> ‘ALL I WANNA DO’ IS MAKE MONEY IN JERSEY ISLAND
Rummaging through the records of offshore havens turns up a fairly predictable list of assets — real estate, cash, multinational companies shifting earnings to low-tax jurisdictions, hidden masterpieces by Picasso and other artists, antique cars, yachts and planes.
But musical memories? The songs that you danced to at your son’s wedding? The summertime hit you sang driving down back-roads or the reggae tune blasting at the beach? What are they doing offshore?
They’re there for the same reason as other assets — tax advantages. Skipping taxes helps increase earnings from intellectual property — patents, copyrights, trademarks and trade secrets — as well as other holdings.
Files from the Appleby law firm office on the island of Jersey, in the English Channel, include a cache of music publishing rights, a stream of royalties to be collected for music produced by artists that included John Denver, Duke Ellington, Chubby Checker (not your usual Jersey Boys) and Sheryl Crow.
It’s a music catalogue, held until 2014 by a Jersey-registered company and originally managed by another company registered in Ireland. Why Jersey? Its standard corporate tax rate is zero.
If the owner plays it right, music catalogues can be real money makers. “The music publishing industry generates around $6 billion (all figures U.S.) a year globally,” according to a 2015 analysis in the Berklee College of Music’s Music Business Journal. Every time a song is used in a movie or on TV, in a video game, on the internet or sold as sheet music, the owners of those rights cash in.
The Trammps’ 1976 "Disco Inferno" was the Jersey catalogue’s most profitable song in 2009 and 2010, producing royalties of more than $600,000.
The owner of the catalogue-owning Jersey company, First State Media Works Fund I, attracted investment from pension plans in North America, Europe and Australia. It created the Jersey subsidiary FS Media Holding Co. (Jersey) Ltd. as an investment vehicle, which was managed by First State Media Group (Ireland) Ltd. (FSMG) acting as a publisher — the equivalent of a label for songwriters.
The subsidiary was set up in 2007 specifically to acquire music rights. In July 2009, Crow sold the rights to 153 songs written between 1993 and 2008 to the Jersey company for about $14 million. The package included charttopping hits "All I Wanna Do" and "My Favourite Mistake."
In time the catalogue owned by First Media grew to a collection of 26,000 songs from the last seven decades.
In a 2013 overview written for its proposed sale, the catalogue was described as “one of the larger aggregations of copyrights to have been recently available on the market.”
The review of the fund behind the music catalogue by the accounting firm KPMG also noted its tax advantages. In the first half of 2012, 68 per cent of the royalties earned by the publisher after paying writers, copyright collection societies, commissions and charges, came from the U.S. Yet, according to KPMG, the fund, an English limited partnership, paid no taxes in the U.K. and was not subject to U.S. federal income tax. Nor was there withholding tax associated with the catalogue.
Despite those savings, things weren’t looking good for the catalogue sale. Making money also requires good marketing.
The catalogue ended up being sold in 2014 to Reservoir Media Management, Inc., which declined to comment. The company, an independent music publisher based in New York City but incorporated in Delaware, acquired it for $38 million — about a quarter of its value five years before
It sold for a song.