Own the Means of - and Your Own - Production
Especially your own intellectual property
Would you invest in a piece of Bruce Springsteen's catalog of music?
You may have heard how private equity firms and others are buying up catalogs for eye-catching sums.
Bruce Springsteen's life's work recently went for $500 million.
Was selling it a good financial - or artistic - move for the Boss?
What about Bob Dylan selling the rights to his Nobel Prize winning catalog for $300 million?
Those are big sums, but - I strongly believe - in the long run, Bruce and Bob or their heirs will regret the transaction.
There're many other examples, including Tina Turner, Paul Simon and ZZ Top.
According to Music Business International, in 2021 buyers paid over $5 billion for song rights.
Great Howard Stern Interview
Years ago, I listened to Howard Stern interview Paul McCartney, and Sir Paul described how Michael Jackson wound up owning the rights to a lot of Beatles songs written by Lennon-McCartney.
According to Paul, when Jackson's album THRILLER was selling gazillions of copies, Jackson asked for business advice.
McCartney explained some back story to Stern. After the legal battles around the breakup of The Beatles were resolved, he had $7 million sitting in the bank.
So he went to his successful businessman father-in-law, Lee Eastman, of the Eastman-Kodak family, and asked Mr. Eastman what to do with it.
Mr. Eastman suggested he buy a music publishing house that was for sale.
McCartney wasn't so sure this was good advice, but he was married to the guy's daughter, and Mr. Eastman re-assured him it'd be fine.
Plus, when he looked at the catalog, he found a lot of old songs he liked - and enjoyed the idea of owning the rights to them.
So, he invested the money. And that, he told Sterne, was the secret to his great wealth, because those songs he owned brought in a steady stream of income.
The Value of Musical Rights
Whenever a song is played on the radio (nearly) everywhere in the world, the owner of its rights gets a cut.
Obviously, some songs make a lot more than others.
(Norman Greenbaum, one-hit wonder of "Spirit in the Sky," once told a St Louis radio interviewer he still received around $100,000 a year from it.)
You get a cut when another artist records their own version. More, if it's used in a video.
You get a cut when another artist sings or plays it live, even if it's just in a small bar.
You make more money if it's used in a commercial, TV show or movie.
Online streaming is a major market these days.
Fans love to upload your music to YouTube, but those videos remain up only if the income they generate is sent to the rights holder.
Of course, you also get a cut from the sale of every record, tape, CD or MP3.
According to MRC and Billboard, sales of albums increased 11% in 2021.
In 2020, 65% came from back catalogs (instead of the latest hit songs). In 2021, that rose to 70%.
I just saw an article by Roger Friedman, pointing out 28 of the current iTunes Top 100 were oldies.
Clearly, the existence of unlimited online digital "shelf space" for music is leading many consumers away from the traditional "hit model" - where music companies focused only on the latest and greatest. They ignore every piece of music older than six months.
But this new generation of music fans can find and listen to Jimi Hendrix just as easily as Beyonce's latest - and some of them prefer Jimi.
This enables the "long tail" model. That's where a company selling music (or books or movies) can make money from works that don't sell in the millions - because they sell a few copies of millions of separate works.
Demand for music is also expected to go up with the onset of the "multiverse" virtual reality. That could go in many unexpected directions.
Plus, there are many possible subsidiary rights to songs. Almost nobody in the music industry is good at selling those, however - except one guy I'll write about farther down.
Back to Paul and Michael . . .
So, when Jackson asked Paul for business advice, McCartney told Jackson the same thing.
Buy up music catalogs.
McCartney told Sterne that Jackson then said, "I want to own your songs, Paul."
McCartney says he thought Michael was kidding, and slapped him on the back.
But, as you probably know, in 1985, Jackson himself stabbed Paul in the back. He bid $47.5 million for the rights to Northern Songs, which owned the rights to many early Beatles songs, outbidding Paul & Yoko Ono.
After obtaining those rights, Jackson exploited them in ways that degraded the Beatles brand, such as TV commercials and cheap movies.
And McCartney could do nothing to stop him.
