In 1972, a struggling New Jersey musician rushed to Manhattan to audition for Columbia Records, using an acoustic guitar borrowed from the former drummer.
“I had to carry it ‘Midnight Cowboy’ style on my shoulder on the bus and on the city streets,” rocker Bruce Springsteen recalls in his memoirs.
Half a century later, he can withstand a lot of guitars. Last week, Sony, which now owns Columbia, announced it had acquired Springsteen’s entire collection of work — his recordings and catalog of songs — for what two people briefed on the deal said was about $550 million.
The price, perhaps the richest ever paid for a single musical act, caused jaw droppings throughout the music industry. But it was only the latest huge deal in a year when the catalogs of several prominent artists were sold out, yielding staggering prices.
The catalog market was already booming a year ago when Bob Dylan sold his songwriting rights for more than $300 million, but it has since maintained a steady boil. Major artists who have recently sold their work include, in whole or in part, Paul Simon, Neil Young, Stevie Nicks, Tina Turner, Motley Crue, Shakira, Red Hot Chili Peppers, many for payments of eight figures or more. The industry is buzzing about impending deals for Sting and David Bowie’s songwriting catalog.
Almost everything is being handled now,” said Barry M. Masarsky, an economist who specializes in calculating the value of music catalogs on behalf of investors. “In the last year alone, we conducted 300 valuations worth more than $6.5 billion,” he added.
Not long ago, music was seen as a collapsed business, with piracy rampant and sales plummeting. not longer.
Streaming and the global growth of subscription services like Spotify, Apple Music, and YouTube have transformed the fortunes of the industry. One result is the high prices of music rights catalogs for both the recordings and the songs themselves.
New investors, including private equity firms, have poured billions of dollars into the market, viewing music fees as a kind of safe commodity — an investment, somewhat like real estate, with predictable rates of return and relatively low risk.
For major music conglomerates like Sony and Universal, which bought Dylan’s songs, these deals help them build strength and gain negotiating leverage with streaming services and other tech companies, such as social media, exercise services or gaming platforms, that often cut blanket deals to use their music. .
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Despite the popularity of young works such as Drake and Dua Lipa, old material dominates the Internet. According to MRC Data, a tracking service that powers the Billboard charts, about 66 percent of total music consumption — of which live broadcasts is the largest portion — is for material older than 18 months, and that number has been growing rapidly.
And for artists, the sale can bring tax benefits. Royalties are usually taxed as ordinary income, while catalog selling can be considered capital gains, which usually have lower rates.
Artists like Springsteen, 72, are part of the generation of music stars who, beginning in the 1970s, began to dominate their businesses in droves, in ways that previous generations hadn’t.
“A lot of artists were exploited in the 1950s and ’60s,” said John Branca, Michael Jackson’s longtime lawyer who is now one of the executors of the Jackson estate. “With the advent of better legal and administrative representation in the 1970s and 1980s, there was a drive for artists to gain more power, more influence, and eventually own their own business.”
Many of these stars are now pulling the last lever of that control by making the decision to sell, in numbers unimaginable even a decade ago, say several CEOs and artist consultants.
The desire to control is now reflected in younger stars such as Taylor Swift, who has campaigned publicly about the importance of artists owning their work and has criticized the market in which song catalogs are bought and sold without the participation or consent of the creators. In Swift’s case, she went so far as to re-record her own songs, in part to control earnings from those tracks.
said Bill Werdy, Syracuse University’s Bandier program director on the music industry and former editor of Billboard, the music business publication.
In general, selling means giving up control, and buyers usually want to fully exploit the asset to earn their investment.
In Springsteen’s case, negotiations over the sale of Sony included discussions about limiting how his work could be used in the future, with particular concern about any ads featuring two of Springsteen’s most popular songs, “Born in the USA” and Born to Run, according to three people familiar with the matter. The deal they declined to be named because they are not authorized to speak publicly about it.
Throughout his career, Springsteen has consistently refused to license his music to advertising, despite making his first-ever commercial appearance in February in a pocket ad for the Super Bowl, delivering a message about the need for “common ground” in the United States. (The soundtrack wasn’t one of Springsteen’s hit songs but it’s a great song composed by Springsteen and Ron Aniello.)
Sony and Springsteen representatives declined to comment on the terms of the deal.
Springsteen, one of the most successful singer-songwriters in pop history, has made two major deals with Sony. One was for the so-called master recordings, the sounds of his music as captured on albums and singles. The other, sometimes described as a music publishing, has to do with his songwriting rights — the lyrics, melodies, and musical structure of hundreds of songs he’s written. With both sets of rights, Sony will have complete control over future use and earnings of Springsteen’s music and lyrics, excluding any restrictions that were part of the deal.
According to an estimate by Billboard, Springsteen’s music catalog — his recordings and songwriting — earns about $17 million a year, after costs.
Many older artists see this as the time to sell – while their music remains popular, market conditions are favorable.
But behind the scenes, there was often a heated debate between the artists and their advisors about the sale. For many of the most savvy players, the key question isn’t so much about price as what it offers, as private equity players and other financial professionals – sometimes buying catalogs outright and sometimes just providing financing to niche companies – are getting into the difficult waters of protecting a legacy. Artists in the world of trade.
Jeff Gambol, who manages estates for Doors, Janis Joplin and other stars, said, “What would an artist over half a century in business mean if these assets suddenly disappeared in the heart of a massive hedge fund that had nothing to do with art, music, or legacy?”
While the headlines highlight those who decided to sell, there were some opponents.
Diane Warren, songwriter for songs like Celine Dion’s “Because You Love Me” and “I Don’t Want to Miss a Thing” by Aerosmith, told Rolling Stone that selling her catalog “would be like selling my soul.” When asked if Michael Jackson’s estate would consider selling the rights to Jackson, which could be worth more than $1 billion, Branca said, “I don’t think I would ever sell.”
But as prices rise, it may become difficult for the naysayers to resist.