sales price has been officially announced, and Universal said in only one publication that it was “the most significant music publishing deal of this century.”
Mestel believes the boom is not going to end.
“It seems like anyone who has a relationship in the music business knows that someone is trying to raise money. But that doesn’t mean they can identify assets to sell or even know what they’re doing.”
BMG and private equity giant KKR recently signed a contract to make a major acquisition of music rights and as a One executive told Rolling Stone“We’re not chasing hits after January 2021. We’re looking at a repertoire that has proven to be part of our lives.”
KKR has had big music deals in the past and the trend of buying rights is not new, but the current boom is remarkable and fits in with the asset class appreciation that is taking place in so many parts of the market as investors look for more avenues in their business Bring money to work. While the boomer deals are the biggest headlines, the latest acts are also seeing big paydays. Earlier this yearKKR bought a stake in OneRepublic’s Ryan Tedder catalog for an allegedly large sum.
Companies like Primary Wave are partnering with artists like Nicks to try to keep them as part of the deal and make that deal even better for them in the future, according to Mestel, who says many didn’t understand they were signing a contract partnership, sell a piece of their catalog, and that piece may become more valuable in the future than the 100% they previously owned.
“If everything goes right, [artists] Get the most of what they want to sell it for and it’s usually a win-win scenario for both buyers and sellers, “Valice said.