In recent years, there has been a rise in artists cashing in on their musical catalogs. So, what exactly is the driving force behind this? Some speculate that COVID-19 acted as a catalyst for this sudden increase. In 2020, when everyone was stuck at home, musicians, like many, found themselves losing a key stream of income—touring, which ceased overnight. As a result, there was a boom in companies acquiring musical catalogs of superstar songwriters, artists, and producers. However, there are other factors at play as well, such as a current tax loop-hole artists are taking advantage of and the headache that comes with administering a catalog.

To review, traditionally, publishers (or songwriters) keep the publishing rights, and labels (or performers) keep the recording rights. Publishing refers to a song’s content and recording refers to the specific recording of a song. When an artist sells their catalog, they are giving up their percentage on that song and relinquishing future earnings. That ownership then goes to the buyers.

Most recently, on April 11, Multimedia Music acquired the catalog of Hollywood composer Trevor Morris in an eight figure deal. Multimedia scored both film and TV music rights. In just 15 months, the company spent 120 million on acquisitions alone. 

Other companies, like Hipgnosis Songs Fund and Primary Wave, are also rushing to acquire music rights. These companies have already acquired the catalogs of artists such as Fleetwood Mac, Neil Young, Shakira, and John Lennon.

But why? Well for one, the companies now gain the streams of income that would have otherwise gone to the artist. According to Rolling Stone, this could be money from “ royalties, licensing, brand deals, and other revenue streams that would have gone to the artist.” But this still leaves one question unanswered: why do artists want to sell their catalogs in the first place?

One of the driving reasons is taxes. Joe Biden has implemented tax plans that would significantly alter U.S. capital gains tax to align more with income tax for asset sales valued over one million. Under this new proposition, the tax rate would increase on the sale of assets from 20 percent to 37 percent for big earners, which is a substantial difference. If artists chose to just collect royalties they would be subject to a 37 percent rate annually versus a one-time payout with one-time taxation. Since this new tax rate has been implemented many artists have used this limited time to cash out at the current 20 percent while they can and avoided higher taxation. In short, they are attempting to keep more money in their pockets by selling their rights all at once. This route, so far, appears to be more lucrative for them.

Some artists are cashing in due to more personal reasons, especially older artists. It is often harder for legacy acts to tour and perform, which as an artist is a considerable portion of one’s income. And, when an artist passes, it can provide some ease for their families as they don’t have to deal with administering these catalogs. Late David Crosby, for example, chose to go this route and sold his catalog to Irving Azoff’s Iconic Artists Group which he explained via Twitter.

By taking advantage of the current tax rate, he not only saved his family from dealing with his expansive catalog but also secured them more money. Many others are also taking advantage; country star Travis Tritt sold his catalog to Reservoir Media and stated:

“The biggest reason for me selling was not to leave a huge headache for my family that would have to try to administrate a catalog. I’d rather leave them cash.”

-Travis Tritt

In 2018, Hipgnosis bought the rights to Justin Bieber’s “What Do You Mean?” and the English version of “Despacito” from The D-ream and songwriter Poo Bear. That same year, talent management company Primary Wave bought the publishing rights of Bob Marley for 50 million. In 2019, Hipgnosis acquired rights from Producer Timbaland for his catalog including six albums by Missy Elliot and five albums by Justin Timberlake. 

In 2021, Neil Young sold half of the copyright of his catalog to Hipgnosis. Hipgnosis also acquired the publishing rights of Shakira and the producer rights of Jimmy Iovine. Bob Dylan sold 100 percent of his publishing catalog for an estimated 300-400 million to Universal Music Publishing. Whitney Houston’s estate sold her entire catalog to Primary West for 100 million. 

The list goes on and on. The idea of getting a guaranteed amount of money and owing less in taxes has obviously appealed to a large number of artists. For now, while the tax law remains intact, selling one’s catalog seems like a stellar option. However, things will eventually change once higher taxes go into effect and as larger companies try to acquire rights for larger amounts than the little guys can afford.

Artists have been reaping the benefits at extremely high price tags. In an article by The Los Angeles Times, they state that prices are almost triple what they’ve been in the past. “During the last 25 years, songwriting catalogs generally sold for about eight to 12 times the “net publisher’s share,” . . . Today, valuations are hitting 25 to 30 times the publisher’s share.” Many think that these extraordinarily high prices are unsustainable and that buyers will have a hard time making that money back, especially smaller companies.

It is hard to tell if the market prices have already peaked, but these investors are certainly assuming magnificent risk. They are assuming that streaming will continue to grow at its current pace and that these artists will remain relevant enough to produce the massive number of streams needed to recoup their investments. On-demand streaming is predicted to grow in revenue and subscribers, but for now, it is too early to determine if these companies will make a desirable return on their investments.