There’s been a stunning trend in recent years of musical artists selling their catalogues to labels and investment firms.
Bob Dylan, sold his rights and master recordings for $500 million. Stevie Nicks, sold hers for $100 million. And it isn’t just artists from past generations either. The Killers, Imagine Dragons, and Shakira have done the same.
In return for an eye watering sum, these artists give the new owners the right to licence the songs out to whomever they choose.
The principle behind any good investment is that the net present value of future cash flows will be worth more than the amount paid to buy the asset today. In the case of Bob Dylan, this means Universal and Sony think they’ll make significantly more than the $500 million paid for his music.
I’m no expert in this space, but I think we’ll see a few things happen over the coming years.
1) More and more artists will sell the rights to their music. They’ll receive an immediate, monumental pay day, and forego a set of future cash flows that weren’t guaranteed anyway.
2) There is going to be a tonne more music licensing in the future. The songs of these famous artists will be heard in more places, in more movies, in more advertisements, and at more events than ever before. The buyers have to make back their money somehow. The need to license will likely drive down the price to license a hit song, and create a lot more liquidity in the market. For example, right now I couldn’t upload a video to YouTube with a Bob Dylan song as the background music. In the future, for a few dollars, I may be able to licence any song from his catalogue, or any song from a long list of artists.
I don’t see how Dylan’s catalogue is worth half a billion, but someone does!
Finally, I’m still not convinced if this is artists selling smart, or selling out.