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

From Bob Dylan who connected his electric guitar for the first time to commercials at the Super Bowl, there have always been moments in the history of music when the fiercest fans will accuse their idols of doing the impossible: selling. But right now “selling” has a new connotation and is a booming market for both investors and superstar recording artists.

A wave of boomer rock icons are being sold from their song catalogs. The movements, the last of which was made by Paul Simon last week, indicate a direct truth about the intersection between art and money: music has always been a business and one in which creative genius deserves to be rewarded with riches. And it is a business that is currently seeing major changes caused by streaming and other disruptions caused by the pandemic. The agreements by Paul Simon, Bob Dylan, Neil Young (50% stake in Young) and Stevie Nicks (80% of the rights to his songs) highlight major 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 Universal Music Group from Vivendi buy premium song catalogs in great deals fueled by record low interest rates , with the belief that there will be more profitable profits in the future from 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 Rock and Roll Hall of Fame’s two-time catalog, told CNBC that the economic environment created by the Coronavirus pandemic worked in its 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 talk about a low interest rate environment and you can get a percentage from 7% to 9% … and then increase that through marketing and generate returns in mid-adolescence. This is a very attractive place for people to put money in, “he said. said.

Also, music catalogs have proven to be resistant to recession, and the pandemic has only increased the number of offers made, as the music industry is going through a massive disruption caused by the closure of live venues and tournaments.

The deals also come at a time when streaming music – for all the controversy and skepticism of musicians about getting a gross offer – has proven to be an economical player, at least for record companies. In 2020, Goldman Sachs forecasts that global music revenues will reach $ 142 billion by the end of the decade, reflecting an 84% increase compared to the $ 77 billion level in 2019 and streaming capture of $ 1.2 billion. by 2030, four times the level of 2019, and primarily for the benefit of companies such as Sony, which bought Simon’s catalog, and Universal, which purchased Dylan’s songs.

Global streaming music revenues reached a record high in terms of industry last year (83% according to a recent report) and also favor superstars. Spotify said its mission is “to give a million creative artists the opportunity to make a living from their art,” but as a recent New York Times analysis noted, Spotify data shows only about $ 13,000, which has generated $ 50,000 or more in payments last year.

However, it’s not just streaming. Rights to larger document catalogs, once purchased, can be used in synchronized placements that license music to various forms of media, including movies, TV shows, commercials, and video games.

“From a publisher’s perspective, it is extremely valuable to obtain the rights to a particular catalog that we can synchronize,” said Rebecca Valice, copyright and licensing manager at PEN Music Group. “A catalog can only make its own pitching due to its legendary success.”

The easier it is to recognize a catalog, 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, because timing helps recover money spent by buyers “and then as time goes on.”

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

Some famous musicians of the boomer era have been hit by the situation in which the industry has placed them, such as David Crosby, who said in a tweet in December: streaming stole my record money … I have a family and a mortgage and I have to take care of them, so it’s my only option … I’m sure others feel the same way. “

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

“Given our current inability to work live, this deal is a blessing to me and my family, and I think these are the best people to do it with,” Crosby said in a statement announcing the deal. .

For the musicians themselves, there is a mega trend in the workplace: the real estate planning needs of America’s richest generation. Boomer musicians (and those born at the beginning of that generation like Simon and Dylan in 1941), like their fans, are getting older. “Artists are getting older now, so they can use cash, they can plan properties,” says Mestel.

Of course, the disadvantage may be the loss of control over the most valuable asset of an artist: the creative genius who made his career.

“These old rock stars may want to raise money to secure their property … but you lose control of your brand and heritage, to some extent, depending on the protections you’ve put in place. in the transaction, ”said John 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 made in the statement announcing the deal.

Some fans aren’t too happy to hear hits like Nicks’ “Edge of Seventeen” or Dylan’s “Like a Rolling Stone,” which sells cars and clothes – though Dylan has made several Super Bowl commercials that date back many years for GM and IBM, and for the tracks have been featured alone in others – but decisions to sell catalogs can also help musicians avoid posthumous legal battles, such as having to endure the estates of Tom Petty, Prince and Aretha Franklin .

BMG acquired the catalog interests of Nicks bandmate Mick Fleetwood of Fleetwood Mac earlier this year and mentioned some stats in its ad that show that no matter how old the boomer actions are, they can make a living. renewed from viral streaming hits. The Fleetwood Mac song “Dreams” generated over 3.2 billion streams globally (over a period of eight weeks, September 24 – November 19, 2020) thanks to a video with a fan who loves blueberry juice and introduced a new generation , more common with TikTok, to Fleetwood Mac. The album “Rumors” reached number 6 on the Billboard’s Streaming Songs 43 years after its release.

Dylan’s deal is the largest reported to date, estimated at $ 300 million, although no sale price has been officially disclosed, and Universal said in just one release that it is “the most significant music release deal in the world.” this century ”.

Mestel believes the boom is not coming to an end.

“It seems like everyone has a relationship in the music industry who knows someone is trying to raise money. But that doesn’t mean they can get out of identification assets to sell them or even know what they’re doing.”

BMG and private equity giant KKR recently signed an agreement to go out and make a major acquisition of music rights, and, as a director told Rolling Stone, “We don’t follow hits from January 2021. We look at the repertoire that it turned out to be part of our lives. “

KKR has been trading in big music in the past, and the buying rights trend is not new, but the current boom is noticeable and falls within the appreciation of the asset class that takes place in so many parts of the market as investors he is looking for more ways to put his money to work. While boomer transactions are the biggest headlines, recent acts also see big pay days. Earlier this year, KKR bought a stake in OneRepublic’s Ryan Tedder catalog for a large sum.

Companies like Primary Wave are working with artists like Nicks to try to keep them as part of the transaction and make their business better in the future, according to Mestel, who says many didn’t understand they could enter into a partnership. part of their catalog, and that piece may become more valuable in the future than 100% they previously owned.

“If everything goes well, [artists] make the most of what they are trying to sell and it is usually a win-win scenario for the buyer and seller, ”Valice said.