Connect with us

Entertainment

Actually, Bob Dylan May Have Sold His Music Catalog For $400 Million – $100 Million More Than We Previously Thought

On December 7, 2020, a day that will live in infamy, we reported that Bob Dylan had sold the rights to his music catalog for $300 million. Truth be told, it may have been $400 million OR MORE!

Published

on

One Merck Mercuriadis founded the Hipgnosis Song Fund. After two years of haggling and courting, Merck admitted yesterday in an interview with The Guardian that his company did actually offer $400 million. In the words of Merck

“When Universal made an offer that we couldn’t possible match, we were prepared to do a deal. To bear the cost they paid, you’d need to be a firm that size. which was significantly more than the $300 million that was at the time stated.”

Given that Bob is indisputably the Dylan family’s second-most skilled member, behind Jakob, that $400 million is all the more remarkable.

Bob Dylan Music Catalog
(Photo by Kevin Winter/Getty Images for AFI)

(Image courtesy of AFI/Kevin Winter/Getty Images)

Why Are So Many Artists Suddenly Selling Their Catalogs?

Short answer: Because there’s so so so much money to be made! Duh!

Long answer: Because of the pouring royalties generated by social media sites like TikTok, YouTube, and Instagram as well as streaming services like Spotify, catalog valuations are at an all-time high.

Historically, song catalogs sold for around 10X the average annual royalties produced. Some song collections have been sold for 20X annual royalties.

Another problem is that there is no immediate end in sight to the pandemic, which has completely eliminated any touring income for a year.

If Bob Dylan sold his catalog for $400 million through a Nevada trust, he presumably only paid 20% in taxes TOTAL. That would mean he took home $320 million. If those two loopholes are eliminated, the artist would receive $200 million from a future $400 million deal.

Why Are Private Equity Firms Suddenly Paying Hundreds Of Millions For Song Catalogs?

Long answer: Without getting too financial, the last ten years have seen a greater increase in the printing of money than the prior fifty years combined. In the past year alone, trillions of dollars were created out of thin air. The overall US money supply typically grows by 5% per year. In the last 12 months, US money supply increased 30%.

In order to purchase music catalogs, music funds like Hipgnosis have raised countless billions of dollars from investors. The catalogs are then combined by the music funds into a “securitized” asset class that investors may purchase. If that sounds familiar, you might be recalling how the 2008 real estate crash occurred as a result of a group of exorbitant mortgages being combined and sold to banks as “mortgage-backed securities,” which ultimately collapsed when everyone realized that perhaps a person making $25,000 a year shouldn’t be given a $1 million mortgage to buy a tract home an hour outside of Fort Lauderdale.

I’m not saying the same kind of bubble is happening with music catalogs. One reason is because 200 million Americans don’t live in a musical universe. Another reason is that music may actually be recession-proof. If the economy blows up next month you’ll likely see a precipitous drop in the value of digital art and baseball cards, but people will continue to listen to music. Additionally, libraries should continue to provide dependable income for their owners and investors as long as well-capitalized businesses like Spotify, TikTok, YouTube, and Facebook continue to pay royalties.

And just in case you’re interested, here are a few examples of recent mega-catalog sales:

$100 million Imagine Dragons

$90 million Calvin Harris

$50,000.00 Bob Marley (sale occurred in 2018 and was for a partial stake)