Going for more than a song

What have Bob Dylan, Neil Young, Blondie, Shakira and Barry Manilow in common (other than being musicians of course)? They all recently sold the rights to their back catalogue or at least part of it for a tidy sum.

Neil Young, for example, has sold a stake of 50% of his 1180 tracks for an estimated $150 million. Bob Dylan, on the other hand, sold his full catalogue for a reported $300 million to Universal Music Publishing. Dolly Parton and David Crosby of Crosby Stills Nash and Young to name but them are apparently considering following in their steps.

While sales of records have been falling for years, streaming services such as Apple Music and Spotify have been booming. But for musicians generally it’s performing live in front of an as big as possible audience which pays the most. With concert venues around the globe closed for the best part of a year now and touring being a distant memory, however, artists lost their most reliable way to make money (not that the top grossing performers are in dire straits anyway).

Being cooped up at home, and even before the pandemic, streaming songs has become ever more popular, at the detriment of sales of albums and songs. In the US, in 2019, streaming music represented 85% of consumption when measured by album units. But streaming doesn’t pay nearly as well as a live performance: A songwriter is being paid a Mechanical Royalty of 9.1 cents (typically split with co-writers and publishers), on each sale of an album or a song, or a legal download. And then there is Performance Royalty, which is due when their song is performed on terrestrial broadcast radio, in a live performance venue, or via online streaming services.

Therefore, in order to make a half decent living, a musician needs to have quite a vast collection of songs and a big fan base who stream his songs. Bob Dylan, for example, is said to have earned royalties worth approximately $15 million a year from his catalogue. If we assume that he sold his future royalties for $300 million, he would have to live another 20 years to the proud age of 99 to earn the same amount.

With performing live not an option and streaming paying a pittance, selling the rights to the music is an increasingly appealing option for artists. Another reason certainly is avoiding family feuds as the one involving the legacy of Frank Zappa who passed away in 1993 (the dispute erupted after his widow’s death last October, when two of his children found out that their two siblings inherited a majority stake and were put in charge of the family business). Last but not least, let’s face it, capital gains taxes in many jurisdictions are lower than income tax, saving the artist a bundle.

And we all can now not only listen to our favourite artists’ music, but own own a small share of the rights to these songs too: The Hipgnosis Songs Fund (owns, for example, the rights to the music of Neil Young) and the Round Hill Music Royalty Fund (owner of the rights to some of the early Beatles tracks as well as the music of Neil Sedaka and Craig David) are both listed on the London Stock Exchange.