From The Desk Of... Joe Brenner
PARTNER, GRUBMAN SHIRE MEISELAS & SACKS
HEN THREE of the biggest song-catalog sales were announced in early 2022, the media focused on the astronomical prices. Warner Music Group acquired David Bowie’s publishing for $250 million;
Sony Music purchased Bruce Springsteen’s publishing, as well as his master recordings, for $500 million (with the involvement of Eldridge, an investor in Billboard’s parent company, PMRC); and Universal Music Publishing Group paid $360 million for Sting’s song catalog.
What didn’t make headlines was the complexity of these deals or pressure faced by a team of partners at the entertainment law office of Grubman Shire Meiselas & Sacks — led by self-described “point guard” Joe Brenner — to finalize them before the end of 2021. “Some of these clients have very intricate, sophisticated tax structures,” says Brenner, 57, a 30-year veteran of the firm. “The structures of deals like these may be fundamentally tax-driven and for tax reasons had to be done by the end of the year.”
The Brooklyn-born, Long Island-raised Harvard and Columbia Law School graduate adds that he and his partners also foresaw the cooling of songcatalog sales. “We had a sense that the market had hit its peak and said, ‘Let’s get these deals done.’ Complicated deals can drag on and on. Both sides get deal fatigue, and the last thing you want to happen is for the deal to go away.”
There was another complicating factor, specific to the iconic nature of these artists. As Brenner — who works directly with Sting, the Bowie estate, Mariah Carey, Spotify, U2 (with partner David Toraya) and the NBA, among other clients — explains, song-catalog sales usually come with no strings attached. But beginning with the January 2021 publishing sales deal for another iconic client, Paul Simon, the Grubman team negotiated agreements that afforded these artists approval rights for the uses of at least some of their songs.
You work on a wide spectrum of business. How did you end up working on 2021’s four biggest catalog deals?
These are big, complicated deals, sometimes structurally driven by international tax considerations, that require a big team effort. What I bring to the party is one, familiarity with a number of those clients, their businesses and their history; and two, an ability to keep the train on the track. I’ve been Sting’s point guy here forever. So to the extent that there’s institutional knowledge and understanding of complicated financial structures, for a guy like that, clearly, I’m going to be involved. Similarly, I’ve been Bowie’s point person on the record side. Stuart
Prager, who is my publishing partner here, was involved as well. He has a deep institutional knowledge of copyright and intellectual property law, the vagaries of termination rights and the rest. [Founding partner] Allen Grubman was intimately involved, as was Branch Furtado, one of our corporate partners, and Don Friedman, who is Bruce Springsteen’s point person and probably the smartest guy I’ve ever met in the music business.
You describe yourself as a “point guard” for the deals.
I’m good at making things go and seeing the big picture. The point guard’s job is, “Hey, let’s make sure we’re winning.” It doesn’t matter to me if somebody’s scoring 35 points, as long as we’re coming away with the win.
Was there any one issue that arose in all of the deals?
There were plenty, but the one that comes to mind immediately is, what are the approval rights that a writer of the stature of Paul Simon, David Bowie, Sting or Bruce Springsteen have once they’ve sold their catalogs? Normally, you don’t have any approval rights. With writers of this stature, we took the position that there is a certain respect that needs to be paid to the songs, irrespective of having been sold. There was a whole lot of negotiating, and we wound up in a place where post-sale, they still had a fairly robust set of approvals, and their concerns with respect to certain uses of those songs — they were different for each writer — were addressed.
Did the agreements apply catalogwide or to specific songs?
Yes and yes. That was really the interesting thing about these deals. David’s estate and each of the other songwriters had different concerns about the uses of compositions post-sale. Some were more interested in how [they were] going to be used in commercials — with what kinds of products, for example. Some were more interested in uses with respect to political or similar causes. Some were more interested in uses in films or plays that have to do with their lives. Some had specific concerns about specific songs.
Some writers said, “Under no circumstances can you use X song for a certain period” — maybe it’s before they die; maybe it’s some period after. Some had a more commercial view, which is, “I understand what I’m being paid for,” and they were a little less adamant about approvals.
