Over the last six months, Neil Young, Bob Dylan, Stevie Nicks, Lindsey Buckingham, Calvin Harris, RZA, Shakira, Debbie Harry and Chris Stein of Blondie, Chrissie Hynde of The Pretenders, and Barry Manilow have all sold their song catalogs, exchanging ownership of their life's work for gigantic lump-sum payments. In all but two cases, the buyers weren’t traditional music companies like Universal, Warner, or Sony. They were private equity firms.
These firms have been shelling out 10 to 20 times what a given catalog earns in a year, paying artists tens or even hundreds of millions of dollars for their work. Collectively, they spend more than $4 billion a year on music, according to Barry Massarsky, the CEO of Massarsky Consulting, which advises most of the buyers in the market on their purchases. Two weeks into 2021, private equity firms have already bought catalogs from several marquee acts, including Young, Buckingham, and Shakira. And they're just getting started.
"You won't believe what's going to be transacted in the next month," Massarsky told VICE. "It's mind-numbing."
It's not hard to see why an artist might want to trade ownership of their songs for millions of dollars. What's puzzling is that so many of them are parting with their catalogs all at once—and that private equity firms are interested in buying music to begin with, much less paying top dollar for it. To understand what's behind the frenzy, you first have to understand exactly what it is these artists are selling. It's not music per se: It's a small, extremely specific, and extremely lucrative set of rights—rights that are becoming more valuable by the day.
Under the terms of most record deals, labels retain an artist's master rights, meaning they own the actual sound recordings an artist makes under contract. But artists retain their publishing rights, which means they still own the underlying compositions of their songs—the lyrics, melodies, and arrangements that comprise them. When an artist "sells their catalog," they're not selling their recorded music; in most cases, they don't actually own it. Instead, they're selling their publishing rights.
At first glance, these rights don't seem all that desirable. For every dollar of revenue a given song generates on a streaming platform like Spotify, about 58 cents go to whoever owns the master rights, 29 cents stay with Spotify, and just 12 cents go to the owner of the publishing rights, according to Mannatt, a legal and consulting firm with expertise in the entertainment industry. But streaming revenues only represent one piece of the publishing pie.
Every entity in the U.S. that broadcasts music—including radio stations, TV networks, bars, restaurants, hotels, and a host of other businesses—has to pay for the privilege. As dictated by U.S. copyright law, they don't pay the owners of the master recordings; they pay the owners of the publishing rights. These entities cough up more than $2 billion a year to the American Society of Composers, Authors, and Publishers (ASCAP) and Broadcast Music, Inc. (BMI), and those organizations divvy up the money among songwriters and publishers. The more a song gets played, the more money ASCAP and BMI pay out to whoever owns its publishing rights.
There’s been money to be made from publishing rights for decades; historically, private equity firms just haven’t had any interest in them.
Additionally, publishing rights holders earn money from what are called "sync licenses": one-time fees they charge when an ad agency or production company wants to use one of their songs in a film, TV show, commercial, or video game. Between earnings from sync licenses, streaming revenues, and royalties paid out by ASCAP and BMI, those who own publishing rights stand to make a considerable amount of money, at least if the songs they hold the rights to are popular.
There’s been money to be made from publishing rights for decades; historically, private equity firms just haven’t had any interest in them. But in 2010, a switch flipped. Josh Gruss, who studied music business and guitar at Berklee before getting an MBA at Columbia, started a private equity firm called Round Hill Music. His goal: to buy up as many catalogs as he could, from the biggest names in music he could find.
"It used to be really out there back when Round Hill started—like, way out on the outer-outer fringes of what might be in an investment portfolio," Gruss told VICE. "There was no pure-play investment fund for music rights, even though this is a business that's been around 100 years, and has a long history of making money for knowledgeable people in the space. I thought: Well, that's an opportunity."
Gruss found that the earnings from publishing rights didn't dip when the broader economy did. People still listen to music in a recession; radio stations still play it; movie and TV studios still license it. On top of that, he watched revenues from the catalogs he owned increase every year as streaming services like Spotify attracted more paying subscribers, which translated to more plays of his songs. He continued to purchase catalogs—currently, his firm owns more than 120, encompassing about 150,000 songs from artists including Bobby Darin, The Beatles, and Gil Scott-Heron—and soon, other financial players followed him into the market.
"Private equity got very excited," Massarsky told VICE. "All of a sudden, these funds started popping up like wild mushrooms."
To date, there are 12 to 15 private equity funds dedicated to buying up music rights, Massarsky said, about twice as many as there were just a few years ago. Investors like publishing rights because they're stable, reliably bringing in money even when the economy takes a downturn. They generate revenue from a variety of sources—ASCAP/BMI royalties, streaming, and sync licensing—meaning that even if one bucket suffers, the others remain strong. They're consistently earning more money year-over-year as streaming continues to grow in popularity. And according to Cherie Hu, a journalist and researcher who studies the intersection of music, tech, and business, some investors just like the novelty of having a stake in a well-known artist's oeuvre.
"Numbers aside, there's definitely a personal, emotional, vanity aspect to it," Hu told VICE. "An individual catalog might be appealing for an investor who's more emotionally driven: 'I want to own my favorite band's catalog from when I was growing up.'"
The most fiercely sought-after catalogs are those of legacy artists whose music has endured for decades: the Bob Dylans, Rolling Stones, and Stevie Wonders of the world. While they might not net as many streams and radio plays as, for instance, the latest Ariana Grande single, the numbers they put up are substantial—and crucially, they're consistent. A new release enjoys a burst of popularity, which comes with a financial windfall, but there's no way to know how many people will still be listening to it years from now. Songs that are ten years or older tend to generate a predictable amount of streams, radio plays, and sync deals every year. Investors know how much they stand to make from them going forward. Plus, according to Massarsky, as streaming becomes more profitable—thanks in large part to an influx of middle-aged paid subscribers—the amount of money classic catalogs earn grows with it.