Many believe it was the income from the Beatles catalog that enabled Jackson to live his fancy lifestyle even though his post-THRILLER albums bombed and he paid millions to alleged victims of alleged sex abuse.
Fortunately, Paul now has those rights back, but it's a great example of the value of holding on to them from the get-go - and of buying more, if you can.
This YouTube video seems to contain the interview I heard, but it may be edited because I didn’t hear the part where Paul consulted his father-in-law.
Are Music Catalog Rights Now Overpriced?
For the past 25 years, music publishing rights have usually been valued at eight to 12 times the net revenue - or "net publisher's share."
That is, what goes to the publisher after royalties are paid to the performer.
The latest deals, however, are reaching 20 to 30 times net publisher's share.
Under the older deals, you the buyer would get 100% of your money back in eight to 12 years. After that, it's all free.
Now, you have to wait 20 to 30 years.
But those calculations are assuming 2022's net revenues will not grow.
But the music business is ever-growing.
So, I repeat: eventually these artists or their heirs will regret not holding on to their rights.
Thomas Edison Invented the Phonograph in 1877
Until he replayed "Mary had a little lamb," no human being who ever lived had heard recorded music.
It took more decades of work to produce phonograph records to sell, but the business of recorded music has been skyrocketing for the past 120 years.
And shows no sign of stopping.
Of course, there's no guarantee any particular artist will continue to retain their popularity.
But even Norman Greenbaum is receiving a healthy extra income for the one hit he had in the mid-60's.
Compare to Stocks and Bonds
Bonds don't even return 1%, so that's a 100+ -year wait for the return of your money.
The stock market's overall price/earnings ratio is 38. That means you'll have to wait about 38 years to get your money back.
If you consider stocks with dividends, you can find good dividend paying stocks that are yielding around 2%-5%. If a company pays more than that, it's probably on the verge of going out of business or cutting its dividends.
When it comes to investments for us 99%, you can't find anything better than buying music rights, at least for a good catalog.
A good catalog of music is sort of like the Vanguard Dividend Appreciation or other ETF that holds stocks that pay dividends expected to keep growing long into the future.
If you're Bruce, what're you going to do with that $500 million that's better than collecting the fees your songs earn?
First off, he's going to lose a big cut to the lawyers and other experts who negotiated on his behalf. Of course, the articles don’t even mention that, but I’m sure the lawyers and their accountants are not working for food.
I'm not sure whether he'll pay taxes. Selling song rights would be more equivalent to capital gains than ordinary income, but I'm not familiar with the rules for something like your own intellectual property. There is no base price because Bruce didn’t pay for the rights - he created them by writing the songs. Presumably, the deal is structured to minimize his taxes - if the experts he's paying are worth the money they're undoubtedly charging.
Still, after expenses and taxes, I'd be surprised if he kept 60% - or $300 million - in his pocket.
If he puts that into good stocks that pay dividends (as, of course, I'd recommend), that might bring him $6 million per year in dividend income.
That'd support me and you quite nicely, but these stars are used to the high life. Will that pay his expenses?
But Music isn't as Standardized as Stocks
Of course, the problem is trying to compare music to music. It's all different.
Few artists have the potential to continue selling like The Beatles, Bob Dylan and Bruce Springsteen.
The late 60's saw the birth and death of many groups who didn't become hit artists. One of my favorite psychedelic groups was the Ultimate Spinach.
You could probably buy the rights to their catalog for a song. (Sorry, I couldn't resist.)
Unanswered Questions
The news stories about Bruce Springsteen, Bob Dylan and others fail to address crucial issues.
Do they have any right to object to how their music is used or abused? When they sell the rights, it seems to me the new owner will be in control - or they wouldn’t willingly pay such large sums.
And, no matter what they may promise the artist, the artist may have no recourse. If you start hearing their songs to advertise crummy products, you know they've lost control over their musical brands.
What if some anti-immigration group buys the rights to "Born in the USA?"
How’s Bruce going to react to that?
The executives of music publishing houses may be reassuring the artists that of course, they’ll never disrespect the music. We love you, kid, they’ll say. We won’t violate what your fans expect.
