This week In the Hot Seat with Larry LeBlanc: Lisa Alter, Founding partner, Alter, Kendrick & Baron.
Last year saw a boom in music sales with catalogs being valued for triple or quadruple what they might have sold for two decades ago.
As private equity and other investment groups have discovered the value of recorded music and music publishing catalogs, it seemed that each day brought headlines of more and more outlandish and significant acquisitions.
According to Music Business World, at least $5.05 billion was spent on catalog and rights acquisitions last year. That figure includes deals for individual catalogs sold by artists and songwriters, plus acquisitions of music rights portfolios by companies from other companies.
Close to half of that total sum, some $2.33 billion, was spent on acquisitions of rights directly from artists, songwriters, and/or their estates.
Among recent catalog sellers or leasers were Bruce Springsteen, Bob Dylan, Sting, Neil Young, David Bowie, Paul Simon, Stevie Nicks, David Coverdale, Nancy Wilson, John Legend, Robbie Robertson, Def Leppard, Elvis Costello, Imagine Dragons, Kenny Chesney, Julia Michael, Jim Peterik, Luther Vandross, Toto drummer Jeff Porcaro and most recently, members of Alice in Chains in separate deals.
In the middle of this swirling business mix is New York lawyer Lisa Alter who represents with distinction major and independent music publishers, as well as equity investors—which has included Primary Wave Music, Reservoir Holdings, Tempo Music Investments, Influence Media Partner, and South Korean powerhouse HYBE—in copyright and transactional matters in the purchase, and sale of music assets, putting her on a plateau in music that few American lawyers reach.
Utilizing a pincer movement approach, Alter and the firm’s team of lawyers and paralegals negotiate and close multiple asset purchase agreements day after day.
Alter is also renowned for her work in the area of termination of transfers in accordance with the U.S. Copyright Act, and for the regaining of music publishing, and master recording copyrights.
In the past year, Alter’s firm represented clients in music acquisitions valued at more than $2 billion.
Let’s return to March 13th, 2020 when you shut down your office in the evening, cleaned out the refrigerator and the kitchen, and filled your car’s backseat with binders of all the deals you were working on to take to your apartment in Tribeca.
You had about half a dozen deals in play, including some really significant ones that you were in the middle of. You figured you’d be away from the office for about two weeks. What happened was extraordinary from balancing work, kids home from college, and so on.
Well, we were lucky because a couple of years earlier there was a massive steam-pipe explosion on Fifth Avenue and 20th Street, right in front of our building on the North East side. Thank God, it was early in the day, and nobody was hurt. But our building was drenched in asbestos so no one could go in for three weeks. We couldn’t get a thing out. So I got everybody in the firm set up immediately with full home equipment, internet phones, laptops, printers, everything. And we kept that going when we returned. When new people joined the firm afterward, we had set-ups for them in their houses.
That’s impressive attention to office work details.
First of all, I believe in flexibility, having grown up, and having raised my kids while working remotely occasionally in a time when flexibility wasn’t so much of an option. Working from home, you had to pretend you weren’t. Clap your hand over the kid’s mouth, and quiet the dog.
So you had left your office with all of your case files, and hunkered down in your apartment in Tribeca, and at home in Connecticut.
It was so much easier than it could have been. Look, we could have gone back in, and I did for a while because the mail forwarding was a disaster. So I would go in every once in a while. I don’t live that far from the office.
We were pretty much back by early Spring of 2021.
But we were lucky because, as I said, we were really set up. People would call, and we’d answer the phone, and they were put right through like it was an office. I was also set up in Connecticut. I was set up in both of my places. But we were okay. Shocking that I did say that we would be back in two weeks. I did not imagine that this would going this long and also…
The work didn’t stop.
We are not primarily tour lawyers and my friends who focus on touring had a different situation. Yes, the deals just kept going. I had COVID at the end of March 2020. I came down with COVID the weekend that my partner Katie Baron went into the hospital for her first child. Katie couldn’t work so I had to take on her deals. I was in the middle of a dozen deals which seems like nothing compared to September 2021; but, at the time, I had COVID. I was doing all of this negotiating. And I would just press mute every time that I coughed. And I didn’t tell anybody until the deals closed that I had COVID. But I did tell them afterward, but not during because I didn’t want everybody to freak out.
