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, “sellout” 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 steps of which Paul Simon took the last last week point to a clear truth about the intersection of art and money: music has always been a business where creative genius deserves to be richly rewarded. And it’s a business that is currently going through big changes from streaming and further disruption from the pandemic. The deals of Paul Simon, Bob Dylan, Neil Young (in Young’s case 50% of the shares) and Stevie Nicks (80% of the rights to their songs) highlight important trends in the entertainment industry, capital markets and wealth management.
Music publishers like Hipgnosis Songs Fund and Primary Wave Music, as well as conglomerates like BMG, Sony, Warner Music Group, and Vivendis Universal Music Group, are buying up top-notch song catalogs in big deals fueled by record low interest rates, with the belief that they will generate more lucrative returns in the future by selling the rights to these songs through entertainment platforms.
Pick up cheap fuel music deals
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. These low interest rates make it easy to borrow money, 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 is going through a massive disruption caused by the closure of live venues and touring.
Streaming music is increasing
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 predicted that global music sales will hit $ 142 billion by the end of the decade. This corresponds to an increase of 84% compared to the level in 2019 of 77 billion US dollars and a streaming of 1.2 billion users by 2030, four times the level in 2019. Companies like Sony, who have bought Simon’s catalog, will benefit most from this , and Universal, who purchased Dylan’s songs.
Worldwide revenue from streaming music hit an all-time high in the industry last year (83% according to a recent report) and is also favoring the superstars. Spotify said its mission is “to enable one million creative artists to make a living from their art”. A recent analysis by the New York Times found that Spotify’s data generated only about 13,000 payments of $ 50,000 or more over 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 including 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.”
Appreciation of rock icons
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 regain 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. “
In March, he sold his entire catalog to Irving Azoff’s Iconic Artists Group, which had recently also acquired a controlling stake 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.
Boomer Generation Estate Planning
For the musicians themselves, there is a megatrend: the estate planning needs of America’s richest generation. Boomer musicians (and those born just before the dawn of this generation, like Simon and Dylan 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.
It seems like everyone who has a relationship in the music business knows someone is trying to raise money.
Larry Mestel
CEO of Primary Wave Records
Some fans aren’t particularly happy to hear hits like Nicks’ “Edge of Seventeen” or Dylan’s “Like a Rolling Stone” selling cars and clothes – 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 the posthumous litigation that they endured the estates of Tom Petty, Prince and Aretha Franklin.
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 an agreement for a major acquisition of music rights. A senior executive told Rolling Stone, “We’re not chasing hits as of January 2021. We’re looking for a repertoire that has proven itself.” be a part of our life. “
KKR has made 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 happening 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 year, KKR bought a stake in OneRepublic’s Ryan Tedder catalog for a supposedly 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.