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Yahoo Finance Plus What's really behind Bob Dylan, Stevie Nicks and Taylor Swift's mega-deals
With so much going on in politics and with the pandemic, it may be easy to overlook, or seem trivial to consider, how momentous the past few weeks have been in the world of entertainment.
First, quickly, movies: Disney and WarnerMedia both gave the status quo a vigorous shake as the former announced huge subscriber numbers for its Disney+ streaming service (currently 86.8 million) and mind boggling projections (230 million to 260 million by 2024), as well as a massive new slate of movies and shows for streaming and yes, still, theaters.
Warner on the other hand announced it was blowing up the longstanding Hollywood practice of the so-called theatrical window where movies are released in theaters first and then online. From hereon in, movies from the AT&T-owned studio will be released simultaneously in both venues.
Whether the huzzahs for Disney or Bronx cheers for Warner are properly assigned, will be sorted out over the course of years to come.
But if movies were the main event to many, to me the machinations in the music industry are even more striking and star-studded, reflecting an under-recognized recovery in the business that’s right now being massively jacked by everything from presidential politics and tax policy, to the pandemic and interest rates, to TikTok.
We’re talking about career-defining moves by the likes of Bob Dylan, Taylor Swift and fan favorite, Stevie Nicks. (And if you dig Imagine Dragons, The Killers, Blondie, Rick James, Barry Manilow, and Chrissie Hynde, well they’re all in the mix too.)
What’s going on specifically is a frenzy over music rights and catalogs of top artists’ songs the likes of which the business has never seen.
“It’s amazing the way prices are going [up], after years of music assets being very low priced,” says Guillermo Page, a former record label executive who worked for Sony and Universal, and now teaches in the music program at the University of Miami. “The multiples we’re seeing right now are two or three times more than what those multiples used to be five or seven years ago.The music industry is generating money.”
The deals are bigger too. “Movies are priced less than music,” says a noted Hollywood intellectual property expert. “The multiples are less than music because often movies are based on transfer pricing. You've got five studios who are selling to themselves. Also new music doesn’t eat into the old music nearly as much as new movies eat into existing movies.”
All of that is why I’m zigging to delve into music this week, instead of zagging into movies.
The first rule of writing about music—rock and roll in particular—is to avoid using puns with lyrics, and especially song and album titles. Back in 2002, I wrote a story about the Rolling Stones (the interviews were a kick) and my editor inserted puns in nearly every paragraph. I managed to denude the piece of most of them though at least one remained: “Mick has been around for many a long year.” (Ugh.) I’ll look to avoid that here. (Perhaps it’s also worth noting the line attributed by some to comedian-musician Martin Mull who said that “writing about music is like dancing about architecture.”)
Rock music has been intertwined with commerce since at least the day Chess Records signed Chuck Berry back in 1955, but modern history began in 1997 when the late, great David Bowie securitized his song rights into what became known as Bowie bonds. Bowie sold his songs packaged as securities to Prudential for $55 million in a 10-year issuance that yielded 7.9% (or 1.6 percentage points more than a comparable Treasury bond.) Bowie, always ahead of his time, at first kicked off only a very minor trend: Ashford & Simpson followed suit.
Why was there no gold rush to securitize and monetize music? After all, Wall Street loves nothing more than a predictable stream of revenue, which music rights were in spades. But this was before the world went digital. In fact shortly after Bowie sold, illegal MP3 file-sharing and Napster cropped up, and then eventually iTunes, Pandora and Spotify as well, all of which destroyed the music business’s historical model.
Ultimately with the latter three (and other) legal streaming platforms, the music industry has stabilized and been rebuilt, albeit with lower cash flows. Now bankers and investors feel pretty comfortable modeling cash flows again. (Money coming from songs being placed in movies and commercials remained strong through the transition years it should be pointed out.)
Now let’s flash-forward to today and Bob Dylan. Earlier this week, Universal Music Publishing Group announced it had purchased Dylan’s entire songwriting catalog of some 600 songs for what the New York Times reports in this informative piece by Ben Sisario was a price of “more than $300 million.” Dylan, 79, the recipient of a Nobel Prize for literature in 2016 (the only rock musician so honored and in true rock star form didn’t show up to collect the award), has long been as iconoclastic in his business ventures as he’s been as a songwriter, allowing his music to be used in commercials for the old Coopers & Lybrand, Apple, Cadillac, Pepsi, IBM and even Victoria’s Secret.
Universal Music, (which was severed from the Universal movie studio—now owned by Comcast—in 2004), is majority-owned by French media conglomerate Vivendi. Earlier this year Chinese Internet giant, Tencent, purchased 10% of Universal Music for $3 billion. So yes, Dylan—or at least his music—is now 90% French and 10% Chinese. (How much you want to bet that Tencent increases its stake over time?)
“Dylan to me sounds like estate planning,” says an industry source. “Universal came in with some heady deal. So for that reason and I think the tax issue, Dylan did his deal.” I’ll get back to taxes in a second, but first note that right after the Dylan sale was announced this week, none other than Dolly Parton said she too was looking to sell her rights for “estate planning,” according to The Guardian. And David Crosby tweeted that he too was looking to sell.
