Why Are Artists Selling Their Musical Catalogs?

Why Are Artists Selling Their Musical Catalogs?

Musicians have been making news recently. The headlines aren’t for new music being released but for big paydays that they’re getting for selling the rights to their catalogs of songs.

We don’t know the reasons specific artists made the deals they did. Some probably needed the cash now, while others made the sale as part of estate planning, including getting ahead of potential tax law changes. These deals point to trends in the entertainment industry, capital markets, and wealth management.

Already in 2022, Warner Chappell Music announced it bought the publishing rights to David Bowie’s catalog of songs for an estimated $250 million. Sony Music Entertainment reportedly paid $500 million in December 2021 for Bruce Springsteen’s entire back catalog. Neil Young, Stevie Nicks, Paul Simon, Imagine Dragons, David Crosby, The Killers, and many other household names and not-so-famous people have sold various rights to their songs. Songwriters and producers are also selling their rights.

Selling the rights to their songs or the right to publish their music gives artists a big cash infusion now in the days of a global pandemic when tours and merchandise sales have greatly decreased or stopped altogether. For songwriters, they are trading in the possibility of future income for a certain paycheck.

The artists aren’t the only ones who hope to benefit. The buyers intend to make money through licensing, merchandise, and other opportunities to get songs played. Much like a stock that grows in value, the buyers are hoping the music rights will continue to pay on their investment for decades to come. The companies will now collect the money from royalties, licensing, branding, and other revenue streams instead of that income going to the artist.

Low Interest Rates Attract Buyers

Interest rates are at a near-record low, making it easier to borrow money. Low interest rates plus high rates of return create the perfect climate for buyers.

“You’re talking about a low interest rate environment and you can achieve a 7% to 9% ... and then increase that through marketing and generate mid-teen returns. That’s a very attractive place for people to put money,” said Larry Mestel, CEO of Primary Wave Music in an interview with CNBC. His company recently acquired a majority stake in the catalog of Fleetwood Mac and solo artist Stevie Nicks.

Record Companies Benefit from Streaming Music

In 2020, Goldman Sachs forecasted that the online streaming market will increase to 341 million paid subscribers by 2030. That’s four times higher than the number of subscribers in 2019. Live performances and lack of merchandise sales were walloped by COVID-19, but streaming appears pandemic-proof. The investment banker also believes that global music revenue could reach $142 billion by the end of the decade, an 84% increase over 2019.

Using Songs Across Various Media

Don’t be surprised if you start hearing more of your favorite songs in commercials, on TV shows, and in the movies. Besides streaming, the new owners will look to find a return on their investment by licensing music in film, television, advertisements, video games, and other media. Iconic artists are particularly valuable because their songs are so recognizable.

Estate Planning for the Boomer Generation

Like anyone who is in their 60s and older, musicians are aware that they have more years behind them than in front of them. Planning for when they are no longer here is smart from a financial and emotional aspect.

Selling their rights helps musicians avoid ugly posthumous legal battles like those that happened after the untimely deaths of Tom Petty and Prince.

You don’t have to have a string of top 10 hits to benefit from a professional estate plan. A comprehensive estate plan can do the following:

  • Outline which heirs receive what property
  • Provide for minors or dependents with special needs
  • Minimize estate and inheritance taxes
  • Avoid lengthy probate
  • Protect your family from having to make difficult decisions
  • Allows your business, if applicable, to run smoothly

An estate plan can also help you while you are alive by planning for elder healthcare and for the potential of an incapacitating event like a stroke.

Our lawyers at Scaringi Law have helped clients with a range of simple to complex estates create plans that meet their goals. Every individual is unique and so is their estate. We take the time to truly understand what our clients want and how to best provide for that.

Many people aren’t sure where to start. Scaringi Law is a comprehensive law firm that can address your plan from many angles, from elder law concerns to tax mitigation.

To learn more about how we can protect your future, schedule a consultation by calling (717) 775-7195. You can also contact us online. The initial consultation is free.


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