Music Royalties Inc.
Why are so many artists selling off their song catalogues to faceless companies?
By Alan Cross
Pop Legend David Bowie was one of the first musicians to unlock the future value in his music back catalogue. Dave Benett / Getty Images
Word came down last week that The Killers, one of the most successful bands of the 21st century, had sold the rights to every song they’d written prior to 2020 to a company called Eldridge Industries. The purchase price wasn’t disclosed, but having sold 30 million albums, the number must have been very, very high.
This comes on the heels of a deal made by Imagine Dragons back in the summer. They sold their entire publishing catalogue — including the rights to songs like Radioactive, Believer, and Whatever It Takes — to Concord Music Publishing. The price tag? Somewhere around US$100 million. One. Hundred. MILLION. Dollars.
READ MORE: Why companies are buying up the rights to thousands of songs
And they’re not alone. In the last few years, everyone from Barry Manilow to Chrissie Hynde of the Pretenders to Nikki Sixx of Motley Crüe to Journey has cashed in by making similar deals with the Hipgnosis Songs Fund, which is run by Quebec-born Merck Mercuriadis. Its portfolio of songs is so big — it’s somewhere north of 5,000 — that the company trades on the London FTSE and has raised well over a billion dollars to acquire even more song copyrights.
Then there’s Round Hill Music with its portfolio of 120,000 songs, including tracks by The Offspring (for which they paid US$35 million), KISS, Matchbox Twenty, Black Sabbath, Bruno Mars, and Bachman-Turner Overdrive. The company also trades on the FTSE.
What’s going on? Why would artists give up control over their music? The money, obviously. But that’s only part of it.
Guys like Mercuriadis — who has managed Elton John, Beyonce, Guns N’ Roses, Iron Maiden, and others throughout his career — understand the value of music. Songs are a form of intellectual property that, if properly protected, managed, and nurtured, can continue to generate income for years to come. There’s plenty of profit in owning other people’s songs.
Paul McCartney learned this the hard way. When the Beatles lost control of their publishing company Northern Songs in 1969, he and John Lennon were shut out of the profits of dozens and dozens of Beatles songs. Having learned how the music publishing business works the hard way, McCartney started buying up song catalogues, which came to include all of Buddy Holly’s songs, which he purchased in 1976. Through sales, radio airplay, and use on movie soundtracks, that catalogue set McCartney on the road to being rock’s first billionaire.
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When Michael Jackson became a friend, McCartney gave Jacko advice about the value of publishing deals and how not to get burned as he had been. In 1985, Jackson outbid Macca for the rights to the 4,000-song ATV Music catalogue, which included everything from Northern Songs. Sir Paul was not amused. (He finally got back the rights back in 2017, just a few days before his 75th birthday.)
Meanwhile, the music industry has changed drastically. In the olden days when we bought music on pieces of plastic, hit albums were perennial sellers, generating a steady source of income year after year. If you were lucky to string a couple of best-sellers together, that was your retirement fund. You were assured to find nice royalty cheques in the mailbox every six months or so.
But when the internet got involved in music, everything changed. Sales tanked and cheques shrank. That retirement fund was no longer assured. This goes a long way to explaining why so many heritage acts from the 1960s, ’70s, and ’80s — think Eagles, Fleetwood Mac, and Guns N’ Roses — went back on the road. They had to make up for that lost revenue somehow.
David Bowie was one of the few people who saw this coming. In 1997, he teamed up with Fahnestock & Co., a Wall Street investment firm specializing in asset-backed securities. Both Bowie and Fahnestock’s David Pullman understood that Bowie’s music — 25 albums’ worth — was cash-generating intellectual property. That IP was rolled into an offering known as “Bowie Bonds,” which were then sold to investors with a guaranteed return of 7.9 per cent. Bowie gave up future royalties for 10 years in exchange for an upfront cash payout of US$55 million. Bowie then used the money to buy back the rights to music that had come under the ownership of his old manager, Tony DeFries.
When the bonds matured in 2007, the music industry had collapsed and the bonds were rating one notch above junk status. By parking his IP in bonds during that ultra-volatile period in the record music industry, Bowie emerged not just unscathed but even richer. The music reverted back to Bowie who owned everything until he died. Smart play.
Bowie may have been the first to float his music on the market this way but he was far from the last. James Brown, the powerful Motown songwriting team of Holland-Dozier-Holland, and a few others followed his lead before the state of the music industry made this sort of investment vehicle far too risky.
This brings us to today’s world of Hipgnosis, Concord, Eldridge, Round Hill Music, and a few others. Each company believes that there’s plenty of long-term profit to be made by carefully exploiting song IP and that they can do it at scale. Meanwhile, artists can continue to make music while enjoying massive financial cushions. And they don’t have to worry that changes in technology are going to wipe out their livelihoods.
In the case of the Killers, the band had this to say: “We have the greatest fans in the world. Eldridge’s broad network across music, television, and film will provide new opportunities for our music to be enjoyed by millions across the globe.”
The band is betting that Eldridge will take their old songs and make them even more famous, giving the band a better shot at future success with music they release post-2020 — i.e. music they will own outright. Meanwhile, it’ll be up to Eldridge to somehow recoup the investment. Same with all the company’s competitors.
What will this mean for the music fan? Hard to say. But the next time one of your favourite songs unexpectedly shows up in a TV commercial, now you know why.
Alan Cross is a broadcaster with Q107 and 102.1 the Edge and a commentator for Global News.