As the Market for Investible Music Rights Grows, Should You Sell Your Catalog for Cash?
Executive summary
- Whether you want to sell all or a portion of your music catalog, doing so can be very lucrative as you seek to achieve short- and long-term financial goals.
- Some factors to consider include your catalog decay, future album aspirations, and potential collaborations with other artists, as well as the fan-artist relationship.
- There is a four-step process to deciding to sell: determine the details, know your goals, be realistic, and reach out to the professionals for guidance.
Almost weekly, we're hearing news of artists, songwriters, and producers selling all or part of the rights to their catalogs – and for big numbers:
- Justin Bieber: $200 million
- Dr. Dre: $200 million
- Stevie Nicks $100 million
- Future: $75 million
- Metro Boomin: $70 million
Some of these sales represent entire bodies of work. Others cover portions of work over a period of years and exclude high revenue-producing albums and tracks that will continue to generate wealth for years to come.
As a CPA, CGMA, and a veteran of the music industry, my Entertainment, Sports, and Media team and I can help you understand your options and determine the best way forward for you, right where you are in your career.
You may be thinking about selling all or a portion of your catalog for any number of reasons. We work with clients who have been motivated by the financial setbacks they experienced from tour cancellations due to COVID-19 restrictions, others who have new albums or tours they will be able to fund with lump sum payouts, and those who are ready to retire and enjoy the benefits of their life’s work.
The market is still good right now for investible music rights
Whether you act on it now or consider it as an option for the future, this is a good time to give it some thought and make a realistic assessment.
Radio airplay and sync licensing, as well as streaming on Spotify, Pandora, Apple Music, and other platforms, has the potential to drive significant revenue for artists. This is especially true for the top 1% who command about 90% of the revenue generated from the platforms. It is a long game for many artists who want to achieve wealth through these channels. Artist-fan relationships that can stand the test of time and drive ticket sales, merchandise sales, and album downloads have become even more critical to long-term success.
Should you sell?
At the right level, the kind of payout a catalog sale provides can be life-changing and even have a generational impact.
If you need liquidity fast, and without strings or ties to investors, selling your catalog can be a great way to get it. You can benefit from that money all at once, and from a tax standpoint, you’re going to pay a maximum tax rate of 20% on any proceeds (capital gains tax) you make from the sale. By contrast, if you keep your catalog in place and assume you’d earn revenue on all of it via streaming, you would have those assets taxed as income at a much higher rate. It can be as high as 37% based on your income level, year-after-year.
However, sync licensing, streaming popularity, and playlist rotations don’t last forever. Music and catalogs experience “catalog decay," or the rate at which your music declines in consumption over time. Selling while the current value is up can be a wise choice. There are exceptions, as we saw last year with Kate Bush when her 80s hit “Running Up That Hill" became the most streamed song on Spotify globally, fueled by a sync licensing deal with the hot Netflix series Stranger Things. It is impossible to predict when one of those gems will hit, but in the event of a sale, the purchaser would have benefited from those royalties.
Honestly appraise where you are in your career and your album activity
Every artist is unique with a unique set of circumstances. Let's look at the examples mentioned above:
- Dr. Dre is 58 and his sale worth $200MM+ gave him a huge influx of cash from royalties from two of his solo albums and his share of N.W.A. artist royalties, but he still has other revenue-producing assets and is currently on tour and has years of touring and album productivity ahead.
- Metro Boomin is 29 years old and has years of creative time ahead of him with $70MM from his catalog sale.
- Future is 39 years old, and with his $75MM in catalog sales of 612 songs from 2004-2020, this still leaves him with plenty of streaming revenue from smash hits and Grammy Award winners from 2021 and into the future.
- Stevie Nicks is 74 and is now $100MM wealthier from an 80% sale of her catalog in 2020. She is still actively touring, but she has wealth if she decides to slow down and still maintains 20% of her catalog for ongoing revenue.
- Justin Bieber is 29 years old but just cancelled the international leg of his tour due to his neurological health diagnosis; he now has $200MM he can count on for life and generational financial planning regardless of how he decides to, or is able to, proceed with his music career.
Evaluate how many albums and collab projects you are interested in pursuing as well as how many tours you think you have ahead of you. If you work with other artists, or crossover into different genres, you can cultivate larger audiences and grow your fanbase beyond its current limits.
If you're considering selling your music rights, look at this four-step process:
Step 1: Determine the details.
What rights do you actually own? How much money have those rights made you in the last three years? Knowing this could help you determine how much they’d be worth if you sold them today and it will help you place a valuation on the catalog.
Who’s the potential buyer? Is this a buy and hold type of buyer? Is this a buyer who’s going to actively work your music catalog to increase its revenue, and your popularity? We know what questions to ask potential buyers to help you make the most informed decision.
Step 2: Know your personal and professional goals.
By doing this, you can balance them against the tax implications of selling by your catalog. It is your life, and you have your own personal and professional short- and long-term goals. Whether it's sending your first-born to college or funding your next album or multi-media project independently, you have the power to use your assets in a meaningful way to enable you to attain your goals.
Step 3: Be realistic.
If you decide to sell, understand that not all catalog sales are going to yield the kind of sales that make Billboard magazine headlines. Level set your expectations with how successful you have been over the past few years, and how much you have been earning in publishing rights and streaming.
Step 4: Begin a conversation with us.
We know musicians. We know the industry. We know music. We know taxes. And we know there are options between selling versus leasing catalogs and choices between selling all or just portions of catalogs.
We’ve got you. MGO can be a steadfast partner through every step of this process to help you make the choice that is right for you and your family now, and for generations to come.
How we can help you reach your goals with catalog sales
Your music is your life — we get that. In the end, it’s one of the greatest legacies you’ll leave behind. Connect with our Entertainment, Sports, and Media practice to determine if monetizing your music catalog is the best move for you — and how it can help you reach both your professional and financial goals on a larger scale.
About the author
Tony Smalls is the leader of our Entertainment, Sports, and Media (ESM) practice and helps culture-defining entertainers, athletes, and other high-net-worth individuals build and protect their wealth while maximizing growth opportunities in today’s fast-evolving media marketplace. He specializes in accounting, finance, tax strategy, financial planning, and analysis, financial reporting, and contract/deal negotiations, working heavily on prospective investments like live music tours.