How old is the firm?
It started in 2006 with a different name, and I was also with another small firm, basically with my practice. Some of my clients have been my clients since 1999 or 2000.
How much staff work at the firm?
We have 8 full-time lawyers and a couple of counsel. It’s a great size because we all talk about every deal, we have deal meetings, and partly it’s who’s got the space to take lead on a deal. Sometimes it is, “I really want to work on this. I want to do this deal.” But generally, we work as a team with each deal having its own partner in charge, and its own primary team of associates. And we have a staff now of three paralegals. It’s a pretty well-running machine. And we have an established deal proces. An overall approach to the acquisition/sale process that we adapt for each client because certain buyer clients have different requirements based on their structure, and their financial partner’s requirements.
How do you and Katie divvy up duties?
We just make sure that it is balanced. We are pretty much equal in the number of deals we are handling at a given time.
Do you each have your own set of clients?
No. Katie and I have always worked as a team. We work on the same clients.
As a boutique-style law firm, you are no doubt able to pivot faster.
(Laughing) We pivot on a dime, even smaller than a dime. Oh my God, I am serious. In the last few weeks in December (2021) we closed 25 deals and kept attention to detail. Organization is so important, as is our having the right staff of people, and the people having their own responsibilities. So we have the paralegal team immediately working on a copyright analysis; the main searches, all of that drill down; and working with the in-house team on the buy side to identify what the top earners were, and on the primary focus of ensuring that we look at the top 90% of the catalog depending on…
On a catalog of already released songs, you know what the hits are already?
Yes.
With a publisher or fund client as a buyer at what stage are you brought in? And what does the client want from you at that point?
It depends. Clients differ. Some don’t bring in outside legal until they have a signed letter of intent. Others bring us in to do the letter of intent. Either way, it’s very early. The first thing that happens when a publisher or a fund is determined to make an offer on a deal is that they sign their NDA (non-disclosure agreement). Some of our clients have us do their NDAs for them, but traditionally they have their own form or we give them a form. They sign the NDA, and they commence to the financial diligence. And they may have a rough idea about the contractual side. They know such and such third-party publishers are involved, or third-party labels are involved. But they don’t really delve into all that.
The first level of analysis is financial. Right or wrong,
Then they make an offer and, around that time typically, we come in. The letter of intent gets signed, and then we request, and begin the legal diligence. I’m a firm believer in doing as much diligence as possible. Although financial don’t often work collaboratively, in my view the people doing the legal diligence need to be communicating with the people doing the financial diligence back and forth because you want to make sure that the analyses matches. We are typically provided with a whole data room of documents – sometimes organized, but often not. Sometimes the seller’s lawyers have been with the seller for years, and sometimes for only for a few weeks.
Either way, they may or may not understand the paper chain.
Sometimes they do, and sometimes they don’t. So, you get this data dump, and nobody knows anything. When we are on the sale side, we always conduct seller due diligence up front because we think that helps our client who is selling get the best deal because we can answer every question quickly. Sometimes prices can be higher based on good sell-side diligence. But that’s not typical of all seller lawyers.
What you and your team are doing, in essence, is big picture with attention to detail. Running down two things at the same time.
Exactly. It’s interesting that when you have financial institutions more actively involved in the acquisition that they have other things they like to look at, things a traditional publisher might be less concerned about. Financial institutions, typically, want to make sure that the majority of works, whether it is masters or songs, have been registered for copyright. With older works, we find that works are registered on the song side, but and not necessarily on the master side. But compositions are not always registered, particularly with ex-U.S. works, and newer stuff. So there’s more cleanup that they want done upfront; whereas a traditional publisher will say, “If things aren’t registered properly, we are going to take care of that once we close.”
I take it that in buying an American song catalog that there may be still agreements in place with sub-publishers overseas?
Oh sure. It happens all of the time. People are buying income streams where there is no copyright ownership, but they are subject to all of the deals that are in place. That is part of the diligence process. Does that sub-publisher have any restrictions on assignment? You have to clean all that up before you close. Each existing deal has to be vetted to make sure that the rights that are being sold can be freely assigned.
With increased competition in the field comes an urgency to be on top of every deal quickly.