Are you able to mention any songs that these artists considered hands-off?
No. But the most interesting part of these negotiations was having those conversations with the songwriters. “What are you OK with? What are you not OK with?” In those conversations, you are getting right to the heart of the creative process with some of the greatest songwriters of all time. Clearly, they’ve gotten over the hump of deciding to sell. They understand that it’s a commercial transaction. But fundamentally, there’s a connection that’s deeper for them than the commercial transaction. So where’s the balance between the commercial transaction and the emotional context? That’s where the rubber meets the road.
Did termination rights figure into any of these deals? My understanding is the Bowie estate probably could not ask for termination rights but the other artists could.
It’s complicated. You’re not incorrect. It differs in terms of who owns what rights at what
time, and it’s only a U.S.-based issue. Because of copyright law, termination rights will continue to exist for certain of the sellers or their heirs at some point down the road. But all that gets priced into the deal. What’s interesting is that each of these catalogs went to a major music publisher. I think there’s a reason for that. They know exactly what they’re getting when they buy assets like this. They understand protecting catalogs like this. And they’re also very knowledgeable about termination rights, valuation metrics and the rest of it.
How would you characterize the current market for songcatalog sales?
I don’t think there are many of these types of catalogs left. I’m thinking Billy Joel or Queen. Pink Floyd is out there. There’s a certain premium for the legendary or iconic component. But at the end of the day, you’re looking at earnings, you’re looking at multiples, and, if you’re the purchaser, you assess the valuation. So if you start from the premise that there aren’t many catalogs left like the ones we’re talking about, and you look at how the environment has changed entirely since the end of last year — interest rates are sig
nificantly up, currency exchange rates are very different — I don’t think the current market is what it was. We got lucky, and smart, that these clients wanted to do these deals when they did. I think it may have been the absolute right time.
What about smaller catalogs and those of successful artists who are not superstars?
The business will continue, but I don’t think it will be quite the same. Multiples have contracted some, and I don’t think the appetite is the same — meaning the feeding frenzy for buying these assets that existed last year. But look, music publishing is a great business. There’s always going to be an opportunity to do these sorts of deals. And there are more and more potential buyers.
Will the catalogs of contemporary stars on the order of, say, Drake have the same staying power as those you’ve just sold?
We’re going to have to wait and see how the market looks at these. It’s not fully clear yet how the earnings for these catalogs decay, nor where those earnings plateau — especially for current hits. It will be interesting to
compare those valuations to the ones for the iconic catalogs we recently sold.
Aside from the legal and financial calculations, did any of these deals require the potential buyers to present strategies for preserving and enhancing the legacies of these catalogs?
I’m sure there were conversations between the senior executives and the artists and their management. Our conversations were mostly commercial. Some of these writers said, “Look, I have a relationship with this company. If they can hit this price, we’re done.” Some said, “I’d like to see what the market will bear,” or “While I’ve had a good relationship with this company, if someone wants to step up and pay more, then I’m perfectly happy to have that conversation.”
The Financial Times recently reported that Hipgnosis is having issues closing its deals because of a cash shortage. What’s your perspective there?
I don’t know anything about the internal arrangements between the company and their backers. I do know those guys were out there spending an awful lot of money very, very quickly. So
I’m not surprised that given the activity and how fast it was going on, they’ve run into a bit of a headwind.
Now that catalog sales appear to be cooling, are you seeing any new trends in deals that artists are asking you to negotiate?
We do work in gaming, podcasting, non-fungible tokens and all the newer technologies, both with the companies that develop that stuff and the artists who want to do deals with those companies. They’re all growing businesses, so hopefully, there’ll be a lot of money there. But from a recording artist’s point of view, it’s still the usual income streams: recorded music, music publishing, touring, endorsements, merchandising. And there are other outlets: theater — Bruce had a great Broadway run — and our clients have done plenty of autobiographies. But the big, big money is when you can fill a stadium.