But executives move on and up and out, and are replaced by others. In 30 years, will young executives who have no memory or comprehension of the 70’s care what The Boss represented back then?
Did selling the rights include some provision for "sounding like" yourself?
I know that sounds weird. Let me explain.
In the late 60's and 70's one of the biggest hit groups on the radio was Creedence Clearwater Revival, led by John Fogerty.
Fogarty also wrote their songs.
Well, at some point CCR ran into financial problems, and the rights to their songs went to Saentz/Fantasy.
In the 80's, Fogerty wrote and recorded a new song, "The Old Man Down the Road."
Saentz/Fantasy hit him with a lawsuit, alleging the new song violated their copyright of the CCR hit - written by Fogerty, of course - "Run Through the Jungle."
The songs sounded similar because Fogerty wrote both of them.
But he owned the rights only to the new one.
Saentz/Fantasy lost their lawsuit when the jury decided in favor of Fogerty.
I'm not an expert on music copyright law, but apparently the law does recognize a certain "moral" copyright that can belong only to the song's author. The author can sell the economic rights, but not the moral copyright.
Still, the big music companies and private equity firms investing in these catalogs have the deep pockets to buy the best lawyers, so you wouldn't want to spend the rest of your life in court against them.
Despite his moral rights to the Beatles song “Revolution,” McCartney couldn’t stop Jackson from selling it to Nike for a commercial.
It could happen again.
What about performance rights? Will Bruce Springsteen now have to pay a fee every time he plays his own hits on stage?
That would gall the hell out of me.
Of course, if a particular musician or singer is so old they've stopped both performing and writing songs - especially if they're expecting to die soon - then it makes sense.
Some of the deals are made between the music companies and the estates of deceased artists.
If you're the heir of a great singer/musician, but are not familiar with the business, taking a huge chunk of cash must be very tempting.
Still, I believe an intelligent estate would do better in the long run to manage the catalog themselves - or to hire a competent agency to do that for them.
In the music industry, of course, the trick would be to find someone you can trust without constantly double-checking their work.
Image by intographics from Pixabay
The Greatest Exploiter of Subsidiary Rights in Musical History
About 50 years ago, a down-and-out young songwriter/performer with no hit records got an idea while stuck in traffic on a bridge.
It took him about 20 minutes to write down the words - creating one of the largest empires in the music business.
But, for many years after "Margaritaville" made him a star, Jimmy Buffett simply continued playing concerts and recording not-so-successful albums, just as he had before "Margaritaville."
A friend of his ran a store selling t-shirts for him, but that's it.
Then Buffett found out a Mexican restaurant was running "Margaritaville" specials on their margaritas. Not only did they not ask permission to use his song's name, they weren't paying him for the privilege.
Buffett filed suit, and the restaurant's defense was that Buffett was just a songwriter singing about margaritas - but he didn't own them.
THEY actually sold margaritas, so they could call them what they wanted.
Fortunately, Buffett won the suit - and learned to start using his song rights in unusual ways.
If customers at a Mexican restaurant would order Margaritaville margaritas, why wouldn't they go to a Margaritaville restaurant and bar?
They would, and did.
And many went to Cheeseburger in Paradise restaurants as well, though they've since closed down. And in Las Vegas and other places, you can order a drink at the “It’s 5 O’clock Somewhere” bar.
Today, "Margaritaville" is a prominent brand name for foods, drinks, beachwear and anything else that could be associated with Buffett's brand of beaches, partying, getting drunk, getting high, sailing, traveling, resorts, sex and . . . if you're a Parrothead, you understand.
Lately, he's even created three Margaritaville retirement communities. That’s taking musical subsidiary rights to a new height.
Until the 2020 pandemic shut him down, Buffett went on concert tours every summer. And he's recently released a new album.
How many other 70's stars can say that?
He's worth an estimated $600 million, making him one of the wealthiest people in the music industry. But I bet he wouldn't sell his catalog even if Elon Musk offered him $600 billion.
Buffett's One and Only Job in His Life Taught Him a Priceless Lesson
In the late 60's, desperate for money, he wrote for the Nashville edition of Billboard Magazine.
