John Lennon once loudly screeched: “The best things in life are free. But you can keep ‘em for the birds and bees. Now give me money.”
The Steve Miller Band put it more aggressively: “Take the money and run.”
It seems many of their colleagues are finally getting the message, launching a gold rush for the music catalogues of the world’s most iconic names. Neil Diamond. Bruce Springsteen. Bob Dylan. Stevie Nicks. Paul Simon. Tina Turner. They have all cashed in. News of Neil Diamond selling his catalogue dropped earlier in the week. David Bowie’s estate sold his catalogue this year. John Legend in January. And many, many more, all in the past two years.
But why? And why now? Is it really just all about the money, or is something deeper at play here? We decided to take a look.
Whatever the reasons, the sales have the potential to shift power in the music industry for decades to come. Not all deals are the same, and the details aren’t 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 songs, there are two distinct copyrights. There’s the song composition (the arrangement of the music and the lyrics), and there’s the actual tangible sound recording of the music (known as the “master”).
Often, these copyrights are owned by different entities. Let’s examine the case of Taylor Swift. Her original contract with the label Big Machine was common for a young artist: It gave the label the copyright to her sound recordings, while she retained the copyright to her compositions.
This creates two streams of revenue, but it also requires the owners of both copyrights to sign off on any deal to license the song.
Here’s how it plays out in practice: Bob Dylan wrote and recorded the song ‘All Along the Watchtower.’ Jimi Hendrix later recorded and released a cover of the song, which gained far more popularity. Both of them have some claim to Hendrix’s version, Jason Karlov, a music lawyer who represented Dylan, told The Washington Post in 2019.
‘So if you want to put ‘All Along the Watchtower’ by Jimi Hendrix in your movie, you have to get the permission of the song owner, in this case Bob,” he said. You also have to get permission from “Hendrix, or his estate, or his record company — whoever owns the recording.’”
Is there a way for an artist to get out of these deals?
Many, if not most, recording contracts also include a “rerecord clause,” which prohibits an artist from doing exactly what Swift is doing now: rerecording their own tunes. In her case, the rerecord clause for her first five albums expired in November 2020.
Rerecording those original songs creates a second set of masters. So there are now two versions of, say, the song ‘All Too Well.’
Say Toyota wants to use the song in a commercial for its new Corolla. In the past, it would have needed permission from Swift (who owns the publishing rights) and from Big Red (who owns the copyright to the actual recording). Now, the company could theoretically license the new version of the song from Swift herself, as she 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 acquire both the masters and composition of a song will have a much easier time licensing the tunes. Owning publishing rights of the composition also opens new revenue streams, such as mechanical royalties, paid when a cover of an original song is recorded — to cite just one example.
And companies are paying handsomely to acquire both. Springsteen sold his catalogue to Sony for an estimated $550 million. The company also acquired Simon’s catalogue for an estimated $250 million. Bowie’s estate sold his to Warner Chappell Music for “a price upwards of $250 million,” according to Variety.
“For most of these headline acquisitions, we’re talking about both sets of rights being acquired fully,” said Larry Miller, director of music business at NYU Steinhardt.
Josh Gruss, who co-founded the music publishing company Round Hill Music in 2010, says he doesn’t decide what music rights to buy by their current popularity but by how popular it will be down the road.
The songs Round Hill has purchased looks like a decade-spanning hits playlist: ‘Under the Boardwalk’ by the Drifters, ‘Hit Me with Your Best Shot’ by Pat Benatar, ‘Cherry Pie’ by Warrant and ‘I Want it That Way’ by The Backstreet Boys.
“It’s a very low-risk, very safe, very annuity-like cash flow stream because it’s very diversified,” Gruss said. “You can make money from really everything music touches, whether it’s radio or streaming, 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, the Metaverse) has led to soaring valuations of music catalogues. As Miller put it, it’s an “investable asset, the value of which has only gone in one direction in recent years.”
Most of these acquisitions have involved older artists whose careers may be slowing down. Diamond is 81 years old. Dylan is 80 years old, as is Simon. Turner is 82. Springsteen is 72; Stevie Nicks is 73. Neil Young, who has sold half of his catalogue, is 76. “Let’s just say their most productive and remunerative years of artistic, creative and economic achievement are behind them,” Miller said.
For them, why not sell? Rather than leaving their family a “complex set of music rights,” artists can “leave them a large, investable financial asset,” Miller said. “A big pile of money.”
But some younger artists, such as Legend, also are cashing in. OneRepublic’s Ryan Tedder sold his catalogue to the private equity firm KKR & Co. for an estimated $200 million last year.
It may also come down to taxes. In 2006, President George W. Bush signed into law a tax cut that allows musicians to treat catalogue sales as capital gains rather than ordinary income, which is taxed at a far higher rate.
“I would not advise the sale of music catalogs for early stage or even midcareer artists at this point,” Miller said. “But for artists who have built large catalogs over long periods of time, it’s a great time to sell.”
The Biden administration, however, has proposed eliminating such “long-standing loopholes,” according to a statement from the White House. If that happens, selling one’s catalog might lose some of its appeal.
“The benefits of the capital gains treatment are obvious,” Miller said. There was a “rush to get a bunch of deals done” last year after President Joe Biden was inaugurated. And demand hasn’t abated. “The market is not even pausing to take a breath.”
Since that hasn’t happened yet, for now, it’s full steam ahead.
What does this mean if your name is not Bob Dylan, Bruce Springsteen or Tina Turner?
While the moment may ripe for the top one per cent of pop stars, everyone else is still feeling the squeeze of an industry in upheaval.
“It certainly doesn’t seem like good news to read that people like Dylan and Springsteen will sell their catalogs after holding onto their rights all their lives,” said Damon Krukowski, a music writer and member of the influential indie rock band Galaxie 500, which broke up in 1991.
“When we signed our first recording contract, we were told by our friends who were older in the industry and also our lawyer at the time, ‘They will ask for your publishing. Do not give it,’” he added. “Everybody knew that: Never sell your publishing. Because that’s all you’ve got if a record deal goes sour.”
To Krukowski, big-name artists making millions off their catalogues while the rest of the industry probably couldn’t sell their catalog for table scraps even if they wanted to points to the “wiping out of the middle class in the arts, as well as in everything else.”
When Nacho Cano, who records as Harmless, began making music, he didn’t consider the business realities.
“For the longest time, I thought like, ‘Oh, I wrote this song. I made the song. That’s it. If I sell a song, I get paid for the sale of the song, that’s it, right?’” he said. “The business side of things was a real learning experience.”
Harmless’s fan base exploded when his song ‘Swing Lynn’ went viral on TikTok. Its various versions have accumulated more than 150 million listens on Spotify.
Most musicians would capitalise on that success with a tour, which can amount for a large amount 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 digital distribution.”
So he’s educating himself about the business side of the music industry, boring as it could be. “It sucks, when all you really want to do is make songs about breakups or whatever,” he said. But his goal is simple: earning enough to continue making music professionally.
One day it might mean selling his catalogue.