MUSIC BUSINESS
What’s Really Be Music Catalog Bu
A
ll of the music industry is wondering why these classic catalog artists (Dylan, Paul Simon, et al.) are selling for 18x25x multiples. Well, there is no one answer. One is taxes. Another is streamlining the estate process for wills and inheritance. In some cases, it’s stagnant management of their catalogs in lieu of pushing younger, hotter, genres and artists. Yet another is the decreasing viability of live touring for these artists. Catalogs generate income in two major ways. One is in the form of royalties from spins and streams, mechanicals, and public performances collected by the PROs (ASCAP, BMI, SESAC, GMR). The other is in sync. Basically, when a song is used in a commercial, movie, video game, etc. Well, if you follow streaming, you know those rates are horrible across the board, there is little 10 JUNE/JULY 2021 PERFORMER MAGAZINE
transparency, and crucially, there is simply no incentive for the Spotifys of the world to serve you old music, so they don’t. These genres just aren’t as popular on interactive streaming. But over time, these royalties still add up, they are just a slow trickle. How does an artist increase those royalties? Touring or a residency. If a legacy artist goes on tour, it results in more radio spins in each city they visit, more YouTube views, more sales (merch, VIP packages etc.), and more syncs. The artist and the music become freshly relevant. But, with COVID, these huge package tours are dead on the vine. And once things get going again, it’s unknown what the capacities and extra value tickets sales will be. Now, if you’re 75, do you want to wait 3-5 years to find out? Probably not. Let’s look at taxation. The new administration is definitely raising the capital gains tax. This is something that people like you and me aren’t really affected by. But, if you have assets to sell
that are valued in the tens or hundreds of millions of dollars, it definitely matters. A capital gains tax is applied to the profits earned on the sale of an asset once they are actually sold. This has been locked in at 20% for years, but the increase may be as high as 43.4%. Say you’re Bob Dylan selling your catalog at a reported $250 million. The difference in tax right now vs. when the change comes in would be: $50m in taxes (netting $200m), or $108.5m in taxes (netting $141.5m). That’s a big deal. The better question is why a company would buy the catalogs of older artists and I am here to tell you why. Death. I know, I know, it sucks to talk about. But Dylan and Paul Simon and Stevie Nicks and so on... are in their 70s and soon to be 80s. One thing Michael Jackson taught everyone is his music started making more for the estate in the 5 years
