Welcome to glory days of catalog sales
Springsteen’s $550 million deal shows investors are sold on music rights
In 1972, a struggling New Jersey musician hustled into Manhattan for an audition at Columbia Records, using an acoustic guitar borrowed from his former drummer.
“I had to haul it Midnight Cowboy-style over my shoulder on the bus and through the streets of the city,” the rocker, Bruce Springsteen, later recalled in his memoirs.
Half a century later, he can afford plenty of guitars. Last week Sony, which now owns Columbia, announced that it acquired Springsteen’s entire body of work — his recordings and his songwriting catalog — for what two people briefed on the deal said was about $550 million.
The price, which may be the richest ever paid for the work of a single musician, caused jaws to drop throughout the music industry. But it was only the latest mega-transaction in a year in which many prominent artists’ catalogs have been sold, fetching eye-popping prices. The catalog market was already bubbling a year ago when Bob Dylan sold his songwriting rights for more than $300 million, but since then it has maintained a steady boil. The list of major artists who have recently sold their work, in full or in part, includes Paul Simon, Neil Young, Stevie Nicks, Tina Turner, Mötley Crüe, Shakira and the Red Hot Chili Peppers, many for eight-figure payouts or more. The industry is abuzz about impending deals for Sting and the songwriting catalog of David Bowie.
“Almost everything now is transacting,” said Barry Massarsky, an economist who specializes in calculating the value of music catalogs on behalf of investors. “In the last year alone, we did 300 valuations worth over $6.5 billion,” he added.
Not long ago, music was seen as a collapsing business, with rampant piracy and declining sales. No longer.
Streaming and the global growth of subscription services like Spotify, Apple Music and YouTube have turned the industry’s fortunes around. One result is a spike in the pricing of catalogs of music rights to both recordings and to the songs themselves.
New investors, including private equity firms, have poured billions of dollars into the market, viewing music royalties 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, such deals help them consolidate power and gain negotiating leverage with streaming services and other tech companies, like social-media, exercise services or gaming platforms, that often make blanket deals to use music.
Despite the popularity of young acts like Drake and Dua Lipa, older material dominates online. According to MRC Data, a tracking service that powers the Billboard charts, about 66 percent of all music consumption — of which streaming is by far the largest part — is for material that is older than 18 months, and that number has been growing rapidly.
And for artists, the sale can bring tax advantages. Royalties are typically taxed as ordinary income, while a catalog sale can qualify as capital gains, which typically have lower rates.
Artists like Springsteen, 72, are part of the generation of music stars that, starting in the 1970s, first came to gain control of their work in large numbers, in ways that preceding generations did not.
Many of those stars are now pulling the last lever of that control by deciding to sell, in numbers that were unthinkable even a decade ago, many executives and artists’ advisers say.