I have to say this market has created a very tight schedule; whereas in the old days, going back a few years, you could have a 90-day exclusivity from signing a letter of intent or deal memos to close. That’s rare now. Thirty days is more and more common. I don’t like it, and I’ve told clients in certain cases, “I know that it is a really competitive market, but you still have to do the same work, and depending on a particular deal, 30 days makes it a very stressful situation to make sure that you have covered the diligence.” I don’t believe in filling in blanks. Every deal is slightly different, and we are sticklers on drafting. I have seen so many ridiculously poorly drafted deals in the old days, where people were putting square pegs into round holes just because that was the form that they had. There’s no such thing as just filling in the blanks, and doing a good job.
I’ve seen contracts that were little more than paste-ups of other contracts. Somebody likes a contract clause or sections and copies it into their contract.
I see that all the time. I also see our contracts coming back to us now because we have done some original drafting.
At the moment, the entertainment industry is fixated on the ongoing rounds of catalog acquisitions with multiple being paid up to 32X evaluation.
What’s driving such activity?
Is it a ripple effect of so many deals happening? Is it because of pending changes in capital tax laws? Is it because streaming is driving music income?
Or is it because of the new licensing opportunities now available?
Or that there is increased interest in estate planning as some of these creators grow older?
It’s all of that, honestly. I think that what came first was the coming together of the financial community, and the traditional publishing community in different ways. So whether it’s traditional publishers who have private equity, credit financing, or big bank money behind them, or the funds that have been started specifically for the purposes of buying music-related assets, there has been a global recognition that the predictability, and reliability of the income flow from music content makes it, perhaps, one of the most stable investments because music, historically of a certain ilk—but not all music— retains value.
Financiers, both credit and equity providers, stayed away from the music business for many years after the Dot.com downturn in the late ‘90s.
Among the factors contributing to this most recent surge of activity are that interest rates are low, and the bond market is not yielding significant dividends. While those with capital are looking for other places to deploy their capital, music assets are attractive to investors because they’re relatively safe and stable, and there are increased applications on how to exploit songs.
Today, investment firms like Blackstone, Apollo Global Management, Pimco KKR, HarbourView Equity Partners, Barometer Capital Management, Tempo Music Investments, and Northleaf Capital, along with Hipgnosis Song Management, Primary Wave Management, Reservoir Media Management, Round Hill Music, Kilometre Music Group, Iconoclast, Iconic Artists Group, and HYBE are among the new players investing in music rights while major traditional publishers have been pulled into a capital acquisition arms race.
Lower interest rates are certainly a factor that contributes to songwriter’s or artist’s decisions to sell, and we are now potentially facing higher interest rates. We are not clear where that is going. I don’t know what that is going to mean if interest rates really start sky-rocketing for buyers. A lot of the money now is raised. People have money to spend, and they have to spend it. So I don’t think that it is going to be an immediate break on the buying trend long-term, but rising interest rates could have a negative impact. But when you talk about what happened in the ‘90s, I think that was short-sighted, and that investors probably got scared thinking that the advent of the internet was going to kill the record business. That it was going to kill the music business, and there wasn’t going to be this on-going steady flow of income from those sources, and while there was a momentary blip, streaming is here to stay certainly for the foreseeable future and will result in a rising impact on the industry.
Today, each morning there’s acquisition after acquisition in the news with jaw-dropping figures up to 32% of the valuation. There had been media reports of Sting seeking $300 to $450 million for his catalog.
Universal Music Publishing Group has now purchased Sting’s entire songwriting catalog, including his solo songs as well as those by the Police in a deal reportedly worth more than $250 million. The agreement covers both the publisher and writer shares.
Each day there are hefty catalog purchases being announced, whereas a decade ago there was only a handful each year.
Well, look at it this way. There was so much incredible music that came out of the ‘70s, ‘80s, and ‘90s. There is still some incredible music being made today. But there’s so much incredible legacy music that has a proven track record. Just year after year after year of steady or rising income throughout the decade. All of that material is now fair game. Available either because the songwriter/artist never sold their rights or because the songwriter/artist, through statutory termination, got their rights back; mostly on the songwriting side.
You can sell anything now.
