Blog rate

Lefsetz Letter » Blog Archive » The FT Publishing Podcast



You have taken a 30% discount on your money.

Let’s say you’ve sold your catalog. What did you do with the money?

You first paid taxes, and commissions to your team: your manager, lawyer… So the figure you read in the news is not the net, far from it.

And then you have to invest the money. Keep it in cash and you lose money. There is not a single cash investment that keeps up with inflation. Sure, you could invest it in real estate, which has intrinsic value, but you can’t do that overnight, it requires research, kicking the tires. No, what most people do is put the money in the market. Of course, if they have a good financial advisor, investments are covered, it’s not all stocks, there are bonds and more. But if you’ve read the financial news… the market is bad, overall. We’ve seen a slight uptick very recently, but WSJ experts believe the market is lagging behind reality and needs to come down further. Which makes sense, the market doesn’t always work rationally and people don’t want to believe their stocks are crashing, so false hopes keep the market unreal, until…

And then there are those who bought the dip. The WSJ has done an exhaustive study on this subject. Most of their assets are now underwater. It was different in March 2020, when the market crashed and Michael Rapino and others bought stock in their companies to give the impression of strength. The market crashed and quickly rebounded. Nobody expects that to happen today.

So you got all that money from the publishing house, and now not only have you lost a significant amount of it, at least on paper, but you’ve also given up that annual income for your songs and/or recordings and /or royalty streams were being generated, which is why the publishing company paid such a high multiple to begin with!

Who descends. Hipgnosis skyrocketed the number, supposedly 22x for Neil Young. You don’t see that number anymore, anywhere nearby.

22x. This means 22 times the annual income. Positively insane for old acts whose material ages day by day. Especially in a world where catalog means 18 months. Here again, the classic tunes have increased somewhat, I point out Spotify’s deep dive:

“Spotify for Artists: Catalog”:

Artists tend to be bad business people. It’s like that old Wimpy story, they’ll take 7x when they have miles to go in their life. Yes, they sell their songs or their royalties and in some cases the money is recouped by the company in less than five years. In the meantime, you are done.

Thus, Neil Young sells himself to the sympathetic Merck and…

“Old Man” is used in an NFL commercial. Sung by Beck, but… Does Neil Young really want his classic number paired with a football game featuring aged quarterbacks? No, and he bit online, that’s all he can do, because he sold his songs:

“Neil Young Records Silent Protest Against Beck’s ‘Old Man’ NFL Commercial”:

So you received a large sum of money and you waived your rights and you lost money on what was paid to you. Sounds like a good deal to you?

And then there’s when you sold. Bob Dylan was too soon, he could have had more if he had held on. As for Springsteen… What kind of weird world do we live in where Diane Warren refuses to sell her songs and the Boss cuts a deal? Is artistic integrity no longer worth anything? Don’t want to control your assets? Think about how much money and time you spend creating them.

And as much as Springsteen has had, history has always told us that these deals were undervalued because those involved can’t see into the future. Usually the artist is influenced by the manager, who wants his commission. Colonel Tom Parker sold all of Elvis’ recording assets to RCA. Talk about a bad deal… It’s the gift that keeps on giving, to RCA, not Lisa Marie. And Peter Grant sold the assets of Led Zeppelin to Atlantic, thank goodness the CD came out and the company needed unexpected rights and Led Zeppelin was able to get a new deal. You see, there is always a way to make more money from music. This is Merck’s talk. And he’s right, but once you get involved with the money, people…

It’s all about the money, and you don’t beat the banks or professional investors.

Nobody expected huge inflation and high interest rates at the same time. Investors want to be paid. And now song yields are lower than interest rates. And you don’t screw the banks. So Blackstone might end up owning all your songs, and if you think they care how they’re used, you’ve never met a banker. It’s all about the return, baby.

So maybe you have a huge multiple. Maybe you do estate planning. But most deaths from these acts are not imminent, especially not Springsteen’s. Dylan could live another fifteen or twenty years, think of all the extra money he could earn.

No one cares about your songs except you. Get this right. And those with stake percentages don’t like to sit at home and not make money. If there is an opportunity, they want to at least kick the tires. And then you see the giant number and…

As editor Randall Wixen says, show me a person who hasn’t regretted selling their catalog. I never found any. It’s just that these new offerings are… new. Then again, many of these acts must have some seller’s remorse, after that market haircut. But it’s too late now, baby. They used to get these big checks every year, while they continued to own the assets that went up in value, now they’re out of the game.

Listen to this podcast. Insiders know all this. But there are very few initiates.