Unless you’ve been living under a rock, you’ll have recently seen in the news a glut of high-profile artists, writers and producers parting with all or part of their song catalogues and certain royalty streams to companies such as Hipgnosis, Universal Music Group (UMG), Primary Wave and Round Hill Music. Just in the last month, Bob Dylan sold the rights in his entire song catalogue to UMG for a figure reported to be in the region of $300m to $400m, while Lindsay Buckingham, Neil Young and Jimmy Iovine have all done big business with the UK-listed Hipgnosis Songs Fund Limited, whose market cap value stood at approximately $1.7bn back in September, and has just announced a further $200m increase to its Revolving Credit Facility in the last couple of days. So, what is the motive behind these titans of the music industry parting ways with their ‘babies’? A multitude of factors may be at play (see the recent tweets of David Crosby for one such alternative motivation), and this article looks at three of them.
First, it’s impossible to look past the huge sums of money involved in these transactions. Besides the figure reported to have been paid to Dylan in return for both the publisher and writer share of his 600 song catalogue, Hipgnosis acquired 50% of the worldwide copyright and income interests in Neil Young’s back catalogue in return for a reported $150m, whilst Primary Wave is reported to have paid $100m for a majority stake in Stevie Nicks’ catalogue. Even at the ‘lower’ end of the price scale, Johnny Rezenik of the Goo Goo Dolls sold his songwriting catalogue to New York-based Round Hill Music back in April 2020 for a reported $18m. With current interest rates and inflation at historic lows, investors are willing to pay more for a music catalogue today than they may be once rates increase again. Therefore, whether to buy a new house, to clear debts, to embark on a new adventure (the proceeds received by Iovine’s from the sale of his worldwide producer royalties are to be invested in building a new high school in inner-city Los Angeles), or to simply cover the drop-off in touring income as a result of the coronavirus pandemic, the huge payday will certainly have been a major, if not the biggest, factor.
2. Estate Planning
Second, there is the issue of estate planning. Many of those that have sold their stake more recently are in their 70s (Dylan (79), Buckingham (71), Young (75), Nicks (72)), and may have considered the destiny of their valuable catalogues if they were to fall into the hands of inexperienced family members, rather than entrusting them with industry experts such as Merck Mercuriadis, who managed the likes of Elton John, Guns N’ Roses and Beyonce before founding Hipgnosis. By selling now, rather than letting them form part of their estate, such artists can maintain an element of control over the destiny of their songs.
Finally, there is the timing of the deals. There is no question that we are in a music publishing rights acquisition boom, with more than $4bn being spent on buying catalogues in 2019 – a figure that will have been easily surpassed in 2020. The digital age has also breathed new life into decades-old songs, with “Dreams” by Fleetwood Mac being one such example when in October a TikTok video went viral, and triggered a sudden surge in streams of the evergreen song. Add in the recent election victory of Joe Biden, the Democrats’ taking control of both chambers of Congress following the victories in Georgia, and the president-elect’s planned major overhaul of capital gains taxes in the US (a potential increase for any songwriter selling a catalogue for more than $1 million from 20% to 37%), and there is another incentive for selling now at prices and acquisition multiples that have never before been seen in the music industry, and may never be seen again.
When any artist decides to sell their music copyrights and/or income streams in this way, there are a number of legal implications to think about. Having an experienced music industry lawyer to look over any contracts will give the artist peace of mind.
Please get in touch with Nick Weaser using the below details if you have any questions relating to the above article or music law more generally.
This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please note that the law may have changed since the date of this article.