In the past, you attained a far greater multiple for selling copyrights in songs than anything else. More than writer’s share, and artist royalties, and even higher multiples than even in the sales of masters because in the old days only record labels were buying masters. Now, publishers and funds are buying anything music-related, and they are paying commensurate multiples for almost any aspect of the business of the assets that you have available to sell. So there are more assets available because the assets have expanded.
The reason why there are so many catalog sales now, and why it seems to be happening quickly, is a U.S. tax situation. For artists and artist/songwriters owning their own music, making a sale right now they will likely hold on to more money than if they sell in a few years from now. Under the current capital gains rate, and with the talk of interest rates being hiked, there’s a motivation to sell.
When Joe Biden was elected President he pledged to alter the country’s capital gains tax law so that it would fall in line with income tax for high-earners. That means the taxes artists would pay on their catalog sales could jump to around 37% from roughly 20%,, and that will hammer the valuations of their catalogs. That is what is pushing everyone to get a deal done for their music.
Financiers, however, now seem to be unfazed if a raised capital rate will hammer the valuations of their buys.
There was a sense in the sales community that, “You have to get your deal done in 2021 or it’s too late,” but I think that people are realizing that the capital gains tax, even if it goes up in 2022, it’s not going to go up as much as people originally thought. Even if there is an increase in the capital gains, there is continued interest in selling.
We also must not overlook that while several artists and estates still do choose to own their own work, the decision to sell a portion or even the entirety of a catalog is mostly a financial one. That this is their business; this is their life’s work, and by selling they fear losing control.
That’s right. So there are many factors to these deals that allow the sellers to hold some control or at least some interest. One is just psychological as, “I still own a piece of my copyright. I still own a piece of my creations.” But the other is, “I am going to sell to an entity that I think can increase exploitation, and I want to get some benefit from it. If it is only a fraction that I would have gotten if I kept it larger, but at least I will get some upside.” And these are very smart deals. They are creative deals. They also allow the sellers, depending on how much of an interest that they retain, to retain some approval rights. They aren’t going to hold onto everything, but in most cases, they can retain meaningful approval rights.
We are now seeing termination transfers growing,
Yeah.
That hardly happened years ago. Terminations came up, and songwriters and artists quietly went in, and re-signed with a few upgrades in rates, perhaps. Today, the grass is greener on the other side.
Exactly. The grass is greener, and you get more money, and you get more to walk on that grass. Nobody is going stay just for old time’s sake if they can get twice the number or 50% higher somewhere else. It just doesn’t make sense. Now again where they are going matters too and unless they are selling everything and say, “I don’t care. I want the highest dollar and I am walking” but if they do care and they want to retain an interest or they just plain care than they may not go for the very highest dollar if there are other things on the table with a potential buyer. But they are certainly not going to go multiple percentage points lower to stay where they are.
Or they stay, if the label or publisher decides to gin up the royalty percentage, and offers some shiny goodies. Increased rights within the contract.
Yeah. And there are things that like for statutory termination, the publisher that has been terminated in the U.S. can sweeten the pie ex-U.S. which is something unique to them. It doesn’t happen that often but they could. It could be an added incentive to re-up in part or whole with the same publisher but again there are many writers who just want out. They just want to do something different.
That’s why producers and publishers working in film and TV favor work-for-hire to lock down rights forever.
If I was a publisher and had catalogs of a certain age, I would never want to be surprised by someone serving a statutory notice of termination. I would want to know that it was coming, I would be wanting to: A) Work the hell out of it in the years preceding because of in case I lose it; and B) Trying to incentivize writers, trying to improve the relationship with the writer or the heirs if they wanted to make a new deal. Those publishers who have those older works have so many songs in their catalogs. Nobody has gone out of business because they lost things to statutory termination. It just keeps product going around the marketplace.
Decades ago, the record label would finance the recording but might insist that the artist’s own songs were directed to their music publishing affiliate. Or a music publisher might say they knew a label that would be suitable for the master that the songwriter had recorded.
Many major publishers held a gun to the songwriter saying, “You won’t get your record deal without signing with us.” And many publishers would not give a 50/50 co-publishing deal. They demanded the entire publishing share. “Give us 100% or you don’t get a label deal.” At one time, labels wanted all publishing and even co-authorship.
In the old days, it often was, “I co-wrote your song.”
Like a Motown deal. Being with BMI or ASCAP, they couldn’t take that away from the writers in those days.
