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Who’s The Boss? Springsteen Sells Music Catalog For Record $500 Million

By Gary Symons

TLL Editor in Chief

Legendary American rocker Bruce Springsteen just cashed out with the sale of his entire music catalog for a cool half-billion dollars.

The sale to Sony Music certainly establishes his reputation as “The Boss,” far surpassing the $300 million deal to Bob Dylan, and the agreement that saw Canadian rocker Neil Young sell a 50% interest in his music for $150 million.

But Springsteen is one of the most successful artists in American music history, winning 20 Grammy Awards and still generating $15 million in direct music royalties last year. With the signing of the agreement, Sony now holds sole ownership of Springsteen’s 20 studio albums, including enduring classics like Born To Run, The River, and Born In The USA.

Springsteen: “Sorry … did you say $500 million?”

Springsteen first hit national attention in 1974 when the music critic Jon Landau attended a show with the E Street band in Boston to see what all the fuss was about. “Last Thursday, at the Harvard Square theatre, I saw rock’n’roll past flash before my eyes,” Landau wrote. “And I saw something else: I saw rock and roll future and its name is Bruce Springsteen. And on a night when I needed to feel young, he made me feel like I was hearing music for the very first time.”

Springsteen and the E Street Band were renowned for their hours-long, high energy concerts that turned fans into fanatics, and a year after the Landau review they turned their concert success into vinyl stardom with the release of the classic hit album Born To Run. That album sold 9 million copies and Springsteen appeared on the covers of both Time and Newsweek after its release.

Springsteen’s charisma on stage also turned him into a music video star, where he went head to head with other giants of the day like Michael Jackson, Prince, and Madonna.

In 1985, Springsteen released his biggest hit of all, the eponymous album Born In The USA, which sold 30 million copies worldwide. After reconvening the E Street Band at the turn of the millennium, Springsteen entered a creative hot-streak that has yet to fade—with highlights including 2002’s The Rising, a response to the terror attacks of 9/11, 2012’s politically-charged Wrecking Ball and 2019’s Western Stars, an homage to the 1970s-era golden age of Laurel Canyon pop.

While no public announcement was made about the sale, Billboard magazine reported on the $500 million deal based on information from sources familiar with the details. And if correct, the Springsteen deal is the most lucrative in music history. The only agreement that could possibly compete was the sale in April of Paul Simon’s music catalog (also to Sony), as the sale price was never revealed. However, at an investor relations meeting in May, Sony Music CEO Rob Stringer said the company had spent $1.4bn in acquisitions over the previous six months.

Worth noting is the fact Springsteen has worked with Sony (formerly Columbia Records) his entire career, making the agreement a natural progression.

A Gold Rush For Music Catalogs

The Springsteen deal may be the largest yet, but it’s also in line with a trend that started in the late 2010s. Up until 2016 investment in music catalogs never cracked the half-billion-dollar mark, but in 2016 the sales of these musical treasure chests began to take off.

In that year sales of music catalogs reached roughly $900 million compared to only $200 million in 2015. The number surpassed $1.2 billion in 2017, reached $2.5 billion in 2018, and soared past the $4 billion mark in 2019.

The big players in this market were initially made up of ‘musical royalty funds’ like Hipgnosis, Primary Wave, Royalty Exchange, BMG Music Rights, Kobalt, Eldridge Industries and Round Hill. More recently traditional labels like Universal have entered the game, as they were the ones who purchased the Bob Dylan catalog. Sony is now also a huge player, having completed some of the most lucrative deals in the industry, and as the company noted in May this year, having spent $1.4 billion in only six months.

Mark Mulligan, an analyst at MIDiA Research, says this influx of investor capital has turned musical IP into an incredibly valuable commodity.

“The music publishing deal market is at its peak,” says Mark Mulligan, an analyst at MIDiA Research. “There has never been a better time, there may never be a better time, for a hit artist from the 70s, 80s and 90s to sell their rights. These deals are being done at 17, 18, 19, 20 times value.”

For the licensing industry, the key question is why music catalogs for aging musicians have become such a hot commodity. The answer is complex, and for Licensing Letter subscribers are best answered by going back to TLL’s Special Report in January this year, through the link below.

Special Report: The Evolution of Music Licensing

In basic terms, however, the reason comes down to changes in the way music is licensed, how it’s being delivered, and who’s paying for it.

The most important appears to be a new trend in the sector. Rather than just acting as music publishers, these firms are acquiring wider rights to the art and in some cases the artists.

For example, when Primary Wave acquired the Four Seasons catalog and invested in the Whitney Houston Estate, the purchase went beyond just the music itself. Primary Wave called the Four Season’s deal in October, 2020 “a multi-million-dollar, ten-year strategic partnership,” and said the deal would cover licensing, film and TV production, name and likeness rights, and synchronization.

The Rise of the Synch License

That latter type of license, synchronization, is key to the increase in the value of music catalogs, due to changes happening simultaneously in the social media space. A lot of that is due to the rise of TikTok as one of the world’s largest social media and entertainment platforms.

So, what is synchronization and why is it so important? Essentially, it is the broadest and most powerful type of license, and refers to music that is going to be paired with some sort of visual media, like a TV commercial or a movie. Music catalogs have always held value for those types of uses, but TikTok has unquestionably raised the stakes. The very nature of TikTok is that it pairs existing music with videos produced by millions of people, and those videos are getting billions of views. As we discuss further below, TikTok is also commercializing these videos for advertising and marketing purposes, creating a synergy that is massively boosting the value of music catalogs.

The second driver is the shift in demographics for streaming services. For example, the music publisher discovered that its streaming income for the first half of 2020 was up by 26 per cent over the previous year … but the revenue from catalog music was up by 49 per cent, a much higher growth rate than for new music.

The same thing was happening at Universal, where catalog music contributed 57 per cent of their digital revenues in 2019, up from 54 per cent the year before.

The reason is simple demographics. Older people tend to gravitate toward new trends more slowly than young people, but when they do, they bring bulging wallets with them. In this case, older people are now buying heavily into the streaming world with the result that, as of 2020, roughly 60 per cent of new subscribers in the US and the UK are over 45 years old. These listeners are not tuning in to hear the latest from Dua Lipa; they want to hear the Bruce Springsteen, Young, Fleetwood Mac, or Imagine Dragons, all of whom have recently signed nine figure deals.

As a result, buying up these music catalogs is allowing music royalty companies to essentially create their own monopolies for music that’s older, but still popular with a large fan base. That’s great news for music companies that hold those rights, because it means they can generate more revenue without the high cost of what is known as Artist & Repetoire development (AR).

Ingham notes, for example, that Universal Music Group earned $8 billion in revenue in 2019, but spent $4.6 billion in AR costs, and their annual operating income was only $1.31 billion. Companies buying up catalogs know the music they’re buying is already popular, and there is little or no AR cost involved. The songs might not hit the Top 40 on Spotify, but they are solid, reliable generators of royalty income, at a lower operational cost.

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