There those within the music industry — artists, especially — who believe technology has devalued music to the point where it’s worth almost nothing.
Royalties from the sales of things like compact discs have dropped to almost nothing while streaming pays a pittance of what physical music used to provide.
But a lucky few are making more money than they ever thought possible, thanks to a burgeoning gold rush where a couple of forward-looking companies are gobbling up massive amounts of intellectual property. They’re buying the rights to song catalogues.
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Earlier this month, the members of Imagine Dragons became rich beyond their wildest dreams. Concord Music Publishing reached an agreement to purchase the band’s back catalogue of songs, meaning the group sold the rights to all their old songs in exchange for an upfront payment of the revenue those songs will theoretically generate in the coming years.
The sale price? A staggering US$100 million.
Concord justifies this by noting that Imagine Dragons have sold 35 million singles in the U.S. alone and 20 million albums worldwide. Plus, four of their singles have been streamed at least one billion times.
Such success, Concord believes, is an indication that this music will have a long shelf life, and that they’ll be able to make back their investment by shrewd exploitation and stewardship of this material.
This isn’t Concord’s first deal, either. In 2017, it bought up everything owned by Imagem, a European publisher that owned all of Rogers and Hammerstein’s music. The price? Just US$500 million.
Since then, the company has purchased a variety of other song catalogues. It also owns the rights to PULSE Music Group, which includes material by Ty Dolla $ign and Trevor Daniel.
Wall Street is completely onboard, too. Following the announcement of the Imagine Dragons deal, JP Morgan secured US$600 million for Concord so that it might buy up more even music.
Concord isn’t alone. Other companies are fighting in this space: Downtown, Primary Wave, Tempo Music Investments, Reservoir, Round Hill and Kobal Capital are also pursuing song catalogues.
One of the biggest is Hipignosis Songs Fund, run by Canadian-born Merck Mercuradis, a former marketing person at Virgin Music Canada. Like his competitors, Mercuradis believes that proven songs have genuine value that can generate revenue for decades to come.
Hipignosis has done deals with Beyonce, grabbing the future revenues of Single Ladies (Put a Ring On It), Justin Bieber’s Baby, and Umbrella by Rihanna. The company now owns some 6,000 songs and is the only music rights company on the London Stock Exchange.
Owning other people’s music has always been a lucrative business. Paul McCartney realized this when The Beatles lost control of much of their material thanks to a disastrous move by former manager Allen Klein. To compensate for the lost revenue, Macca began buying up other artists’ catalogues — some 25,000 songs — including everything published by Buddy Holly, the rights to A Chorus Line, Annie, and Grease, as well as a university fight song or two.
When he and Michael Jackson became friends in the early 1980s, McCartney extolled the value of these investments. When The Beatles’ Northern Songs came up for sale, Jacko promptly outbid McCartney, using profits from the Thriller album. Sir Paul was not impressed. (McCartney eventually regained the copyright to those Beatles songs in 2017.)
David Bowie was another artist who learned about contracts and publishing the hard way. A terrible deal with ex-manager Tony DeFries saw Bowie earn a tiny fraction of what he should have throughout the 1970s.
When Bowie presciently realized that the internet was going to decimate the traditional recorded music business, he and Prudential Insurance Company offered Bowie Bonds in 1997. By promising investors revenues generated by 25 Bowie albums — in other words, offering them an actual piece of a rock star — they raised US$55 million. By forfeiting any royalties for the 10-year life of the bonds, Bowie got paid upfront. Shrewd, considering that CD sales crashed a few years later. This was one of the very first deals that used intellectual property of any kind as collateral for such a financial offering.
It turned out to be the best deal of Bowie’s life. The Bowie Bonds cratered with the rise of MP3s and falling CD sales and were eventually devalued to one notch above junk status. When the bonds expired in 2007, the copyright of all those songs returned to Bowie and promptly started earning money in the era of streaming.
Meanwhile, other celebrity bonds were offered on behalf of Motown and James Brown. Bob Dylan and Neil Diamond looked into similar issues but ultimately backed out because investor interest just wasn’t there.
Now, though, thanks to the moves by Concord, Hipignosis and others, that’s all changed. What might these asset-back securities look like in the near future?
Take The Eagles as a hypothetical example. For decades, members of the band could count on fat royalty cheques showing up in the mailbox as the result of continuing album sales. That back catalogue of hit songs was like an annuity that just kept paying.
But when sales started to dry up, those cheques started getting smaller and smaller. To make up for the lost revenue, The Eagles have had to go back on the road where they made out like bandits.
But with COVID-19 shutting down the touring industry, those revenues have disappeared for the foreseeable future. Might the band seek to sell their song catalogue to one of these companies? If Imagine Dragons’ music is worth US$100 million, what could The Eagles get? And how much could an investor earn on, say, Hotel California over the next 20 years?
If you’re a student of the financial markets, keep your eyes on these purchases. There are plenty more to come.
Alan Cross is a broadcaster with Q107 and 102.1 the Edge and a commentator for Global News.
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