I am selling mine also ...I can’t work ...and streaming stole my record money ...I have a family and a mortgage and I have to take care of them so it’s my only option ..I’m sure the others feel the same https://t.co/EXWHR2v6iq
— David Crosby (@thedavidcrosby) December 7, 2020
Streaming is now a growing business, especially this year. To hear music now you need to stream it, which has been a boon to Spotify, Pandora and Apple, and to the artists whose songs are streamed. So yes, music streaming is on track to be up more than $1 billion in sales in 2020, or 10%-plus in the U.S., but that still doesn’t explain the mad rush. Well, consider that COVID-19 is not only adding value to the deals because of that growth, but also adding to their urgency, as the pandemic completely pulled the plug on the live concert business. In other words there are zero dollars coming in from touring, which for many bands and artists was their life blood. That means you have a paradoxical scenario of motivated sellers who can command strong prices, a rarity in business.
“I’ve had quite a few clients who sold their catalogues or portions of their catalogues because they lost touring income this year and may lose a lot of it next year,” says Mark Maxwell, entertainment lawyer and professor of the music business at Belmont University.
So we understand why the sellers are selling, but why are the buyers buying? I mean would you invest in David Crosby? (Sorry DC, love the music, but you are, eh, erratic.) True, but remember streams of Crosby’s music are as stable (and perhaps with upside for commercials) as he is temperamental.
Larry Miller, who advises musicians and rights holders, and teaches in the music business program at New York University’s Steinhardt School explains: “If you're buying a portfolio of copyrights that have been cranking out predictable income over a long period of time, then volatility is low. The assets are long-lived, low volatility, and uncorrelated to the stock market. In a zero-to-low interest rate environment, which we’ve been in for a long time and will continue to be for the foreseeable future, investors are chasing returns. As growth of streaming music has increased, the consumption and discoverability of music and the value of music publishing assets as well as recorded music assets has increased.”
Bingo.
Now let’s return briefly to taxes. It’s no coincidence that this flurry of dealmaking also comes at the tail-end of Trump’s presidency and before Joe Biden takes office. Why? Because many expect Biden to raise taxes on capital gains which could mean multiple millions less for someone like Dylan if he did his deal next year. The wrinkle here is Biden may not have the votes to pass tax legislation, (watch Georgia), and even if he did, the new laws might not take effect next year anyway.
Which brings us to the timeless and yes campy Stevie Nicks, a lesser artist than Dylan to be sure, but still a remarkably salable commodity apparently. Nicks, 72, just sold 80% of her catalog (plus her name and likeness) for a reported $100 million, to an outfit called Primary Wave Music, a huge sum by comparison to Dylan’s much larger body of work. On the other hand, ask yourself how many times you actually hear “Landslide” versus Dylan’s “Blowin’ in the Wind.” (Primary Wave it should be noted got its juice when Courtney Love met the company’s founder which led to Primary Wave buying 50% of Kurt Cobain’s Nirvana rights.)
Be advised that Nicks is the only woman to be inducted into the Rock and Roll Hall of Fame twice, once as a member of Fleetwood Mac and once as a solo artist. Even better though, Nicks has seen a recent surge in popularity as her song “Dreams” charted again after a viral TikTok video featuring a man skateboarding and lip syncing to the tune.
Dang. How many millions did that add to the deal?
Taylor Swift’s recent wheeling and dealing speaks to some of those trends, but also her propensity to always be working it, whether it’s recording new music—her new album “Evermore” dropped about six hours ago—re-recording old music as a strategic move in her long-standing feud with Scooter Braun, or sticking a re-recording of her hit “Love Story” in a sick Ryan Reynolds’ produced viral commercial for Match.com about Satan and the horrible year that is 2020. (Highly recommended viewing.)
Taylor’s remarkable productivity this year is at least in part I’m sure due to her being unable to tour during the pandemic, (“Evermore” is her second album in five months.) But her feud with Braun speaks again to this notion of ever-higher value of song rights, though to be clear it has more to do with Swift wanting to be in control of her assets, and her very clear animosity towards Braun.
Short version: Braun bought the rights to Swift’s earlier work for $300 million in June 2019. Swift says she was blindsided by the deal and had history with Braun, whom she calls a bully. Swift has taken her fight to the public and celebs have been lining up either on Scooter’s side (Justin Bieber, Demi Lovato, etc.), or Swift’s side (Selena Gomez, Ed Sheeran, etc.) Swift had been busy re-recording her old music to get back at Scooter, which it appears she can do in this instance, probably for commercial use mostly.
I spoke to Braun about the feud in an interview last year: “I appreciate you asking the question because as a good reporter you’re going to have to,” he said. “I've kept the same line that I will continue, I have the utmost respect for Taylor. I have the utmost respect for every artist and every person, I believe people are inherently good. But that conversation as I have hoped from day one, I hope will be a private conversation because I think misunderstandings come when there is silence between groups.”
Attempts were made to broker a peace, but nothing ever came of it.
Then, boom, last month, Braun sold Swift’s music to Shamrock Holdings, a private equity firm founded as the late Roy Disney’s family's investment firm. (Roy is the nephew of Walt Disney and father of activist shareholder Abigail Disney.) Swift is none too happy about this either as again she wasn’t in the loop and Shamrock will continue to share proceeds with Braun.
And on and on we go.
So we have Taylor versus Scooter. David Crosby ranting on Twitter. Bob Dylan no-showing for the Nobel. But that’s what musicians are like. And it really doesn’t matter—unless you’re on the other end of it of course—because the music is amazing.
So says hundreds of millions people...and dollars.
This article was featured in a Saturday edition of the Morning Brief on December 12, 2020. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe
Andy Serwer is editor-in-chief of Yahoo Finance. Follow him on Twitter: @serwer.
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