Big-name musical acts are showing they’re just as savvy in the office as they are in the studio. Whatever the factors may be — age, the state of live music post-Covid, interest in liquidity — the likes of Bob Dylan, Shakira, The Beach Boys, RZA and more are selling their catalogs, rights and intellectual property to music royalties firms for big bucks.
But what if musicians don’t have a “Mr. Tambourine Man” in their arsenal? Can lesser-known artists get in on the action?
Absolutely. A new wave of working artists is selling the rights to their tunes directly via firms like mine or commission-based platforms. The multiples on these deals (the amount by which current royalties will increase) are smaller than deals involving musical icons, but nevertheless, carry plenty of benefits for emerging artists as well.
Based on my experience, here is a closer look at the shifting music landscape and how indie artists can determine if they should sell their catalogs.
From Standing Room to Jamming on Zoom
Creatives and musicians were gobsmacked by the pandemic. A late 2020 report found that almost 30 percent of performing artists had become unemployed as live venues shuttered their doors and money made from touring and merch tables vanished, practically overnight. But performers know how to improvise. Musicians took their acts from dive bars to Zoom rooms.
Bands like Low Cut Connie pivoted to livestreaming, selling access to exclusive gigs through Patreon and accepting virtual donations, while e-peddling merch ranging from cologne to boxing gloves. Sam McCandless of the band Cold took it a step further and offered fans virtual drumming lessons. The recent noise around NFTs is encouraging — just consider the recent headline-making sales by Grimes, Steve Aoki or Kings of Leon — though selling non-fungible collectibles to fans isn’t sustainable for many artists.
A less-talked-about, but promising, option for indie musicians? Selling their catalog, even if only a percentage of it. Data shows that 90 percent of streams go to the top one percent of artists. The remaining 10 percent of those streams likely isn’t going to help pay the rent. An artist who cashes out now could capitalize on what may be a generational seller’s market for musicians.
Harmonious Market Conditions
For musicians looking to sell their masters, and generate alternative income and/or liquidity post-Covid, the market conditions, for now, are irregularly skewed toward artists.
Hipgnosis, Primary Wave, Kobalt, my company Vintage Amp and a slew of other buyers are incentivized to acquire catalogs more than ever thanks to record-low interest rates, cheap loans and favorable taxes. Much like the maelstrom of crazed sports and Pokemon card collectors, investors seem to be gaga for assets that are non-correlated to the stock market right now. In the era of big data, investors are also more comfortable placing bets as streaming stats and other insights make for easier catalog sales, transparent valuations and future earnings projections.
Most importantly, this isn’t an all-or-nothing proposition — artists have the bargaining power, and that means flexibility.
Considering and Determining if You Should Sell
The benefits of selling masters can be significant for artists of all sizes, particularly those needing fast, no-strings cash. For instance, an artist may thirst for liquidity: The lump sum compensation for their catalog could be used to fund other projects, music-related or not. Selling a catalog of music is akin to a successful business owner cashing out. Not only that but receiving the money in one swoop could be preferable to taxed royalty money collected over several years.
Some musicians sell their entire catalog; others opt for a fragmentary sale. Most investors understand they are buying into a partnership with the artist and don’t mind acquiring partial recording royalties and IP. Artists with multiple royalty streams, rights, ownership, etc., at their disposal have the flexibility to carve out a portion of their catalog and retain assets they hold dear.
If an artist is contemplating selling their catalog, the first step is to find out what rights they own, how much those rights have earned in the last 12-36 months and what they are worth if sold today. This, among other factors, is the information firms look at to determine the valuation of a given catalog. They should also consider the tax implications of selling as well as their short- and long-term goals. Some musicians I’ve worked with wanted to finance a new album, others had different aspirations: paying off or purchasing a home, starting a new business, diversifying their investment portfolio, paying for their children’s or grandchildren’s college education or simply retirement.
Artists who ultimately decide to sell their catalog should keep two things in mind:
First, surround yourself with a team of industry experts and trusted advisors: attorneys, accountants, financial advisors, analysts and brokers. The due diligence process is complicated and expensive; consulting with the right advisors is critical to ensuring a smooth sale and transition of rights.
Second, set realistic expectations for the sale. Some catalogs will be worth more than others and few will rack up the huge rockstar multiples you see in the headlines. Anticipate a projection that’s commensurate with your catalog’s performance.
And the Band Played On
Selling the rights to masters and publishing provides liquidity and flexibility, and establishes a partnership that can only build upon an artist’s legacy. Given the unpredictability of both the economy, it could be an option to keep in mind for smaller acts in need of financial security.
Even the greats miss a note here and there. But they keep playing — they adapt.
As the industry morphs at a startling rate, and marketing and branding continue to take on as much importance as the music itself, I’m proud to help artists power through these uncertain times and ensure their voices are heard — on the mic and at the bank.