The music publishing catalog business has been booming for years—both in terms of the sale of individual writers’ catalogs and smaller entities being swallowed by larger ones. It’s a seller’s market, which has led to greater emphasis on lawyers’ and law firms’ devoting significant time to identify sales and purchasing opportunities. Lately, though, a growing number of industry insiders, mostly on the buy side, are saying the bull market has run its course. Has it?
In the past few years, we’ve seen significant catalog sales including Concord’s acquisition of Imagem, Round Hill’s purchase of Carlin, Kobalt’s pickup of SONGS, and—perhaps the largest—Sony’s agreement this summer to buy an additional 60 percent share of EMI. Individual artists and writers have been active, too; notable recent catalog sales include Ryan Tedder’s to Downtown, Ashley Gorley’s to Round Hill, Ross Copperman’s to Rezonant, and Smokey Robinson’s to Primary Wave, among many others.
Industry analysts and publications have floated a variety of theories to explain this recent strength. One suggests that high sale prices reflect market reactions to changes (or anticipated changes) in tax treatment with respect to income considered ordinary or capital gains. Another posits that anticipated increases in the royalties paid to songwriters and publishers under the new Music Modernization Act are partly responsible. Still another point to the improving strength of the U.S. economy overall, the growing popularity of streaming services, and the inflow of money from nontraditional sources such as venture funds.
All of these are true, to some extent, but the most significant fact might be the last one. Such “new money”—when added to that of the established players and the increasingly strong indies/mini-majors (Concord, Kobalt, and others)—has bolstered demand for a limited commodity. New ventures and established companies flush with cash are driving up bids for catalogs across a number of genres.
We are, indeed, as likely to see catalog-sale bidding involving investment bankers and funds that weren’t involved in this space five years ago as we are to see the “usual suspects”—Warner/Chappell, Universal, and Sony/ATV. Entertainment-law firms should therefore work to cultivate relationships with these new entrants in addition to those already within the music-and-entertainment sector.
Will the sky fall, or are the good times set to continue? We believe the established players will always look for great catalogs, the supply of which is limited. The increasingly rosy forecast for licensing and streaming royalties (plus the basic law of supply and demand) suggest the strong market will go on. For those in this space, it will likely remain business as usual, with the end of the soundtrack—for the foreseeable future, at least—not yet remotely audible.
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Jeff Biederman is co-chair of Manatt’s music practice group and a partner in the entertainment and media practice. His many clients include major writers, producers, actors, recording artists, record labels, publishing companies and estates throughout the U.S. and internationally. In recent years, Jeff and his team have focused on the buying and selling of music catalogs, in which time he has negotiated transactions worth more than $150 million. Jeff was recognized by Billboard magazine as a top music lawyer for 2017.
Gary Gilbert is co-chair of both Manatt’s entertainment and media practice and music practice. He is a veteran negotiator who understands the industry from two key perspectives – as a former top executive at Capitol Records and from more than four decades practicing law in the entertainment industry. He continues to represent countless multiplatinum-selling recording artists and pre-eminent songwriters across genres and generations in catalog sales, hologram, tour, and publishing administration deals and other entertainment transactions.