That gave him access to interview many successful artists who weren't part of the New York/Los Angeles mainstream.
Country stars, and also blues singers for Stax Records in Atlanta Georgia and others - anybody in or south of Nashville.
In his memoir A Pirate Looks at 50, he writes how many of these wonderful artists didn't have the careers they deserved because they wanted to "just play."
That is, they let agents and managers handle the unpleasant business chores - and they paid a high price.
Buffett doesn't actually go into the gory details of what he learned, and doesn't connect the dots, but it's clear he understands the value of hanging on to the rights to his own music.
He doesn't want to wind up like so many talented artists have.
I don’t know any details, but I’ve heard he’s turned down many offers to sell rights to his songs. And why shouldn’t he hang on to them? Would any of those companies now be operating three Margaritaville retirement villages?
Florence Ballard, the Supreme who got squeezed out of the group by Diana Ross and Barry Gordy, wound up receiving Aid to Dependent Children, according to Mary Wilson in her book GOLDEN GIRLS.
Think about that - 1/3 of the greatest female group in history - on welfare.
Not many years ago, I read Sly Stone (of Sly and the Family Stone) was homeless in Los Angeles, sleeping in a car.
I don't know what happened. Drugs were allegedly one factor, and that's all too credible. So was financial "mismanagement." Meaning that, if he were in control, he screwed himself, possibly for drugs, but, most likely, somebody took advantage of Sly’s condition to screw him - or lots of somebodies.
Supposedly he's happy in his car, but I bet he'd be happier receiving all the royalties he should be getting from his hit records.
If You Want to Invest in Music . . .
This article explains the general procedures pretty well.
It's more for people who may wish to own the right to some music to use in their own videos or other productions.
If that's the case, it'd be a lot easier and cheaper to just use royalty-free music.
You could also pay a musician to create music for you. Go to Fiverr, or look around for other sites. Just make sure the musician understands they're giving up all their rights to you.
It's the musical equivalent of writing "for hire." When I write for clients, when they pay me, they own all the rights.
But what I write for myself, such as this newsletter, I own all rights to.
In This Case, the "Means of Production" is Your Skill, Musical Imagination and Talent
You can't really sell that.
You can sell the rights to the specific works your skills and talents - whether musical or literary - have produced.
But know what you're doing.
Inactivity is the Greatest Career-Killer
Are both Bruce Springsteen and Bob Dylan completely retiring? Are they burned out, suffering from writer's block? On the verge of death?
I don't know. That isn't being mentioned in the articles on how much money they're receiving for their back catalogs. It's simply assumed their motive is money. That's obvious, but why they now want to sell out is not mentioned.
Because nothing makes a back musical catalog sell more than new concert tours and new record releases.
What happens when they wake up in the middle of the night with the idea for a terrific new song? Are they going to ignore it?
I think not. They're great artists.
Death does temporarily jack up sales. After Michael Jackson died, he sold more music than he had for a long time.
But that lasts only so long.
Generally, except for a tiny minority, such as Shakespeare, artists become less popular after they're gone.
How many songs do big band leaders Benny Goodman and Glenn Miller sell these days?
Or even Frank Sinatra?
Making Money from Your Own Works
If you have a blog, you own the copyright to it.
How much that's worth, is up to you.
If it's just for your friends, that's great, but not financially lucrative.
Branch out into something you can leverage for income.
You can make money from blogs, newsletters (here on Substack and other places), music and videos.
We all have different experiences, talents and skills.
According to Rolling Stone, top pianists are making $250,000 per year playing easy-listening music streamed to dentists.
Sadly, I never took piano lessons. Listening to me play the piano would be anything but "easy." You'd pay me to stop playing.
And there're other ways for musicians to profit:
Watch:
If you want to write books, self-publishing on Amazon's Kindle and other platforms means you own your copyright, so you control your career.
If you sell your book to a mainstream publisher, you will own the copyright - but they will be in control.
My widowed mother's investments enabled her to live a comfortable lifestyle for over 50 years, beating the pants off the Wall Street gurus even though she couldn't have read a balance sheet to save her life.
Find out how.
Check out my Income Investing Secrets book right now
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