What to Know About Music’s Copyright Gold Rush

Last month, news broke that Bob Dylan sold his songwriting catalog to Universal’s publishing arm in a deal reportedly worth more than $300 million. Although the singer-songwriter has been a renowned harbinger of epochal shifts for nearly 50 years, the move was merely the most illustrious in an ongoing frenzy of music copyright acquisitions. In the weeks since Dylan’s announcement, the likes of Neil Young, Lindsey Buckingham, and Shakira have sold the rights to their songs to a relatively new buyer on the scene: Hipgnosis Songs Fund, an investment company founded in 2018 by former artist manager and label head Merck Mercuriadis. With a name cribbed from the groundbreaking album-art designers behind Dark Side of the Moon, Hipgnosis is following in the footsteps of many self-consciously disruptive companies as it targets a long-unsexy segment of the music business.

What’s physically changing hands may be little more than lists of song titles in filing cabinets, as The New York Times’ Ben Sisario recently pointed out in a podcast on this subject. But what’s at stake is nothing less than control of the popular music canon. Some investors compare songs to real estate, because (financially speaking, at least) both are assets that are expected to generate predictable income over time. But while the supply of land is pretty fixed, artists keep churning out more and more music every year. And despite the occasional delightful rediscovery, like TikTok going nuts over Life Without Buildings, only a tiny sliver of that new music ends up being played again and again long into the future. By the market’s logic, the most lucrative bet is buying the songs that are already proven winners, and there are only so many of those to go around.

Meanwhile, the big three music publishers—Universal Music Publishing Group, Warner/Chappell, and Sony/ATV—have seen increasing competition from other traditional publishers like Concord Music Group, Downtown Music Publishing, Kobalt Music Group, and Primary Wave, as industry observer Cherie Hu has written. But financial interest in songs has also grown among private-equity firms, pension funds, and, through Hipgnosis’s 2018 listing on the London Stock Exchange, everyday punters trying to play the market. Mercuriadis isn’t even the only former label honcho getting into the mix.

At first blush, the fact that songs are apparently valuable enough to inspire a 21st-century gold rush seems worth applauding. But allowing the fate of classic songs like “Only Love Can Break Your Heart” or “Landslide” to be interpreted mainly through the philistine prism of Wall Street (almost literally, treating music like an oil well) feels wrong. For music lovers without a vast fortune lying around, bigger concerns may include how such mega-deals could affect the music’s cultural impact, and what any of this means for the many musicians struggling to merely scrape by.

First, a quick refresher on how music copyright works, because it’s absurdly complicated. There are two types of copyrights in the music industry. One set of rights is for the song or musical composition, also called the “publishing,” which means the underlying music and lyrics—essentially, whatever could be written down as traditional sheet music. The other is for the sound recording, or “master,” which is the finished track that ends up on streaming platforms. Contracts vary, but the songwriting copyright is typically co-owned by the songwriter and a publisher, which is a business that helps the songwriter collect royalties. To massively over-simplify: If you write a song and I record a cover of it, you’ll get the song royalties (with a share going to your publisher) and I’ll get the master royalties (with a share going to my record label). Song rights break down further into mechanical rights from streams or physical sales, performance rights from radio play or live renditions, and synchronization rights when music appears in TV shows, films, or commercials. Long story short, owning the publishing to songs that generate popular covers and turn up across visual media can add up to steady income over the long run.

The business side of these deals, similarly, can be as simple or complex as you want. In 2019, the most recent full year for which numbers are available, the U.S. recorded music industry saw its revenues grow for a fourth year in a row, to $11.1 billion, while U.S. music publishing revenues posted a fifth straight year of increases, swelling to $3.72 billion. But recorded music revenues were still less than half their inflation-adjusted 1999 peak of $14.6 billion; by contrast, 1999 U.S. music publishing revenues appear to have been slightly below their current level, even in current dollars. And while the streaming services typically pay out a larger share to record labels than to songwriters and publishers, the ongoing legal battle to boost the publishing share means that income from song catalogs may have room to grow. Add in a pandemic-induced lack of touring income for performing songwriters, plans for a tax increase on capital gains (which catalog sales can fall under), and you’ve got a recipe for deal-making.

