Why Are So Many Musicians Selling Their Catalogs?

Last month, Universal Music Publishing Group announced Bought bob dillon list Reported at $ 300 to $ 400 million. This is a major step forward for an artist with such an extensive collection of songs – over 600 in six decades. Instead of keeping a steady stream of income in the coming years, Dylan is selling all of this in a big way.

To be fair, Bob Dylan is 79 years old. This sale should easily establish him and his family for a lifetime. But she is not the only one who has recently sold her list. Other composers, including David Bowie, Stevie Nicks, Imagine Dragons, Blondie, and Barry Manilow, have participated in some or all of the ways on their list.

So why are musicians going this route and selling their music to the highest bidder? There are three main reasons for this.

Catalog ratings skyrocket

The increase in streaming has led to an increase in value in music catalogs. CC Digital Media Association 2020 streaming forward report, Music streaming revenue exceeded $ 10 billion in 2019. This is a 21% increase from the previous year, and streaming only continues to grow.

The Wall Street Journal reports that music catalogs are now trading at 10 to 18 times their annual value. This means that a catalog that earns $ 50,0000 a year can easily be sold for anywhere between $ 5 million and $ 40 million. This is a heavy breeze for any artist.

Older songs usually benefit more because of their longevity and can sometimes grow from a viral hit. For example, a song like “Dreams” by Fleetwood Mac – released in 1977 – can be featured in a Teatalk video Who breaks the internet. result? The band re-enters the Billboard charts and its catalog price goes up.

why are so many musicians selling their catalogs?

Christopher Polk / Getty Images for VH1

Licensing also plays a major role in catalog valuations. A song featured on a syndicated episode of a massively popular show such as friend or SeinfeldThe This is a good, consistent income stream as those shows are rebroadcast across multiple channels and online platforms.

Even new artists can see an increase in their catalogs. By releasing a new album, fans will naturally flock to existing music, either preparing themselves for upcoming releases or digging into a discography they may not be familiar with. Either way, streaming has helped to increase the value of many artists. And the coronovirus epidemic has not slowed that growth one bit.

Travel is no longer a viable option with epidemics

What epidemic is The affected is visiting. For most of the year, the musicians have not been able to host the show. Even at outdoor locations, the idea of ​​standing together near a crowd is a risky endeavor. No one wants to cause an outbreak of COVID-19, so it is safe for musicians to avoid situations that could cause harm.

There have been good efforts by the musicians to stay connected with their fans. Erika Badu did A “Bedroom Concert” Series Where fans could choose her setlist and they wanted her to perform at her home. gold Finger Issued several live quarantine demonstrations, Jamming to their classic tunes from afar.

Those virtual shows are no substitute for going on the road and touring, though. The opportunity to sell merch or upsell to other concert experiences is almost nil. And it is an important part of revenue for the majority of artists. We don’t know when live music will be normal or if it ever will be. Why not take a huge amount now?

Substantial tax benefit

Perhaps the most intriguing reason musicians can sell their catalogs is: they own a special tax rate on self-produced works. Musicians owe capital gains tax rates of 20 percent on their music. This includes album sales, streaming, licensing and any other royalty proceeds. If they were to pay a simple tax rate, a musician could be taxed up to 37 percent of their earnings.

Musicians are the only artists who can save at this special tax rate. Filmmakers, illustrators and video game makers have to pay simple income tax rates on sales and royalties.

Let’s go back to the Dylan example. If their inventory is sold for $ 300 million, the 20 percent tax rate would be $ 60 million. At 37 percent, Dylan would pay $ 111 million, or $ 51 million more in taxes. And if its inventory is sold at the reported high threshold, the savings are even more substantial.

On a $ 400 million sale, Dylan would cost $ 80 million at a 20 percent tax rate. If that simple income tax is owed, that payment will be $ 148 million. Dylan would walk away due to a capital gains tax rate of between $ 240 and $ 320 million, saving between $ 51 million and $ 68 million in taxes.

Some artists may save even more. If they live in a state with no income tax, such as Texas, Florida or Nevada, they will not pay additional taxes on their recordings. They can also sell their catalogs through a trust in one of those states and thus save taxes. If Dylan, who has lived in California for a long time, walked this route, he could have saved another $ 42 million.

We have no idea what the future holds, but it is likely that Joe Biden could raise taxes for the rich, raising the top tax rate to 39.6 percent. The government can completely remove this allowance to sell its work to musicians; Some Republicans tried to do so in 2017 before changing their views.

Because of the uncertainty, many artists tried to strike, while iron and money are hot. In Dylan’s case, he could have saved well over $ 90 million north. Those savings may not occur in the coming months and years.

Nevertheless, we can see more artists selling their catalogs, whether it is a full sale or just a part of their music. There are a lot of hungry buyers, and small investors can get a piece of the pie through platforms such as Royalty exchange, Which auctions catalog listings from various artists.

As the music landscape continues to evolve, there is so much to keep an eye on – and it will be fascinating to watch.

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