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

Earlier this month, Bruce Springsteen made history by selling his entire body of work – his songwriting catalog and 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 cashing in by selling their publishing rights for colossal.

Last year, Bob Dylan sold his entire songwriting catalog 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 offers. But why, all of a sudden, are investors so willing to spend hundreds of millions of dollars on song catalogs?

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

“I think investors are starting to believe that there’s going to be an upsurge in different ways to exploit content that didn’t exist before,” Chidekel told InsideHook. “They’re betting that if they go 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 for someone else to much more than he paid in. That’s the bet.

Of course, only time will tell if that bet will pay off or not, 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 an investment. of $550 million. But as Chidekel points out, that’s not necessarily the point.

“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 about a return on investment on that investment, because any financier looking at a deal would be like, ‘Wait a minute, this thing makes X amount a year. How many times do you pay X? How do you get your money back? You can not. The business that pays the ridiculous amounts of money has a strategic need to have that particular thing because they know that with that particular thing they can sell their business for a ridiculous amount of money to someone else. It’s not just this transaction. This isn’t just a dollar-for-dollar ROI type conversation. It’s more strategic, ‘We want market share. It doesn’t matter 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 in for us, check that box. So I think that was probably what it was about. Whoever promoted it internally at Sony, there’s a strategic reason why they did it.

Meanwhile, from an artist’s point of view, that kind of money is just too good to pass up. Especially for older artists whose commercial appeal may begin to wane as they age, this is an opportunity to get their estate in order. As Chidekel says, Springsteen probably couldn’t turn down a deal that would give his family everything they might need long after he’s gone.

“He’s not a child,” he said. “He’s getting older, he has a family and everything. And it’s like, ‘If I lock this in now, half a billion or so, then I know they’re taken care of. If I don’t, bad things might happen after I’m gone. Someone could do all sorts of terrible things in the library and that [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 all up. He knows the family is taken care of.

In fact, Chidekel recommends artists wait until they’re Springsteen’s 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 will buy a piece of it for a bit. But if you have 20 hit songs, you can get a lot more. Give him the time.”

Of course, the biggest criticism of deals like Springsteen’s is that artists somehow “sell themselves” by giving up the rights to their life’s work. That’s a fair point, but many of them include stipulations about exactly how the music can be used. “From what I hear, Springsteen was able to get a number of marketing restrictions, which probably made him feel comfortable,” Chidekel says. “Like, ‘Yeah, I’ll sell you my stuff, but you can’t use it for political ads without asking my permission. You can’t use it for religious stuff without my permission. Stuff like that. D “From what I understand, he had a bunch of them, these kind of marketing restrictions. Without that, maybe he wouldn’t have done it.

Ultimately, he says, it’s those restrictions that drive him to advise his clients to consider selling their catalogs.

“I think the key questions [for a client considering selling] is there a way for you to get a license rather than selling it outright? Otherwise, okay, you have to sell it,” he explains. “If you sell it, can you get a reversion? In other words, can you recover the rights after a certain time? If the answer is no, and the only option is that I have to sell this thing, then I would say, first of all, how much money are you getting for this? I would be suspicious of anyone who didn’t put enough money on the table. I would be suspicious of anyone who disagreed with marketing restrictions – I would never do that. 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 will upset you, forget it.

After all, there’s something to be said for striking 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 the number of additional businesses that are willing to invest in songwriting catalogs. In the years to come.

“If Sony does very well, you’ll see more and more of that,” he says. “If Sony, two years from now, has been a disaster, we’re going to see less and less of it.”

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