There are a couple of reasons for the interest in older catalogs. Streaming has shifted away from being exclusively focused on newer music. Also, some of the catalog buyers have come up with innovative deals. Years ago, entire rights had to be included in a deal, but today, as we said, there are varied approaches in deals including the original rights holder or the estate retaining a sizeable interest.
It’s now much more palatable because there is always the concern on the part of the seller, “What if I sell at a great multiple based on my past three years, and the company that buys my rights really does an incredible job of exploiting? What if we get that Super Bowl commercial the year after I sell and then I short-changed myself.”
(Laughing) That a buyer might be able to create opportunities for branding, create opportunities for new ventures with so many avenues like streaming, films, TV syncs being available to the buyer.
That is sort of a hard thing. You sell your house at what you think is the top of the market, and the following year the market doubles.
Besides Sting, there are some major catalogs that could come on the market including Prince, whose estate was recently valued at $156.4 million. His publishing assets it has been said could fetch from $100 to $300 million.
Among those with potentially available catalogs are Diane Warren, Billy Joel, Dolly Parton, Don Henley, U2, Bryan Adams, Bob Seger, Steve Miller, KISS, Ozzy Osbourne, Joni Mitchell, and Noel Gallagher.
Yeah, there’s a lot. Just go down the list, and there are a lot. And then there are all the songwriters who might not be household names but their songs are.
It used to be there was the phrase, “If you wait too long nobody will want it.” I don’t know if that’s true anymore. There are so many avenues to exploit songs today if it’s still bringing in income. The interesting ones are some of the newer catalogs where they’re worth in 5 to 10 years can’t be easily determined.
That’s a little harder to predict. I remember many, many years ago, early in my career, hearing about a country songwriter who had sold his songs and that was during the heyday of the second wave of terminations. It was after the passage of the Sonny Bono Term Extension (The Sonny Bono Copyright Term Extension Act of 1998).
(On October 27, 1998, President Clinton signed into law the “Sonny Bono Copyright Extension Act,” which extends the terms of almost all existing copyrights by 20 years, in order to provide copyrights in the United States the same protection they are afforded in Europe. The basic term of copyright protection, the life of the creator plus 50 years, was increased to life plus 70 years)
The reasoning behind the Sonny Bono Copyright Extension Act was to preserve an incentive for creators to create by guaranteeing that they would be able to enjoy the fruits of their own labor for a set period.
In 1963, Paul Anka purchased the rights and ownership of his ABC-Paramount catalog, I believe, for $1 million, and industry people thought he was crazy.
(In 2019, Paul Anka entered into a strategic partnership with Primary Wave Music Publishing that covers his controlled publishing, his master rights, and his name and likeness.)
Paul’s 1963 buy-back was forward-thinking for the time. As he told me, few artists then thought they’d be around after 5 years. It was up and down the charts, and then off onto the rock ‘n roll oldies circuit.
People started really focusing on getting out of deals and, maybe, making a new deal; but more likely holding on to their songs because they were so happy to get them out of their old lousy deals. I spoke to this country writer who had sold. And I said, “Why would you do that?” He said, “This is country music. Who the hell knows if anybody is going to listen to it in 10 years?” That was wrong but, at the time, it made some degree of sense. As a buyer, you have to be careful. Obviously, the newer music will usually, but not always, command a lower multiple in some cases because you just don’t have the history. With the older music, you have decades to look at.
The recording industry was the first media sector to feel the full impact of the Internet, and technology-empowered consumers. After peaking in 1999, music creators and record companies were side-swiped by a technological revolution, and soon faced a borderless global ecosystem that defied control or monetization. Then the industry missed years of opportunity to bulk sell music on the internet because of fears over the conversion of music to files. It tried to discourage consumers from copying music across the internet by suing alleged infringers; and trying to implement a secure digital watermarking scheme.
Right, piracy was rampant.
Then it was conceded that downloads wouldn’t make up for lost music sales, and streaming further rolled back music sales as sources of artist and songwriter revenues, and their income would now depend primarily on touring.
Exactly.
Then touring disappeared due to COVID-19.
