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Music Funding Tips: The Pros and Cons of Selling Your Music Catalog

Music Funding Tips: The Pros and Cons of Selling Your Music Catalog

Emerging musicians often have a hard time coming up with the financial resources required to record, produce, release, and promote their music, especially if they’re on a tight budget. That’s what motivates them to sign record deals with labels, sign publishing deals, apply for music grants, initiate crowdfunding campaigns, or try to get loans or support form angel investors to fund their music projects. There are benefits and drawbacks to each of these options, so of course, we always advise you to get advice from an experienced legal and financial expert to help you make an informed decision. 

One other way for musicians to get revenue from their musical projects is to sell their music catalog. Catalog sales really started gaining traction and becoming a widespread industry trend during the pandemic, when touring was not an option and many artists had to find alternative ways of making money and funding their projects. Let’s see if this is still a good option today, and what are some of the advantages and disadvantages of selling your music catalog as an artist. 

Why are artists and songwriters selling their catalogs?

There are various reasons why both emerging and established, legendary musicians are choosing to sell their music catalog nowadays. Many artists started selling their catalog in 2020 and 2021, when lockdowns prevented everyone from touring and doing live performances. Selling their catalog allowed artists to have access to revenue to fund their short-term musical projects even while unable to tour, perform live, or go to a recording studio. Because of this, artists buyers alike realized that the value of music assets tends to remain stable during times of crisis, so it’s a solid investment or revenue-gaining option, however you look at it. 

Another reason why many artists are selling their music catalogs has to do with tax-related benefits. Profits from music rights sales are usually taxed as capital gains, as explained by Morgan Stanley, which means you’d have to pay a maximum tax rate of 20% on sale proceeds. If you choose not to sell and gain revenue from royalties, you have to consider that they are taxes as ordinary income, at up to 37%. 

Rolling Stone offers the example of Bob Dylan, who sold his entire publishing catalog for $400 million. At a tax rate of 20% for the catalog sale, he’s due to pay $80 million to the U.S. government. On the other hand, at a tax rate of 37%, he’d have to shell out an additional $65 million. 

When it comes to legends like Bob Dylan, who’ve been around for decades and have released classic record after classic record, concerns about inheritance and staying relevant in the competitive music landscape can also be motivators to sell. As Rolling Stone puts it, it’s easier to divvy up a $400 million payout than to put together a lifetime of publishing copyrights. At the same time, new musicians arrive on the music stage every year, and new classics are released all the time as the industry evolves and grows. Some artists prefer to sell their catalog now, while it’s still popular and sought-after, than to take a chance and hope that that popularity is maintained years later. 

Who's buying music catalogs?

Recently, various companies have started purchasing and investing in music catalogs, from music publishers to investment firms and even individual investors. For music publishing companies, buying music catalogs allows them to expand their portfolio and generate revenue from royalty collection, while investment firms see the potential for stable returns from royalties, even during turbulent economic times. High-net-worth individuals purchase music catalogs as an alternative investment, as they see potential for passive income and music licensing opportunities. Many of these individual investors are avid fans and they invest in music catalogs sold by artists they love, as a trophy, if you will. 

Some of the biggest players in the music catalog buying scene include Universal Music, Columbia Records, and other established record companies with decades of experience in the music industry. However, in recent years, startups like Hipgnosis, Primary Wave, and Vine Alternative Investments, to name just a few, have started investing heavily in music catalogs. Hipgnosis has acquired various copyrights from big names like Mark Ronson, Rick James, Richie Sambora, Tom DeLonge, and Neil Young, while Primary Wave has purchased music rights from Stevie Nicks and the Whitney Houston estate. 

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Who's sold so far? The biggest music catalog sales in recent years

There has been a lot of activity in the music catalog sales scene in recent years, as many artists sold rights to their music during the height of the pandemic. One of the biggest sales was Universal Music Group’s $400 million purchase of Bob Dylan’s songwriting catalog in December 2020. Another newsworthy sale was that of Stevie Nicks’ publishing rights to Primary Wave for around $100 million. Also newsworthy was Taylor Swift’s music rights sale to Shamrock Capital, a deal that made headlines because it wasn’t done with Swift’s approval. 

Concord Music Group bought publishing rights from Imagine Dragons, reportedly for a 9-figure sum, Calvin Harris sold his publishing rights to Vine Alternative Investments, while Primary Wave snagged 50% of rights from the Whitney Houston estate, as well as a majority stake in Ray Charles’ pre-1960s catalog. Neil Young sold 50% of the publishing rights to his entire music catalog, covering 1,180 songs, to Hipgnosis in 2021, for a hefty sum of around $150 million. 

