Bruce Springsteen, Stevie Nicks, Shakira, Bob Dylan, David Bowie. What do all of these artists have in common? Aside from being chart-topping successes in their own right, they are also all artists who have signed deals to sell their musical catalogue in some form.
The most recent artist to have joined the ranks is global pop sensation Justin Bieber who inked a deal for $200 million dollars giving Hipgnosis Songs Capital the rights to his entire back catalogue.
This news came as a surprise to the industry as Bieber is one of the youngest to sell the rights to his music. At 28, the superstar performer is still relatively new in his career, meaning he’s not yet in that legendary status that might generate steadfast enough returns across decades. Nevertheless, his streaming numbers promise great returns.
For reference, Bieber’s latest 2021 album titled “Justice” recently accrued over 6.3 billion streams, not to mention his even more popular releases from earlier on in his career.
With this in mind, founder and CEO of Hipgnosis Songs Management, Merck Mercuriadis, backs his investment move in a statement saying:
“The impact of Justin Bieber on global culture over the last 14 years has truly been remarkable.
This acquisition ranks among the biggest deals ever made for an artist under the age of 70, such is the power of this incredible catalog that has almost 82 million monthly listeners and over 30 billion streams on Spotify alone.”
What’s in it for the artists?
Other than a lump sum of money, why are artists suddenly so keen on selling their rights? Once, the idea of giving way to corporate greed for commercial gain was viewed as “selling out” and against the true ethos of artistry, but is that true today?
Artists like Taylor Swift would likely argue that preserving the rights to her music is a necessity for artistic control across all fronts. She has spoken very publicly on the matter of selling rights after Scooter Braun’s private equity firm Ithaca Holdings acquired Big Machine and subsequently sold Swift’s master recordings. The public controversy shed light on an artist’s right to choose whether their catalogue should be sold and how their songs can be used.
Nevertheless, there’s clearly many artists who are willingly choosing to sell their catalogue without looking back. This could be due to a variety of factors and of course, every deal looks a little bit different.
Some speculate in the aftermath of Covid-19, artists are more willing to take the safer route because of the financial standstill in that time. For older artists, it could be a way to make life easier post-mortem as their loved ones can divvy up the hard cash made from the deal instead of percentages of royalties. Others argue that there’s a tax incentive as performers, at least in the US, are taxed around 37% if they’re in the highest bracket but are only taxed 20% if they receive a large one-time payoff.
When it comes to Justin Bieber, it seems his motivation was to cash-in now and bank on himself to continue to do well in the future. Because the singer sold 100% of his share of his publishing copyright, performance rights, master recordings and neighbouring rights, Hipgnosis can use his catalogue however they’d like in sync deals, etc. and subsequently receive royalties from it until the copyright runs out, which is 70 years after the creator of the copyrighted work passes away. Even so, Bieber can receive royalties from whatever future music he puts out and will likely continue to rake in revenue through more lucrative forms of money-making for artists like touring and merchandising.
What’s in it for the buyers?
If Bieber makes music that’s even more popular when he’s older will his older catalogue become obsolete? Hipgnosis is banking that it won’t.
Although Mercuriadis is going for a younger artist, that doesn’t mean his business model is changing. He and his investors are betting on the fact that the money given to artists upfront will pay itself off in the long-run through placements and royalties as fans continue to engage with their music. In this way, the nature of the investment becomes somewhat risk-free with seemingly endless returns. Even so, with an artist like Justin Bieber and despite his billions of streams, there’s a chance that his career and namesake could be soiled in the future, meaning the investment of his catalogue was a riskier move on the CEO’s part.
How do different deals work?
As mentioned earlier, the Canadian popstar sold 100% of his shares to different rights, but what does that really mean? Well, the world of royalties is a confusing one, but some artists have formulated deals in which they actually don’t have to give up full control of their rights. Here’s a rundown of how different deals can go based on musical rights:
When songs are released, there are two main sources of revenue: publishing royalties and mechanical royalties. Under composition royalties, there are mechanical royalties which account for physical and digital sales, performance royalties which account for times when the song is played live and sync royalties, like when a song is placed in a commercial or YouTube video.
Knowing this, an artist might decide to sell their share of their recording royalties without selling their composition royalties. In this way, they can keep making decisions over where their music is going but profit on money upfront at the same time.
What does this mean for the future of music?
Since the announcement of Justin Bieber’s deal, it was announced that Warner Music Group struck a deal with British rock-band YES to acquire their music rights while Primary Wave Music made moves to acquire Ray Manzarek’s music rights, a member of the Doors. With so many artists lining up to sell their rights, including one of the biggest pop stars of this generation, what does this mean for the future of music?
According to Eamonn Forde, a music business reporter, these deals could pose a problem for publishers. In the future, there could be less money to invest in up and coming artists and publishers might have to adjust royalty rates in order to keep up with market demands. Forde also hypothesised that deals in the future might allow for the artist to re-obtain their rights in the future as part of the deal. Nevertheless, time will tell how these deals will affect music and if it’s feasible in the long term. “This is a strange time for music acquisition,” he says.
Aside from business, how will this change the way we think about artists and their art? Does selling your rights make you a sell-out or a realist?
While the debate is ongoing, especially depending on the artist you ask, the bigger picture is that it points to an ongoing conversation about artist’s prioritising stability. Instead of revering the “starving artist” trope, creatives in a post-pandemic world are putting the present at the forefront instead of relying on future success. Their legacy has already been secured, so why not capitalise on it?
With the abysmal turnover rate in streams to cash for even the biggest names in music, it seems the time is now to sell. And on the buyer’s end, it doesn’t look like these investment firms are slowing down anytime soon in attempting to acquire the low-hanging fruit of music rights.