Touring disappeared in the Spring of 2020, and yet this (publishing) business has just been booming since then. We have done, exponentially, more deals in 2020 than we did in 2019, and in 2021 even more. 2022 has been the strongest start that I have ever seen. The strongest first January ever in terms of the number of deals that are kicking off. Usually, there’s a lull (in the month I think that everybody was kind of stunned by the first two weeks in January because we were all working and every single area of the business was so focused on getting deals closed by the end of the year.
For decades, it seemed that traditional major publishers were buying catalogs as add-ons to their portfolios without any increased exploitation; riding on the coattails of their record label partner, doing little more than trying to have a great operational backroom, and sending along a check to the songwriters and co-publishers involved.
So many prestigious music publishing catalogs were folded into the overall catalogs of music publishing giants invested in songs, licensed them, and watched as their catalog continued to grow.
One of the traditional ways to evaluate a catalog is by looking at the historical performance of a catalog, and then projecting out what you think the revenue might be from that catalog into the future. Back when the industry wasn’t changing much, that was a fairly simple exercise. What has changed is that there are new income streams that never existed previously.
Therefore, buyers now evaluating catalogs are not only looking at traditional income streams, but they’re also projecting what new income streams might be coming in.
That’s another reason that the value of catalogs has skyrocketed.
When savvy new buyers evaluate the multiples, they likely have figured out in most cases where there is additional value in exploitation. If the catalog made this in the past three years, they know they can make this amount plus from doing these types of things. Looking at the multiples, they think, “Okay, this is our ceiling. We know what we can earn further.”
Yeah, and it may be that collectives in the past weren’t collecting every dime. There is a lot of money lost in this business if you don’t have a team that is really making sure that every society around the world properly registered the works so the money is coming through. That there is nothing lost. So just by improving collection of income from various source payors, you can increase revenues. Then by enhancing exploitation of the works, you can significantly increase the monies derived from the music. And buyers, they aren’t going to go out on a total limb and say, “Well, I can double this income and therefore I am going to pay double what I would ordinarily pay based on the historical value.” But it gives them a little room.
Today’s wave of rightsholders believe very strongly in partnering with artists, with heirs, with estates, and with the management of the artists. They bring to the table marketing teams, branding teams, publicity departments, and a publishing infrastructure which includes licensing and synch opportunities.
Some of these newer publishing entities have great support teams.
They have fantastic teams. They really do. I love working with most of our clients. These are exciting times.
Who’d ever dream of Primary Wave Music after acquiring 50% of Kurt Cobain’s music catalog, would use his lyrics, graphic designs, and signature on a limited edition Converse running shoe in 2008?
With only owning a portion of the music publishing, Primary Wave Music had to do something involving the music rather than a merch deal, which they weren’t involved in.
A brilliant and provocative use of copyright.
And we are seeing a lot of that. We are seeing a lot of…even if the seller doesn’t sell their branding rights outright, they are often granting a non-exclusive right to create branding opportunities that both parties would benefit from, and that’s very exciting because it does help to bring the music to a new generation.
We mustn’t overlook that some of the artists are older, and may be thinking, “I’m 75, and my family won’t know what to do with my songs or masters.” it’s better to make decisions about who’s going to manage their copyrights before they pass, instead of having that become something their heirs have to deal with.
I know you represented the children of the reclusive singer, songwriter, and producer Lee Hazlewood (“These Boots Are Made for Walking,” and “Houston”) in selling his music publishing rights to Universal Music; and with the heirs of Anthony Newley (“Willy Wonka, Main Title, (Golden Ticket/Pure Imagination),” “The Candy Man,” “Once In A Lifetime,” “Stop the World”) in the negotiation of an administration agreement with Downtown Music Publishing.
Estates, in many cases, have little idea how to deal with master or music publishing rights.
Well, in effect, it is putting a burden on your kids. Some artists and songwriters have complicated family situations. They might have multiple children from different marriages.
Are you saying that maybe the third wife shouldn’t get a great cut of the…
(Laughing) No. Not at all. I am just saying that it might be easier to set up a situation where the assets are for sale that the money is invested and everybody gets their interest and a CD (certificate of deposit) or even if there is an interest participation retained that is easy to allocate. There doesn’t have to be the possibility of tension between the heirs over how the exploitation should happen. What if one kid thinks, “Anything goes. I don’t care about changing lyrics. I don’t care about any of that. Let’s just go for the highest dollar,” and the other kid wants to preserve the artistic integrity (of the songs)? That could create tension. So that’s another reason.