"The best catalogs you can buy are timeless," Gruss said. "In general, it's things like Motown, or The Beatles, or Christmas songs, or classic rock songs. Those are going to be very consistent earners."
When Gruss founded Round Hill Music in 2010, a classic catalog typically fetched about five to eight times what it earned in a year, according to Hu. But with an ever-increasing number of private equity firms competing for these rights, and their streaming revenues continuously rising, catalogs are selling for ten, 15, or even 20 times what they make annually. The dollar figure attached to a multiple like that can be gargantuan: In December, Bob Dylan reportedly sold his catalog for almost $400 million.
“Some people are really testing the ceiling.”
With that much money being thrown around, artists who own their publishing rights are eager to cash in—especially older, established musicians, Massarsky and Gruss said. For one, their catalogs are the most valuable on the market. But beyond that, many of them have reached the age where they've begun estate planning, Massarsky and Gruss said. It's easier to leave $100 million to your heirs than it is to leave them hundreds of songs, each of which generates a different amount of money annually.
Some artists might be worried that the market for music rights has reached its peak; if they wait any longer to sell, they may miss their opportunity to get 15 or 20 times what their catalogs earn in a year. They could hold on to their publishing rights, believing they'll always be able to sell them later. But maybe they need a lump-sum payment for a big purchase; maybe they want to diversify their investments; maybe they just want a multi-million dollar payout while they're still young enough to enjoy it.
Regardless of their personal reasons for selling, Massarsky said, many artists have likely been emboldened by seeing so many household names offload their catalogs. If Bob Dylan and Neil Young did it, why shouldn't they?
"They read about it, and they want to be a part of it," Massarsky said. "You could continue to earn royalties, and hope that this market will never stop growing. But what if you're wrong? Nothing's worse than a value less than what you could have sold at a year ago."
Artists are under additional pressure to sell right now because of an impending change to the tax code, Massarsky and Hu said. As it stands, any artist who sells their publishing rights for more than $1 million has to pay a 20 percent capital gains tax on the transaction. Joe Biden has vowed to raise that rate to 37 percent, and artists want to sell before the hike takes effect. That may be part of the reason so many artists have sold their catalogs since November, Hu said, adding that we'll likely see a flood of sales before a change to the tax code can be made.
"I imagine we'll hear at least, like, one per week for the next three to four months," Hu said.
There's no way to predict exactly which artists might sell in the coming months, but the predominant buyer is all but guaranteed: Hipgnosis Songs Fund, an investment firm that's spent more than $1.7 billion on high-profile acquisitions since it launched in 2018. Its co-founder, Merck Mercuriadis, embarked on a buying spree last year, one that's continued into 2021 with purchases of rights to music by Adele, Beyonce, and The Chicks, along with Shakira, Young, and Buckingham's catalogs. He's managed to nab those rights for a simple reason, Hu said: He pays the most. Gruss typically won't offer an artist more than about 10 to 15 times what their catalog earns in a year, he said; any higher, and it becomes difficult to make a return on his investment. According to Hu, Mercuriadis regularly pays multiples of about 20, and sometimes more. (When reached by VICE, a representative for Mercuriadis said he wasn't available for comment.)
"Some people are really testing the ceiling," Gruss said. "Maybe they see the future in rose-colored glasses a little bit more than I do."
It makes sense for older artists to sell their catalogs now, when prices are at an all-time high and the popularity of their music has plateaued. But younger artists who join them might be cashing in too early, according to Guillermo Page, a former label executive and a professor in the University of Miami's music business program. Early-career artists' catalogs aren't proven, reliable long-term earners; because of that, buyers aren't willing to pay as much for them. By selling now, these artists risk leaving decades' worth of publishing income on the table. Even if a young artist manages to get 15 years' worth of publishing revenue for their catalog—which they rarely can, according to Hu—they're missing out on what they'd be earning in year 16, and every year thereafter.
"It's so important for the young ones to understand what they're doing, and to try to retain—in every possible case—ownership of the publishing side," Page told VICE. "Twenty years from now, thirty years from now, they can do what these [older] acts are doing right now."
But some young artists aren't willing to wait that long. Calvin Harris, who's 36, sold his catalog in October. Ryan Tedder, the 41-year-old frontman of OneRepublic, sold his earlier this week. A number of still-active songwriters and producers have done the same, including No I.D., the 49-year-old behind hits by A-listers including Drake and Rihanna, and Rodney Jerkins, 43, who's written songs for Justin Bieber and Sam Smith.
These artists have been paid lavishly for their publishing rights; according to Billboard, Harris's catalog was likely purchased for upwards of $90 million. But at a time when so many artists are preaching the importance of ownership, from Taylor Swift to Kanye West, it's strange to see young acts cede the rights to their work to private equity buyers. In doing so, they lose control of how their songs are used, allowing investment firms to license them—or even sell them outright—to anyone they please. And there's a chance these artists are getting short-changed, missing out on years of future income and the ability to sell their catalogs for more money later in life.
"There seems to be a contradiction between this trend and the rising conversation around the importance of ownership," Hu said. "We spent all this energy telling people that they have to own their masters, that it is so important to own your own work and not have to rely on other people. And then all of a sudden, we're seeing songs being tossed around like this between financial firms, many of which are not involved in music."
When an artist sells their catalog, they're putting stewardship of their music in the hands of a financial firm whose primary concern isn't artistic integrity—it's money. These musicians have an opportunity to make millions. It's up to them to decide whether you can put a price on owning what you create, and controlling the legacy you leave behind.
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