Songwriters Cashing Out Their Royalties For New Opportunities

Long-tail upswing in catalog income creates high-demand for royalty assets.
November 3, 2017

Benom Plumb, Assistant Professor of Music Industry Studies at the University of Colorado Denver, reviews the biggest stories of the week affecting music royalties. He is a music industry professional, not an attorney.

The Songwriter Catalog Market Is Booming, With Indies Leading the Way (Billboard)

Benom’s Take: It’s an amazing time for the buying and selling of music catalogs. This week’s Billboard article reports on the booming seller’s market in music publishing rights.

So why are artists and writers so interested to sell their most precious assets?

There are two primary reasons for these recognizable catalogs: Age and lagging streaming royalties for songwriters. As Tom Cochrane (writer and artist of the hit song, “Life Is A Highway”) says, folks are getting older and they want the money now so they can enjoy it. Many of these aging creators would like to cash in on their catalogs to buy real estate or other investments that provide a better rate of return in the short term.

It makes a lot of sense if you wanted to slow down, retire or invest in other things. The music copyrights from classic catalogs are a cash-rich asset that can provide lots of exciting opportunities to the seller. If you can get several years worth of your current earnings, and those current earnings are already healthy, that’s a lot of financial opportunity!

In addition to the age factor, some older artists are deciding not to patiently wait out the long tail curve of songwriter streaming royalties. Jeff Biederman, the attorney quoted in the article, makes a poignant statement on this issue: “It will be a while before a writer is paid his or her due on Spotify the way labels are...” Most songwriters are still waiting for streaming revenue to catch up. And for those who are aging, it makes more sense to cash out now. How very interesting that a lag in songwriter streaming royalties has actually helped drive these catalog sales.

So if that’s the case, then why has the buyer side seen such high demand and high multiples? For one, most analysts agree the music business is becoming more stable by the day. Remember that Goldman Sachs report? Buyers are seeing the long tail upswing in income generation for popular songwriter catalogs, especially through smart licensing and marketing strategies. These buyers are in it for the long game and know there is high demand in their network to license recognizable songs.

The article also mentions there is a lot of wealth in the independent publishing sector. These publishing professionals understand the business and have the deep pockets. Because they know the publishing business, their strategies will add more value and revenue generation to the copyrights. As Jeff Beiderman is quoted, “...people realize that publishing is the mother lode.”

With “evergreen” songs written by the likes of Smokey Robinson, Steve Cropper, Brenda Russell, Tom Cochrane and George Benson, for example - a publisher with deep pockets can hardly resist the opportunity to exploit the classic songs for various licenses.

And now for this week’s other headlines:



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