You earlier mentioned county music, as you know, Hipgnosis Song Management recently acquired 80% of Kenny Chesney’s recorded music royalties, covering his catalog from his 1994 debut “In My Wildest Dreams” through to 2017’s ”Live in No Shoes Nation.”
But there have been few major acquisitions of late little in country music, maybe, because so many artists and songwriters were developed by label and publishing company combos, or by traditional major publishers.
At the same time, there’s not been a lot of acquisition activity in hip-hop where multiple songwriters and producers work on tracks. Like Travis Scott’s “Sicko Mode” has 30 collaborators pertaining to the amount of samples. Hard to slice up?
If you only have a fractional share, the deals are more complicated. Nobody wants to divide 10%. You can’t do much with that.
Much of country music is about co-writes. I’m sure you’ve heard the popular Nashville saying, “In for a bit, in for a split.” The rule being whoever is in the room contributing gets an equal split of song.
Correct. A lot of hip music, as well as legacy compositions including by Lennon & McCartney, are co-writes.
But Lennon & McCartney’s earlier songs remained with specific music publishers through the years.
Diligence is a lot of what we do on the buy side and the sell side. It makes the diligence a little more complicated, but co-writes are sort of the state of the business, and that doesn’t make the work less valuable. If it is really getting to many different authors, then you can run into some issues. With samples. A lot of newer works have complicated histories. They are complicated because things (songs) changed hands.
How about checking orphan works, whose owners are hard or impossible to identify or locate, a considerable cause of gridlock in the digital marketplace?
You can do some degree of that by having portal access to the various payor societies etc. around the world, and some of it is going to be cleaned up post-close. Any composition catalog of any age, but certainly an older catalog, if you check how the works are registered at ASCAP (U.S.), PRS (UK), SACEM (France), BUMA (Netherlands), and GMR (Global Music Rights) around the world you are going to find mistakes.
Collective rights management organizations are under pressure globally to deliver more accurate services to their members, and to their licensees.
Despite all of the efforts to have a uniform registration system it doesn’t work. It’s not happening yet and there are going to be mistakes. Then there’s multiple songs with the same name or it’s hard translating it. That is the job of a good publishing company, and good sub-publishers to go in and track all of that down. But what happens with an older catalog, let’s say the rights have been sitting for 35 years, the publishing company may make that big effort early on, in years one, two and three, but in year 35 they are not looking at how those works are registered around the world as carefully as they are with newer works, So there is always money to be found.
Today, we’re still seeing growth in Interactive streaming services like Spotify, Apple, Amazon, Pandora, and Google but we are also seeing growth in a lot of the new media platforms, whether it be gaming or in-home fitness or social media like FaceBook, TikTok, Peloton, Roblox, Twitch, and Instagram.
Last year, Spotify, Apple, Amazon, Pandora, and Google filed documents with the US Copyright Royalty Board (CRB) to tell them what they think they should pay songwriters for the five years between 2023 and 2027.
The National Music Publishers’ Association claimed that the music streaming services were trying to cut the amount of money they pay songwriters in the U.S. to the “lowest royalty rates in history”.
The global transition to digital is creating greater opportunities for creators to reach consumers more than ever before. But, there has been a disruptive effect through all of the creative industries. It’s important that creators assert their rights if their ability to create and earn a living is being affected.
The challenge for publishers is to ensure and maintain the value of licensing against all the things happening with technology. As new digital partners emerge, to directly build relationships with those partners, and collect much efficiently and quickly.
It is a challenge and it’s been a challenge but I think that the licensing structure has improved so that you are hearing less, certainly there are issue in the whole Peloton case but I think that these new exploitations with these service providers etc. are falling into line with the fact that they do have to license. Now the rates are another issue…
The NMPA’s proposal asks for the current headline rate (i.e. the proportion of a service’s annual revenues paid to songwriters) to be increased to 20%. That would be a 4.9% raise from the 15.1% rate the NMPA secured in the previous CRB process, which is currently being appealed by Spotify, Amazon, and Google.
