John Lennon once shouted out loud:
The best things in life are free. But you can save them for the birds and the bees. Now give me money.
The Steve Miller Band put it more aggressively:
Take the money and run.
It seems many of his peers have finally gotten the message, launching a gold rush into the music catalogs of the world's most iconic names. Bruce Springsteen. Bob Dylan. Steve Nicks. Paul Simon. Tina Turner. All received.David Bowie's estate sold its catalog earlier this year;John Legend, earlier this month. And many, many more, all within the last two years.
But why? And why now? Is it really about the money or is there something deeper at play here? We decided to take a look.
Whatever the reasons, sales have the potential to change the power of the music industry for decades to come. Not all offers are created equal and details are not always publicly disclosed. But here's an overview of what's going on here.
What exactly are these musicians selling?
First, it's important to understand that for most music, there are two separate copyrights. There is music composition (arranging the music and lyrics) and recording the tangible sound of the music (known as "mastering").
Often these copyrights are owned by different entities. Let's examine the case of Taylor Swift. Her original contract with the Big Machine label was typical for a young artist: she gave the label the copyright to her sound recordings, while she retained the copyright to her compositions.
This creates two revenue streams, but it also requires both copyright owners to sign any agreements to license the song.
Here's how it works in practice: Bob Dylan wrote and recorded the song "All Along the Watchtower". Later, Jimi Hendrix recorded and released a version of the song, which gained much more popularity. Both have some claim to Hendrix's version, Jason Karlov, a music lawyer who represented Dylan,he told the Post in 2019.
"So if you want to put Jimi Hendrix's 'All Along the Watchtower' in your movie, you have to get permission from the owner of the song, in this case Bob," he said. You also need to get permission from "Hendrix". , or his estate, or his record company, whoever owns the record'”.
Is there a way for an artist to get out of these deals?
Many, if not most, recording contracts also include a "re-recording clause," which prohibits an artist from doing exactly what Swift is now doing: re-recording her own songs. In his case, the re-recording clause for her first five albums expired in November 2020.
Can Taylor Swift Re-Record Her Entire Song Catalog?
Re-recording these original songs creates a second set of masters. So now there are two versions of, say, the song "All Too Well" (which, by the way, is why everyone istalking about that scarf that seems to be going around the Gyllenhaal family again).
Let's say Toyota wants to use the song in a commercial for its new Corolla. In the past, you would need permission from Swift (who own the publishing rights) and Big Machine (who own the copyright to the actual recording). Now, in theory, the company could license the new version of the song from Swift herself, as it owns both.
Of course, Swift is an outlier. Most songs aren't recorded multiple times, which is at the heart of many of these recent deals.
Why are these copyrights so valuable?
Companies that buy the masters and composition of a song will find it much easier to license the songs. Owning the publishing rights to the composition also opens up new sources of income, such as mechanical royalties, which are paid when a version of an original song is recorded, to cite one example.
And companies are paying dearly to acquire both. Springsteen sold his back catalog to Sony for aestimated at $550 million. The company also acquired Simon's catalog for aestimated at $250 million. Bowie's estate sold his to Warner Chappell Music for "a price in excess of $250 million," according toVariety.
“For most of these large acquisitions, we're talking about both sets of rights being fully vested,” said Larry Miller, director of music business at NYU Steinhardt.
Josh Gruss, co-founder of music publishing company Round Hill Music in 2010, says he doesn't decide which music rights to buy based on current popularity. but because of how popular it will be in the future.
The songs Round Hill bought read like a playlist of decades-old hits: "Under the Boardwalk" by The Drifters, "Hit Me With Your Best Shot" by Pat Benatar, "Cherry Pie" by Warrant and "I Want It That" . ". by the Backstreet Boys.
“It's a very low risk, very secure cash flow, very similar to an annuity, because it's very diversified,” Gruss said. "You can really make money from anything that plays music, whether it's radio or broadcast, concerts, music in a bar or restaurant."
The exponential growth of streaming services and the emergence of new platforms that use music (think: TikTok, Peloton, Metaverse) has led to skyrocketing valuations of music catalogues. As Miller put it, it's an "investable asset whose value has only shifted one way in recent years."
Most of these acquisitions have involved older artists whose careers may be slowing down. Dylan is 80 years old, as is Simon. Turner is 82 years old. Springsteen is 72 years old; Stevie Nicks is 73 years old. Neil Young, who sold half of his back catalogue, is 76 years old. "Let's just say your most productive and rewarding years of artistic, creative and financial achievement are behind you," Miller said.
For them, why not sell? Instead of leaving the family a "complex set of music rights," artists can "leave them a huge financial asset to invest in," Miller said. "A big pile of money."
But some younger artists, like John Legend, are also cashing in. Ryan Tedder of OneRepublicsoldhis catalog for private equity firm KKR & Co. for about $200 million last year.
It can also come down to taxes. In 2006, President George W. Bush signed a tax break law that allows musicians to treat catalog sales as capital gains rather than ordinary income, which is taxed at a much higher rate.
“I wouldn't recommend selling music catalogs to early-stage or even mid-career artists at this point in time,” Miller said. "But for artists who have built large catalogs over long periods of time, it's a great time to sell."
However, the Biden administration has proposed closing these "longstanding gaps," according to a White House statement. If that happens, selling someone else's catalog may lose some of its appeal.
“The benefits of capital gains treatment are obvious,” Miller said. There was a "scramble to close a bunch of deals" last year after President Biden took office. And the demand has not diminished. "The market doesn't even stop to breathe."
Since that hasn't happened yet, we're full steam ahead.
What does it mean if your name isn't Bob Dylan, Bruce Springsteen or Tina Turner?
While the timing may be right for 1% of pop stars, everyone else is still feeling the pinch of an industry in turmoil.
"It certainly doesn't sound like good news to read that people like Dylan and Springsteen are going to sell their back catalog after retaining their rights for life," said Damon Krukowski, music writer and member of the influential indie rock band Galaxie 500, which broke up. in 1991. .
“When we signed our first record deal, our older friends in the industry and also our lawyer at the time told us, 'They're going to ask you to publish. Don't give,'" he added. “Everyone knew this: never sell your posts. Because that's all you get if a record deal goes bad."
For Krukowski, big-name artists who make millions from their catalogs while the rest of the industry probably couldn't sell their catalogs for scrap metal, he points to the "elimination of the middle class in the arts, as in everything else".
When Nacho Cano, who records as Harmless, started making music, he hadn't considered the reality of the business.
“For a long time, I thought, 'Oh, I wrote this song. I made the music. That is all. If I sell a song, I get paid for the sale of the song, that's all, right?'” he said. “The business side of things was a real learning experience.”
Harmless' fan base exploded when his song "Swing Lynn" went viral on TikTok. Its different versions accumulate more than 150 million listeners on Spotify.
Most musicians would capitalize on this success by touring, which can make up a large portion of an artist's income. But, as he said, "when you don't have access to a tour because of [pandemic-era shutdowns], the money really is in the digital distribution."
So he's been educating himself on the business side of the music industry, as boring as that is. “It sucks when all you really want to do is make songs about breakups or whatever,” he said. But his goal is simple: earn enough to continue making music professionally.
One day that might mean selling your catalogue.
This man will be responsible for David Bowie's money and music
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