On December 7, 2021, a day that would live in infamy, we reported that Bob Dylan had sold the rights to his music catalog $ 300 million. The sale transferred all royalties and management rights, including more than 600 Dylan-Penn songs to Universal Music Publishing Group. At $ 300 million, it was the largest amount a solo artist has paid for a music list to date – three times before Steve Nick took an 80% stake in his list – double what Neil Young received in a month. Was found before. And as it turns out, we are now learning that Bob Dylan raised over $ 300 million.
A few days after the Dylan sale was confirmed, Rolling Stone heard from multiple sources with “intimate knowledge of the situation” who claimed the final sale price was $ 300 million. One of the sources was certain that the deal was particularly huge because he was personally involved when Dylan offered $ 400 million from a music publishing company called the Hipgnosis Song Fund.
The Hipgnosis Song Fund is founded by a man named Merck Mercuridis. Yesterday Merck confirmed in an interview with The Guardian that his company actually offered $ 400 million after two years of negotiations and wooing. In Merck’s words:
“We were ready to strike a deal, then Universal made an offer that we cannot possibly compete with. You have to create a company of that size to absorb the price they paid … [which was] Much more than the $ 300 million reported at the time.“
Based on the report that is now coming out, it is now safe to assume that Bob Dylan had at least sold his list. $ 400 million.
This $ 400 million is particularly impressive when you consider that Bob is purposefully the second most talented member of the Dylan family behind Jakob.
Why are so many artists suddenly selling their catalogs?
short answer: Because there is so much money to be made! Duh!
long answer: The catalog evaluation was never thanks to royalties produced by streaming services like Spotify and even social media platforms such as TickTalk, YouTube and Instagram.
Historically, the song catalog sold for around 10X, producing average annual royalties. Recently, some song catalogs have been selling for 20X annual royalties.
Another factor is that the epidemic has completely reduced all tour incomes for a year, with no short-term end.
Now there is also a tax incentive to sell to artists. Specifically related to music catalogs is a special tax code that allows sellers to pay IRS long-term capital gains as opposed to short-term. This difference reduces an artist’s federal tax rate on sales from 37% to 20%. If Bob Dylan sold his list for $ 400 million, he saved 17% compared to a short-term investment. That saved him $ 68 million. In addition, there is another drawback that allows particularly clever artists to sell their catalogs through Nevada-based trusts to avoid California’s 13.8% state tax rate. Both of these tax loopholes are rumored to be on the chopping block in a Biden administration, so artists may see this as their last opportunity.
If Bob Dillon sold his list through the Nevada Trust for $ 400 million, he certainly paid only 20% in taxes. That means he took home $ 320 million. If those two flaws are closed, the future $ 400 million deal will be worth $ 200 million to the artist.
Why are private equity firms suddenly paying millions for song catalogs?
short answer: Some investors feel that the royalties produced by the song catalog will only increase over time and this is evidence of a musical meltdown.
long answer: Not for getting excessive financial here, but more money has been printed in the last decade than in 50 previous years. In the last 12 months, thin air of billions of dollars was printed. In an average year, the total US money supply increases by about 5%. In the last 12 months, the US money supply increased by 30%.
why does that matter?
There is only so much money around the global financial system. That is why the stock is at an all-time high. Therefore bitcoin is at $ 45–50,000. This is why you are hearing about haphazard rookie baseball cards for $ 100,000. That’s why you’re hearing about people paying $ 1 million for a piece of digital art.
This is why music funds such as Hypnosis have raised billions of rupees on investor cash to spend on music catalogs. The music fund then takes the catalogs and puts them together as a “securitized” asset class, in which investors can invest. If that sounds familiar, you may be wondering how the 2008 real estate crash that followed was highly valued mortgages. The lumps were put together and sold to banks as “mortgage-backed securities”, which eventually exploded when everyone realized that maybe the person making $ 25,000 a year was out of Fort Lauderdale for an hour. A $ 1 million mortgage must be given to purchase a track house.
I am not saying that the same kind of bubble is happening with the music catalog. For one thing, 200 million Americans do not remain on a song list. For another, music may actually be recession proof. If the economy picks up next month, you will likely see a steep decline in the value of digital art and baseball cards, but people will continue to listen to music. And as long as there are enough royalty-paying companies like Spotify, TikYok, YouTube and Facebook, the catalog should continue to generate reliable income for its owners and investors.
And if you’re curious, here are just a few of the mega catalog sales in recent years:
Imagine Dragons – $ 100 Million
Calvin Harris – $ 90 million
Taylor Swift – $ 300 million (she was not a seller)
Steve Nick – 100 Million Dollars (80% Sales)
Neil Young – $ 150 million
Ryan Tedder – $ 200 million
Bob Marley – $ 50 million (sale occurred in 2018 and was for partial share)
Lindsey Buckingham – $ 100 million (over two transactions, first in 2012 and then second in 2020)