Someone who has bought a long-term asset isn’t going to want to burn through all its value on day one with, say, an explosion of shameless product placements (while announcing the Neil Young purchase, Mercuriadis jokingly ruled out a “Burger of Gold”). So evidence of catalogs changing hands might not be obvious to everyday listeners at first. “It’s not going to change the continued exploitation of these catalogs in various ancillary formats, like synchronizations, Peloton, or TikTok,” says Jason Boyarski, a lawyer who recently negotiated the catalog sale of Post Malone collaborator Louis Bell to Universal.

Instead, look for established hits to become entrenched in deeper ways. “We created a holiday for Smokey Robinson,” says Primary Wave founder Larry Mestel, whose company’s recent flurry of acquisition activity includes a stake in the works of Stevie Nicks. “We’re producing a Whitney Houston biographical film with Anthony McCarten, who wrote Bohemian Rhapsody. We’re doing a Bob Marley destination show in Las Vegas with a company called Five Currents, who’ve done the opening and closing ceremonies for [a dozen] Olympic Games.” In other words, the handful of artists who struck it biggest in previous generations may cast an ever-larger shadow over the future.

Where does that leave up-and-coming talent? Songwriters cashing in on this trend don’t necessarily have to be staring down retirement—Hipgnosis’ earlier deals also included The-Dream, No I.D., and Justin Bieber collaborator Poo Bear—but massive hits are required. “When younger artists see the Dylan catalog going for $300 million, they should understand that those numbers don’t apply to them,” says Tony Alexander, president of Made in Memphis Entertainment, a studio, label, and publisher he co-founded with indelible Stax Records tunesmith David Porter. Alexander sees alternative opportunities for independent artists in areas like sync licenses, where he’s heard from music supervisors who specifically want unreleased songs.

Hipgnosis’s Mercuriadis says that where the big three publishers use their legacy catalogs to underwrite the costs of gambling on fresh talent, he finds that “completely illogical.” He explains: “Why would you spend your time trying to create something new at the expense of your catalog, when your catalog is already filled with songs that people know and love and have demand for? I’m not saying you shouldn’t create new, but it shouldn’t be at the expense of the catalog. So our focus is completely on catalog.” To me, this sounds like pulling money out of the broader music ecosystem for the sake of Hipgnosis’s shareholders. Pressed about what funding Hipgnosis’s strategy leaves for the creation of new songs, Mercuriadis points to his company’s recently acquired Hipgnosis Songs Group unit, a publisher working with St. Vincent, Kamasi Washington, and other active artists outside the superstar set. Music lawyer Boyarski optimistically suggests that the money from deals can also trickle down through A-list songwriters effectively paying it forward, signing emerging writers to their own publishing companies.

Even more ambitiously, Mercuriadis contends that he can help songwriters gain greater economic clout. He cites plans to form a powerful new “songwriter’s guild,” although the tight regulation of U.S. music publishing might make that tricky. “There’s always a need for new advocates,” offers Boyarski, who also works with the advocacy group Songwriters Association of North America. A bigger-picture problem is that copyright law doesn’t reflect the way songs are made today. Individual songwriters rarely write hit songs anymore, which means songwriters’ stakes in their own compositions—and thus, potential payouts—are much smaller. And the lines between “writing” and “recording,” in contemporary pop or rap production, can be as squiggly as a Playboi Carti ad lib.

So: Will these lavishly priced purchases of songwriting catalogs turn out to be lucrative for buyers? It’s hard to say. Some of these acquisitions may be less about the bottom line than attempting to grab market share, notes Made in Memphis Entertainment’s Alexander. Plus, the finance types drawn to publishing because it seems like reliable income may lose their appetites if they can find better returns elsewhere, or if songs fail to deliver as consistently as hoped.

Hipgnosis calculates that it will own the songs in its catalog for an average of 101 years before losing copyright protection. When I challenge Mercuriadis to name music he listens to from the 1930s, when shellac 78s still hadn’t given way to vinyl LPs, he answers with Robert Johnson, Benny Goodman, and Lester Young. “The [catalogs] that I buy are things that I consider to be not only proven and successful, but of great cultural importance as well,” he says. “If we were to fast-forward 80 years, if someone was writing a history book on the most important artists of the first hundred years of the new millennium, I think Justin Bieber, Ed Sheeran, Beyoncé, Kanye West, Rihanna, and JAY-Z will be amongst those artists who are being talked about.” Not coincidentally, Hipgnosis owns stakes in songs recorded by all of the artists mentioned.

Originally Appeared on Pitchfork