Expert Explains Why All Your Classic Rock Heroes Are Selling Their Catalogs Now

Earlier this month, Bruce Springsteen made history by selling his entire work – his catalog of compositions and his masters – to Sony for $ 550 million. Springsteen’s deal is by far the largest of its kind, but is just the latest example of what has become a growing trend: older rock stars are making money by selling their publishing rights for money. huge.

Last year, Bob Dylan sold his entire catalog of compositions to Universal Music Publishing for over $ 300 million. Neil Young, Stevie Nicks, Paul Simon, Tina Turner, the Beach Boys and David Crosby have all followed suit with similar deals. But why, all of a sudden, are investors so willing to spend hundreds of millions of dollars on songbooks?

According to David Chidekel, a partner at Early Sullivan Wright Gizer & McRae LLP who represents clients in the media and entertainment industries and has overseen countless transactions related to intellectual property and licensing matters, increasing streaming revenues as well. that blockchain technology, cryptocurrency, and DTVs are likely a factor.

“I think investors are starting to believe that there is going to be an upsurge in different ways of exploiting content that was not there before,” Chidekel told InsideHook. “They’re betting that if they come in now, the long tail isn’t going to go down, it’s going to go up, at least to some extent, and then they can sell their assets at some point to someone else for good. more than he paid for. This is the bet.

Of course, only time will tell if this bet pays off, but even given the enduring popularity of an artist like Springsteen, it’s hard to imagine a company like Sony getting a favorable return on a $ 550 million investment. . But as Chidekel points out, that’s not necessarily the problem.

“They will never get their money back, but they don’t care because they have a strategic reason to do so,” he explains. “It’s not a return on your investment on that investment, because any financier considering a deal would say, ‘Wait a minute, this thing is making X amount per year.’ How many times do you pay X? How do you get your money back? ‘ You can not. The company that pays ridiculous amounts of money has a strategic need to have this particular thing, because they know that with this particular thing, they can sell their business for a ridiculous amount of money to someone. else. It’s not just this transaction. It’s not just a dollar-for-dollar return on investment conversation. It’s more strategic: “We want market share. We don’t care what we spend. We don’t care if we are profitable. We mean we have 45% of the blah, blah, blah market. So that fills that out for us, tick that box. So I think that’s probably what it was. Anyone who promoted this internally at Sony, there’s a strategic reason they did this.

Meanwhile, from an artists point of view, that kind of money is just too good to be left out. Especially for older artists whose market appeal may start to wane as they get older, this is an opportunity to put their succession in order. As Chidekel puts it, Springsteen probably couldn’t turn down a deal that would give her family everything they might need long after she was gone.

“He’s not a child,” he said. “He’s getting old, he has a family and all that. And it’s like, ‘If I lock this down now, half a billion or more, then I know they’re taken care of. If I don’t, bad things could happen after I leave. Someone could do all kinds of terrible things in the library and this [could] have no value and my children are losers. You know what I mean? Unscrupulous representatives or stupid family members. That way they can’t mess it up. He knows the family is being taken care of.

In fact, Chidekel recommends that artists wait until they are Springsteen age or older if they plan to sell their catalog. “I wouldn’t recommend anyone to sell anything when they’re young because you don’t know what your catalog will be,” he says. “If you have two hit songs, someone will give you some money for it. They’ll buy a piece of it for a little while. But if you have 20 hit songs, you can get a lot more. Give it time. “

Of course, the biggest criticism of agreements like Springsteen’s is that artists sort of “sell” by giving up the rights to their life’s work. That’s a fair point, but many of them include stipulations on exactly how the music can be used. “From what I heard, Springsteen was able to get a number of marketing restrictions, which probably made him feel comfortable with it,” Chidekel said. “Like, ‘Yes, I’m going to sell you my stuff, but you can’t use it for political advertising without asking my permission. You cannot use it for religious purposes without my permission. Stuff like that. From what I understand, he received a bunch of these kind of marketing restrictions. Without them, maybe he wouldn’t have done it.

Ultimately, he says, it’s those restrictions that make him feel comfortable advising his customers to consider selling their catalogs.

“I think the key questions [for a client considering selling] are, is there a way for you to authorize it rather than selling it directly? Otherwise, okay, you have to sell it, ”he explains. “If you sell it, can you get a reversion?” That is, can you get the rights back after a certain period of time? If the answer is no and the only option is to sell this thing, then I would say, first of all, how much money do you get for it? I would be wary of anyone who doesn’t put enough money on the table. I would be wary of anyone who wouldn’t agree to the marketing restrictions – I never would. I would say if the money is enough then you take it and then you can do other things with it. And as long as you know they’re not going to do things with your art that are going to piss you off, let it go.

After all, there is something to be said for hitting while the iron is hot, and Chidekel says the success (or lack thereof) of the Springsteen / Sony deal will likely have a big impact on how many additional companies willing to invest in catalogs of compositions. In the years to come.

“If Sony is doing great, then you’ll see more and more of it,” he says. “If Sony, in two years, has been a disaster, we will see less and less. “