Musicians - 10 Reasons To Sell Music Publishing & Masters Now

My firm CREATV Media has deep expertise in the world of music, including in the world of music publishing and master recordings. We have unique relationships across the world of potential buyers who are actively looking to partner with artists, bands, and songwriters to acquire some or all of their publishing and/or master recordings. In one recent example, we identified and facilitated the acquisition by leading music publishing company Primary Wave Entertainment of the publishing catalog of legendary jazz musician Count Basie. Critically, for artists/bands/songwriters, selling does not mean losing control over their works. In fact, I see nothing but upside in the current market. Here's why.  

10 REASONS WHY NOW MAY BE THE RIGHT TIME TO CONSIDER SELLING SOME OR ALL OF YOUR MUSIC PUBLISHING & MASTER RIGHTS (& RESIST KNEE-JERK REACTIONS FROM YOUR REPS TO SAY "NOT INTERESTED")

(1) It’s a great time to be an owner of valuable music publishing and master rights (intellectual property or "IP") — the market of well-funded buyers is actively and aggressively competing for music publishing and master recording rights right now. Multiples on royalty streams are at their peak. That means that you can get a big cash payment right now -- in one immediate lump sum -- rather than wait for royalty checks arriving over the years that may never add up to that lump sum that you can enjoy right now. Here's an example. So-called "multiples" (essentially a multiplier placed on your current royalty streams) can typically range from 10X - 13X (sometimes even higher for the biggest names). So, if your annual royalties for the past 3 years average $500,000 for example, a 10X multiple means that you could expect to receive an offer of at least $5 million; if they average $2 million annually, then you can expect an offer of at least $25 million and potentially more (depending on the mix of publishing versus master royalties). Remember, "at least" (since multiples can go higher than that).

(2) By the way, these deals can have major tax benefits over ongoing royalty payments.  Buy-out compensation (in the above case, the $5-$25 million number) is generally treated as long-term capital gains, whereas continuing royalty checks are treated as ordinary income. So, that gives you even more money to enjoy right now.  [I am not an accountant, so please confirm with your own tax advisors.] This is a significant factor you should consider.

(3) You (the artist/band/songwriter) are in control, so don't feel that you lose control over your songs and recordings if you decide to sell! It's not an "all or nothing" proposition when considering selling your publishing and/or master rights. In fact, there is absolutely no pressure to sell 100% of your share.  In fact, most major buyers are happy to simply be in business with you. That's why they are flexible and listen to your goals and what you want -- and are happy to acquire much less than 100%. So, while some artists are happy to sell 100% to maximize their immediate up-front payment and enjoy their money now (rather than wait to collect it over a period of years), others are more comfortable selling 50% or less of their publishing and/or masters rights in order to retain a continuing financial stake in their songs/recordings. That can be a smart "partnership" strategy with the buyer. In those cases (selling only a portion of rights), artists, bands and songwriters can (i) take a significant chunk of money off the table right now (with the potential major tax benefits mentioned above), yet (ii) still hold on to a significant percentage (the percentage that feels right to them) and "let it ride" with the percentage that the artist retains. This scenario enables the artist to participate in the upside growth that inevitably will result from more active and proactive management of those rights (your songs/recordings) by sophisticated buyers who essentially become your partners to maximize value in everything you do -- with their deep expertise and teams of specialists behind them to promote your valuable songs/recordings. These are resources that most artists, bands and songwriters simply can't match on their own.

(4) By the way, with respect to publishing rights, buyers are generally very happy to focus only on the publisher's share.  So, don't feel the need to sell your writer's share (unless you want to, of course). You will be able to continue to receive your "mailbox" money if that is your desire. Again, there's tremendous flexibility in how to structure these deals. Again, you, the artist/band/songwriter, are in control.

(5) Potential buyers have deep expertise and resources to grow opportunities for your songs, recordings and overall "brand" and legacy -- expanding your audience in the process (including to new generations of fans). Resources that you, the artists/bands/songwriters generally can't match. Some buyers have built significant teams of brand experts, marketing experts, digital experts -- in addition to traditional synch and licensing experts -- who actively and proactively manage your catalog and create important and innovative new opportunities to maximize your “brand” and extend your legacy.  It's in their interest to do that, of course. But, that's a good thing for you! They are willing to pay you top dollar for your valuable works, because they are confident in their ability to actively manage and succeed and build overall value. And, that benefits you. Your interests here with your buyer/partner are absolutely aligned.

