Why there is a boom in boomer rock stars selling their songs

From Bob Dylan, who first plugged his electric guitar into the Super Bowl commercials, there have always been moments in music history when the most stubborn fans accuse their idols of doing the unthinkable: selling out. But right now, ” sell out ”s has a new meaning, and it’s a booming market for both investors and superstar recording artists.

A wave of boomer rock icons sold out of their song catalog. The moves, last week made by Paul Simon last week, point to a straightforward truth about the intersection of art and money: music has always been a business, and creative genius deserves to be rewarded with wealth. And it’s a company that’s currently seeing huge changes caused by streaming, and further disruption caused by the pandemic. The transactions of Paul Simon, Bob Dylan, Neil Young (in the case of Young a 50% stake) and Stevie Nicks (80% of the rights to her songs) highlight important trends in the entertainment industry, capital markets and wealth management.

Music publishing companies such as Hipgnosis Songs Fund and Primary Wave Music, and conglomerate players such as BMG, Sony, Warner Music Group and Vivendi’s Universal Music Group, are buying up leading song catalogs in big deals fueled by record low interest rates with the belief that there will be. more lucrative returns in the future by selling the rights to these songs on entertainment platforms.

Larry Mestel, CEO of Primary Wave Music, the company that just acquired a majority stake in the dual Rock and Roll Hall of Fame industry catalog, Stevie Nicks, told CNBC the economic environment facing the Coronavirus pandemic created, worked in favor. of companies wishing to buy large assets. These low interest rates make it easier to borrow money, and high rates of return have created a perfect opportunity for acquirers.

“You’re talking about a low interest rate environment, and you can reach 7 to 9% … and then increase it by generating marketing and revenue for teens. It’s a very attractive place for people to invest money,” he said. he said. said.

Music catalogs have also proven to be a recession file, and the pandemic has only increased the amount of deals just entered into, as the music industry is going through a massive disruption, caused by the closure of live venues and touring.

The offerings also come at a time when streaming music – due to all the controversy and skepticism on the part of musicians on the part of acquiring an unprocessed deal – was an economic juggernaut, at least for the record companies. In 2020, Goldman Sachs predicted that global music revenue would reach $ 142 billion by the end of the decade, reflecting an 84% increase compared to the 2019 level of $ 77 billion and streaming capturing 1.2 billion users at 2030, four times its 2019 level, and especially companies like Sony, which bought Simon’s catalog, and Universal, which bought Dylan’s songs.

Global streaming music revenue peaked last year as a percentage of the industry (according to a recent report 83%) and this is also the preference for the superstars. Spotify said its mission is “to give a million creative artists the opportunity to make a living from their art,” but according to a recent New York Times analysis, Spotify’s data shows that only about $ 13,000 last year was $ 50,000. or generated more.

However, it does not just flow. The rights to larger deed catalogs, once acquired, can be used in synchronizations that license music in various forms of media, including movies, television programs, commercials, and video games.

“From a publisher’s perspective, it’s extremely valuable to get the rights to a certain catalog that we can look up for sync,” said Rebecca Valice, PEN Music Group’s copyright and license manager. “A catalog can store its own just because of its legendary success.”

The more a catalog is recognizable, the more valuable it becomes for companies to buy and use in movies or television. The best catalogs ‘pay for themselves’ over time, she says, as synch helps to recover the money that acquirers have spent ‘and then a little over time.’

“I do believe that the icons and legends are worth more than the other artists,” Mestel said. Primary Wave owns the catalogs of stars such as Whitney Houston, Ray Charles and Frankie Valli and the Four Seasons.

Some famous Boomer-era musicians expressed the situation in which the industry placed them, such as David Crosby, who said in a tweet in December: ‘I sell mine too … I can not work … and streaming stole my record money … I have a family and a mortgage and I have to take care of it, so that’s my only option … I’m sure the others feel the same. ‘

He sold his entire catalog in March to Irving Azoff’s Iconic Artists Group, which also recently acquired a controlling interest in The Beach Boys’ intellectual property, including a portion of the song catalog.

“Given our current inability to work live, this agreement is a blessing to me and my family, and I believe they are the best people to do so,” Crosby said in a statement announcing the agreement. has.

For the musicians themselves, there is a tremendous trend at work: the estate needs of the richest generation in America. Boomer musicians (and those who started in 1941 just like Simon and Dylan in 1941), just like their fans, are getting older. “Artists are now getting older so they can use cash, and they can plan estate,” Mestel says.

Of course, the downside could be the loss of control over an artist’s most precious asset: the creative genius that made their careers.

“These aging rock stars may want to pay out money to take care of their estates … but you lose some control over your brand and your legacy, depending on the protection you put in place as part of the deal,” John said. Ozszajca, musician and founder of Music Marketing Manifesto, a company that teaches musicians how to sell and market their music.

Crosby and Azoff have been friends for a long time, a point Azoff announced in the release announcing the deal.

Some fans are not too happy to hear hits like Nicks’ “Edge of Seventeen” or Dylan’s “Like a Rolling Stone” selling cars and clothes – although Dylan did several Super Bowl commercials from GM and IBM, and his songs have only been shown in others – but the decisions to sell catalogs can also help musicians avoid posthumous legal battles like the estates of Tom Petty, Prince and Aretha Franklin.

BMG acquired the catalog interests of Nicks’ bandmate, Mick Fleetwood, from Fleetwood Mac earlier this year and in its announcement noted some statistics that show that as old as boomer actions can be, they can get a new life from viral streaming. hits. The Fleetwood Mac song ‘Dreams’ produced more than 3.2 billion streams worldwide (over a period of eight weeks on September 24 to November 19, 2020) as a result of a video featuring a lover of blueberry juice, and a new generation introduced, more accustomed to TikTok, to Fleetwood Mac. The album’s album “Rumors” reached number 6 on Billboard’s Streaming Songs chart 43 years after its release.

Dylan’s deal is reported to be the largest to date, estimated at $ 300 million, although no sale price has been officially announced and Universal only said in a release that it was ‘the most important music publishing deal of this century’.

Mestel believes that the boom will not end.

“It seems like someone who has a relationship in the music business knows that someone is trying to raise money. But that doesn’t mean they can identify an asset to sell or even know what they’re doing.”

BMG and the private equity giant KKR recently signed an agreement to make a major musical rights acquisition, and as one CEO told Rolling Stone: ‘We are not chasing hits from January 2021. We look at repertoire about which he has proven to be part of our lives. ‘

KKR has had great music offerings in the past, and the trend to buy rights is not new, but the current boom is noticeable and fits within the appreciation of the asset class that takes place in so many parts of the market as investors seek more ways. to put their money to work. While the boomer deals are the biggest news, recent performances are also big pay days. Earlier this year, KKR bought a stake in Ryan Tedder’s catalog from OneRepublic for a reportedly high amount.

According to Mestel, companies like Primary Wave are working with artists like Nicks to keep it as part of the deal, and make it even better in the future, according to them. partnership, sell a piece of their catalog, and that piece may become more valuable in the future than the 100% they previously owned.

“If all goes well, [artists] bring out the best for what they want to sell it for, and it’s usually a win-win scenario for the buyer and the seller, ‘Valice said.