The recent announcement that Bob Dylan sold the publishing rights to his catalog of songs is news only because, well, it’s Bob Dylan. But the practice has become a repeated refrain amid the many verses of the business of songwriting.
When Dylan was breaking out in the early 1960s, the songwriters’ dream was the gold album. For an earlier generation, it was making the “Top 100” on the radio playlist. Before radio, there was sheet music, with songwriters hawking their tunes in storefronts.
All are ways to sell a song, monetize a melody, amortize an air, and loosen liquidity from a lyric. Through copyright, the artist can create ownership and thus an income from rent, as a royalty. A good song will pay it forward for decades.
Mechanical royalties are paid every time a “physical unit” that allows “interactive consumption” of the song is sold. Interactive consumption allows for listener control—to stop or start listening—and includes a digital download through a service like iTunes or through streaming apps like Spotify.
Performance royalties are paid for every performance, whether live or through broadcast such as radio or noninteractive streaming services, like Pandora. There are still print royalties, paid on sheet music, arrangements, or reproductions of lyrics. And then there are synch fees, that pay for the use of a song in another medium such as a movie, advertisement, video game, or greeting card. An artist can be paid a synch fee and still collect the mechanical royalty every time the song is reproduced, so a song used in a hit movie or ubiquitous ad can spawn a small fortune.
With every technological leap forward, from sheet music to radio to recordings to streaming, the mechanics of distributing reproduced sound are made cheaper and more accessible, and thus more scalable and more profitable. Eventually, copyright protections are revised to support these new income streams, the song’s value, and the artist’s control.
As these income streams become more numerous and significant for more artists, not only does the act of creation become more profitable, but so does the business of managing and distributing the music. Dylan’s catalog was purchased by Universal Music Group, which owns such iconic brands as Abbey Road Studios, Capital, Decca Records, Deutsche Grammophon, EMI, and Def Jam. Universal is still very much in the business of creating and distributing music as well as realizing the profits from its income streams; it is a subsidiary of Vivendi, a publicly traded company.
Another suitor for the Dylan catalog was Hipgnosis, which has been buying up songwriters’ catalogs for their income streams but also as investment assets. Given the history, it is not hard to see that a catalog could create not only income but also upside potential, especially if a song ages from a hit into a classic, or the next disruptive technology exponentially expands markets.
More like a mutual fund than a nurturer of creative talents, Hipgnosis buys catalogs from a variety of artists and then, since its initial public offering in 2018, offers its shareholders a diversified portfolio of pooled income streams. If the catalogs also increase in value, so does Hipgnosis, earning a gain for its shareholders. It is a very different business model, and in a real sense, is unabashedly commodifying those catalogs as never before.
Dylan is the latest of many to seal such a deal this year, which has become noticeably more popular. For artists at the far end of long and successful careers, as for any entrepreneur nearing retirement, it is a lucrative way to cash out: to swap an actively managed product line for a lump sum, which can then be diversified as it is passively re-invested. And there are tax advantages, as the artist realizes a gain, taxed at a lower rate, rather than royalty income.
Younger artists have been selling too, although the reputational risk is higher for them, as the mismanagement of past work could reflect poorly on the prospects for future success. And there is a risk that rights will be even more valuable in future, with technology allowing more and different access, so that to sell now would be to sell too cheap.
And so markets evolve, and even simple songs become income streams, assets, commodities, and/or pooled investments, sought after by fund managers as well as music managers. Yet, for all that, the songs we loved and listened to are the soundtracks of our lives. Now we can invest in them too.