One of the biggest deals of 2023 took place in January, when Hipgnosis announced it had purchased the rights to Justin Bieber’s entire music catalog, for an undisclosed price tag (although reports place the number at around $200 million). This was one of the biggest deals ever closed for an artist under the age of 70, according to CNN

Should you sell your music catalog?

There are several upsides and downsides of selling your music catalog, and you’ll need to work with a team of experts with a background in handling music industry deals to figure out if it’s the best choice or the best timing for you. One upside is that you get access to revenue immediately, upfront, which can help you secure your financial future or cover new projects right away. Selling your catalog is also a risk-free move that doesn’t come with any legal bindings, and is not dependent on evolving or shifting market changes. 

Another perk is that you won’t have to keep dealing with the hassle of managing your music catalog, tracking royalties, negotiating, and handling administrative tasks. Keeping tabs of royalties and payments can be very time-consuming, and by selling your catalog and delegating those tasks to someone else, you’ll be freeing up a lot of time that you can spend on growing your career. 

There are downsides to selling your music catalog, as well. For one, you will lose all control over how your music will be used and exploited in the future, and you might also be restricted from using these works in new projects, depending on the terms of the deal. This can limit your artistic freedom and leave you with no input on how your music is presented to the world. At the same time, you might be giving up long-term revenue gains. While a quick payout can be highly appealing, you will lose all revenue related to streaming, merchandise, royalties, licensing deals, or downloads. Lastly, many artists have an emotional attachment to their songs and their music, and they identify so strongly with their work that it’s impossible for them to give the rights up to someone else. 

Making a quick decision without taking these things into consideration can lead to regret and feelings of loss, and it’s a decision you cannot take back, so think carefully before giving up the rights to your work to someone else. 

Are there alternatives to selling?

If the goal is to gain access to financial resources to fund a musical project or pay short-term fees, there are other options to consider before deciding to sell your music catalog. You can look into starting a crowdfunding project to allow fans to make donations towards funding your project, finding an angel investor to help get your next release off the ground, or look into getting a low-risk advance that won’t involve you giving over full control over your music. You can also try selling just parts of your music catalog, or leasing out the rights for a limited term of 10 years, for example, which can help you in the early stages of your career. 

Whichever option you decide on, don’t sign the dotted line before consulting with a team of experts with a background in the music industry, who know the ins and outs of these deals and who can advise you so you don’t sign a bad deal. 

Frequently Asked Questions

How are music catalogs valued?

Music catalogs are typically valued based on a combination of factors, including historical revenue generated from various income streams (such as streaming, sales, and licensing), the potential for future income, the popularity and enduring appeal of the songs, the artist's commercial success and reputation, market trends, and the overall demand for music assets as investment opportunities. The valuation process involves analyzing past earnings, projecting future income based on industry trends, considering the catalog's cultural impact, and assessing the strength of the artist's fan base.

Why are music catalogs so valuable?

Music catalogs are valuable for several reasons. They provide a consistent and predictable stream of income through royalties generated from various sources, such as streaming platforms, radio play, and sync licensing. In an era of digital music consumption, where songs continue to generate revenue over time, catalogs offer stable and long-term income potential. Additionally, iconic songs hold cultural and nostalgic significance, making them timeless and appealing for licensing in movies, TV shows, commercials, and other media, further boosting their value. As alternative investments, music catalogs are seen as a way to diversify portfolios, potentially offering attractive returns and a hedge against market volatility.

Which artist has the most valuable music catalog?

Currently, the most valuable music catalog is that of The Beatles, estimated at well over $1 billion. Other high-worth music catalogs include those of Michael Jackson, Bob Dylan, Pink Floyd, David Bowie, Elton John, Bruce Springsteen, Led Zeppelin, and Queen. 

Join Xposure Music and gain access to some of the best music industry professionals in the U.S. Top experts from Sony, Columbia, Def Jam, or Universal have already joined our platform, and they’re ready to give invaluable, on-point feedback on your work, which can help you land that dream record deal or publishing deal you’ve been working towards. Sign up now and reap the rewards.

If you’re looking to kickstart your music career but have limited resources, we can help you get funding for your next project while staying in control of your own work and career trajectory. You keep 100% ownership of your masters and get an advance ranging from $1,000 to $3 million to get your career off the ground. Get an estimate now and start turning your dream into reality.

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Gregory Walfish
Co-founder of Xposure Music, Gregory Walfish stands at the intersection of music, tech, and culture. With a software engineering background, he's passionate about artist development and technology.

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