And that is a problem, but at least they seem to be acknowledging the licensing structure, and that is a big improvement. And again, the growth in the area of digital exploitation has contributed to the increase in the value of music assets.
Nevertheless, there still remain a lack of parity between master and publishing rights, between what publishers get from digital, and what record labels get. Music publishers and songwriters continue to argue that they are marginalized in industry negotiations over music use.
There’s the argument that recorded music companies, Universal, Warner, and Sony, are leveraging their big publishing affiliates that instead should be advocates for songwriters. They can’t advocate because they answer to their recorded music divisions.
If the streaming services and others had to pay publishers more, they argue, it’d have to come from the recorded music side. There’s only so much money to be paid out. But with all of the new publishing players coming in and not being connected to a record label, they are going to further demand that rates be increased.
Right, there’s something to that.
The CRB is currently in the midst of proceedings to determine songwriter streaming royalty rates for the five years between 2023 and 2027. As you know three judges are charged with conducting those proceedings and one of those roles is currently up for grabs.
It’s important.
Now in his 17th year as president & CEO of the NMPA, David Israelite has been at the forefront of the fight to secure higher royalties for music publishers & songwriters, Much of the credit for the passing of the Sen. Orrin G. Hatch Music Modernization Act in 2018 goes to him.
Oh, he’s amazing. There are other issues. The whole issue of the majors both on the record side and on the publishing side, but more on the record side, try to make it very difficult for buyers to step into the shoes where they are buying rights that are subject to existing deals with majors by refusing to honor letters of direction and by insisting on their own language even if the contract does not support that. That is a big issue.
Moving rights from one PRO (performance rights organization) to another is possible, though PROs put up roadblocks. It takes a lot of time and effort and it must be done on a writer-by-writer basis and is at the mercy of the speed that the PRO will move at, the rights must go to another place within the PRO network to ensure that royalties continue to flow, and the change in PRO must be accurately documented within every single PRO’s systems.
Right. We have several clients that changed very early to GMR and it took years to fully implement it.
How competitive are the traditional musical publishers today?
More than they were but very selectively.
I remember discussing one of the new funds dipping into music publishing and asking a publisher friend if they had been involved, and he said, “We’d never get involved when it’s that kind of multiples. There’s no way they can make money.” Now, they have to be involved, but they weren’t.
Right. The multiples that they were paying a couple of years ago were significantly lower against the multiple being paid by independent publishers.
That has changed.
Last year, Warner Chappell Music, the smallest major publisher, bought David Bowie’s songwriting catalog for $250 million. In December 2021, WCM UK renewed its global deal with the estate of singer-songwriter, George Michael, and last month, WCM also signed a worldwide (excluding Belgium) sub-publishing administration deal with the estate of iconic Belgian singer-songwriter, actor, and director Jacques Brel.
Quite a step up from recent years when reportedly the company spent $40 million (2020), $41 million (2019), and $14 million (2018) on music publishing content acquisitions.
They had to change because not only can they not can’t keep up with the new content that comes on the market they can’t retain any of their writers who might get rights back through terminations or whether it’s contractual, statutory, or other if they don’t compete. And remember when someone steps out of an old non-state-of-the-art deal, it takes a lot for them to want to re-sign with that same entity when they have been waiting years to get out of it.
Do you do any artist recording contracts these days?
We do some but most of our artists and songwriter clients are more legacy. But there are some that are still doing new deals and we are doing those it’s rare. It’s less frequent.
You can work long hours getting an artist a recording contract but compared against the income from a $100 million catalog deal it’s small potatoes for a lot of work.
Yes, it’s a lot of work, I think we are known for the acquisition/sale is niche and that’s is where we are primarily focused right now.
Larry LeBlanc is widely recognized as one of the leading music industry journalists in the world. Before joining CelebrityAccess in 2008 as senior editor, he was the Canadian bureau chief of Billboard from 1991-2007 and Canadian editor of Record World from 1970-80. He was also a co-founder of the late Canadian music trade, The Record.
He has been quoted on music industry issues in hundreds of publications including Time, Forbes, and the London Times. He is a co-author of the book “Music From Far And Wide,” and a Lifetime Member of the Songwriters Hall of Fame.
He is the recipient of the 2013 Walt Grealis Special Achievement Award, recognizing individuals who have made an impact on the Canadian music industry.
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