Why Are Artists Selling Their Catalogs?
Over the past couple of years, the number of artists selling off portions of their publishing catalogs has risen greatly, with artists from classic rockers like Bob Dylan and Sting putting up their legacy hits to hip-hop artists like Future, Iggy Azalea, and Metro Boomin cashing in on more recent material. Even R&B and pop stars stars like John Legend, Justin Bieber, and Justin Timberlake have joined the gold rush, while the estates of both Juice WRLD and Michael Jackson have sold the stars’ catalogs.
So, why are so many artists selling their old music?
Well, it likely comes down to a couple of reasons. The first, and most obvious, is for the cash payout. While publishing is still the most lucrative revenue stream for artists outside of playing live shows and doing brand partnerships, publishing is really only profitable when songs are licensed for use in advertising, film, television, or sampling in other artists’ music. However, there really are only so many opportunities available there, and things like streaming don’t generate the kind of income that actual album sales did back in the day.
As the late David Crosby wrote on Twitter when he sold his catalog, “I can’t work …and streaming stole my record money …I have a family and a mortgage and I have to take care of them so it’s my only option ..I’m sure the others feel the same.” Now that he’s gone, that cash is likely a comfort to his family — and much easier to deal with than administrating his massive catalog. As country star Travis Tritt said when he sold his catalog to Reservoir Media, “The biggest reason for me selling was not to leave a huge headache for my family that would have to try to administrate a catalog. I’d rather leave them cash.”
The other big reason stars might be selling their catalogs has to do with taxes. Because of the way income is taxed from royalties, artists might end up keeping more of their money by selling the publishing rights all at once. Royalty payments are viewed by the IRS as regular income, which could be taxed as high as 37 percent under current tax codes depending on how much those royalties are. However, a catalog sale is taxed as capital gains — which has a much lower max rate of 20 percent.
With the current administration working to close that loophole, many artists and their business managers view it as a limited window of time to take advantage of it, and they are doing so before time runs out. From a purely pragmatic standpoint, it also makes sense because while the long-term realization of the catalogs’ value will likely be many times when artists are being paid for them now, most artists probably won’t see all that potential — even if they aren’t as old as, say, Sting.
Getting a guaranteed eight figures now rather than a possible larger payout some indiscriminate time in the future seems like a pretty good deal. After all, you can’t take it with you and you’d rather be able to enjoy it while you’re young enough to do so. And while there may be some unintended consequences down the road — monopolies are never good — for now, it would appear to be in artists’ best interests to cash out while their hand is hot — because everyone cools off eventually.
For more information, check out The Washington Post‘s coverage.