(6) Because your interests are aligned, if you (the artist/band/songwriter) choose to retain some portion of your publishing and/or masters, then those will become more lucrative and valuable over time as a result of the buyer's active and proactive management and development of new strategic opportunities to use your songs and/or recordings (and name/likeness, if you wish ... with emphasis on if YOU wish -- remember, you are in control!). Even if you choose to sell your full ownership stake (to maximize your immediate pay-out), you buyer's active and proactive management of your songs/recordings yields substantial continuing benefits to you.  First, those new opportunities will essentially serve as tremendous marketing for all of your continuing pursuits and overall "brand" (touring and visibility, as two examples). That means more opportunities to maximize your ongoing income. Second, your buyer's active management extends your legacy and introduces you to new audiences, etc. And, just think of all the new technology out there -- virtual reality (VR) and immersive entertainment and other new media platforms, are just some examples. Those are all new and potentially highly lucrative opportunities to reach new audiences for your songs and recordings. For your songs and recordings to drive entirely new experiences. To drive entirely new impact. To drive entirely new fan engagement. To broaden your fan base. And to deepen it. To introduce it to an entirely new audience that frequently engages and enjoys music very differently than they did just a few years ago. 

(7) And, don't worry, not all buyers are massive nameless, faceless entities. Many (certainly the buyers with whom I work) give real attention and focus to you and your songs, recordings and "brand." After all, you control the destiny of your songs and recordings! They think of you as partners, in every sense of the word (and want you to feel the same way about them).  That's why most sophisticated buyers develop real strategies. And, they share those strategies with you. They seek your input. They want you to actively participate. And, they are receptive to your wishes. I have seen it. Personally. That's why many of the biggest artists and legends of all time have entered into these kinds of deals. All the buyers with whom I work are top quality and have impeccable reputations who want to work with the best of the best. That means you and your songs and recordings also will be in good company. (By the way, most sophisticated buyers will share their vision and strategies for your songs and recordings early in their discussions with you so that you can see if you like what you see.)

(8) For many artists/bands/songwriters, without active management and new opportunities, their "brand" may slowly diminish over time and their songs and recordings will lose out on the critical opportunity to be exposed to (and enjoyed by) new generations of fans (who face an onslaught of new media choices and new artists vying for their attention). Not only does this reality run the risk of diminishing and marginalizing an artist's legacy, it also likely will significantly slow down their royalty streams over time. That "mailbox money" starts becoming less significant. So, while I understand an immediate urge by some artists, bands and songwriters (and their representatives) to just say "no" and not even consider an acquisition of some or part of their music publishing or master rights, just think about this before you do (in addition to all of the other factors above).  

(9) Meanwhile, active and proactive management by a dedicated and passionate team of experts is necessary to build your legacy, introduce you and your work to new generations, and increase the overall value and impact of your songs, recordings and overall “brand” (and all of the opportunities and revenues that flow from that).  And, the buy-out portion of any deal — at current high multiples (and with the additional tax benefits) -- would require a helluva lot of years of royalty checks to match that sum you can enjoy today. In many cases, artists will never make up that number. So, you can enjoy the monetary value of your great work/art today (rather than wait for an unknown tomorrow). 

(10) One more critical thing to think about — by making this kind of deal, you (the artist/band/songwriter) are in control of your own legacy -- and in control of who will care for and nurture that legacy into the future. Many artists see tremendous benefit in making their own decisions about their own songs and recordings, rather than having others control key decisions if they are not able to do so themselves at some point for various reasons.

That’s a helluva lot of positives!

That's why there is absolutely no downside to seriously considering an acquisition deal of some kind at this moment in time. And, there's absolutely no downside in receiving a formal offer. After all, you -- the artist/band/songwriter -- are in control of whether you want to ultimately say "yes" or "no" to that offer (or modify it to be structured precisely the way you want it to be).  That's why anyone who advises an artist, band or songwriter NOT to listen to all of this — and at least actively consider whether a deal of this kind of deal may make sense — is doing a tremendous disservice to their client in my view.

So, if you own a significant music publishing catalog, or own valuable master recordings (or both), then contact me at [email protected] to (i) discuss the pros and cons of considering a potential deal, (ii) discuss the potential right "fit" and buyer/partner (since all potential buyers have their own individual personalities), and (iii) to receive a formal offer for your consideration (and without any obligation to sell, of course). 

And, don't forget about your REVERSION RIGHTS under copyright law. So long as you give sufficient notice, ownership of your music publishing rights for your songs -- and potentially even your own master recordings -- revert back to you after 35 years (if you didn't originally own them outright). That means that, in most cases, should own all of your songs (and potentially all of your master recordings) published and recoded prior to 1984 (no matter what your deals looked like back then).