Our most beloved classic rockers, both living and dead, are cashing out and selling off their legacy songwriting catalogs. Like Tommy Lee Jones faced with Javier Bardem’s Anton Chigur in No Country for Old Men, some are finding today’s music business to be no country for old artists. Stevie Nicks, Bob Dylan, and Bruce Springsteen have all sought to cash in on their highly coveted catalogs over the past year.
The announcement of Springsteen’s catalog sale to Sony Music Group just a few weeks ago turned more than a few heads. “Industry reports placed the purchase at north of $500 million,” NPR’s Neda Ulaby said in her analysis of the mega-deal. Half-a-billion dollars would have been practically unthinkable in prior years.
Springsteen’s was the highest payout to date in a financial race-to-the-top that has quickly escalated over the last year. Nicks sold off the majority of her publishing rights to Primary Wave Records in a deal worth nearly $100 million. Universal Music Group snapped up Dylan’s catalog to the tune of $400 million. The cash register hasn’t been ringing just for living artists, either; David Bowie’s estate handed Warner Music Group the rights to the legendary singer’s legacy in exchange for $250 million.
While mega-deals are nothing new to the music business, they are unique for legacy catalogs. Usually, deals worth hundreds of millions of dollars are reserved for entertainers in their prime revenue-generating years that can provide 360-degree deals that include albums, touring, and more. Why the sudden value-spike for the rights to decades-old songs?
Call it the perfect financial storm: Companies looking to acquire catalogs can get capital at historically-low interest rates, while aging artists are facing potential new tax hurdles, and the booming expectations of Wall Street have everyone eager to cash in on sky high valuation predictions.
“It seems like anybody that has a relationship in the music business that knows anybody is trying to raise money,” Larry Mestel, CEO of Primary Wave, said to CNBC. Interest rates continue to linger near historic lows. Companies that can leverage at these low rates are looking at the catalogs of popular legacy artists as a great investment for long-term returns. The music business continues to splinter, making new blockbuster acts hard to find or create, and there is a massive population that already adores the artists with whom they grew up.
How lucrative are the projected returns? Goldman Sachs predicts global music revenue will rise to $142 billion by 2030, with streaming luring in nearly 1.2 billion users. The pandemic has pushed projections even higher, as many consumers spend more of their time at home, putting more and more of their entertainment budgets toward streaming services, where legacy catalogs are extremely valuable.
For aging artists, the decision to part with these catalogs are mostly about business and investment savvy. As with interest rates, tax rates on capital gains have been low in the United States, as well. Now, with the Biden administration pushing for a higher top-tier tax on capital gains, artists are doing the math and betting that a one-time 20% tax hit will be more palatable than paying potentially-higher annual rates in the future. Rolling Stone’s Tim Ingham and Amy X. Wang summed it up like this: “Exchanging [potentially higher annual tax rates] for a one-time multi-million dollar payout with 20% tax can be a lot more prudent.”
While some may call it “selling out,” it’s important to note most of these artists are entering their twilight years, and are now planning for end-of-life, not just the twilight of their recording and touring careers. But instead of thinking your favorite legacy artists have sold out, consider that they’re simply calling it a day, leaving publishing-rights wrangling to the suits. Now companies and fans are pondering a different question: What big rights deals are coming next? It’ll be fascinating to see what happens, and how it affects the music we love.
