“We should send a thank you note to the Bob Dylan folks,” says Charles “Jeff” Biederman, partner at law firm Manatt, Phelps & Phillips, which has a thriving music practice. “The day Dylan happened, I must have gotten four calls that morning,” he adds, referring to Universal Music Publishing Group’s December announcement of a deal to buy Dylan’s entire songwriting catalog for what some said was $300 million — thought to be a record price for the acquisition of a songwriter’s publishing rights.
Blockbuster deals for the songs of such superstars Dylan, the Beach Boys, Neil Young, Stevie Nicks — and the latest on the list, Paul Simon, who sold his catalog to Sony Music Publishing — and popular hitmakers including Shakira and Calvin Harris have been announced so rapidly that it might feel like hammering out these multimillion-dollar sales at multiples that seemed impossible a few years ago has become a pro-forma process for the players involved. Don’t be deceived.
“There’s a tremendous amount of preparation and analytics that go into these deals, far and away beyond any [other] type of deal we work on,” says Doug Davis of the Davis Firm, whose client roster includes Barry Manilow, who recently sold his catalog to Hipgnosis Songs Trust.
Compared to most artist deals, catalog negotiations are “more intense because you’re talking about a bigger, more valuable long-term asset, so that’s going to involve more thought about intangibles as well as tangibles,” says Mark Kaplan, partner and West Coast head of music for business management firm Citrin Cooperman. “You’re probably more likely to engage other levels of professionals, like maybe a valuation person or tax lawyers, because once again, it’s just the size of the deal.”
Aside from all the numbers, there’s an emotional aspect to these sales. “It is kind of tricky, because there’s sentimental value and your songs are like your kids,” says Eric Custer, another partner at Manatt, which represents the likes of Neil Young, the Eagles and the Migos.
Hipgnosis founder Merck Mercuriadis spoke to that when he guested March 16 on Tom Truitt’s “Smartest People in the Room” webinar series.
“I never sit down with anyone whose songs I don’t love,” he told interviewer Ralph Simon. “That’s the important thing to start with, to obviously demonstrate that you care, demonstrate that you’re going to be a good surrogate parent for these children, and that you care about them as much as their real parents.”
While a who’s who of artists has already jumped on the catalog bandwagon, music attorneys expect the pace to continue, especially with bidders extending beyond obvious buyers including Hipgnosis, Primary Wave Music Publishing, Round Hill Music and Irving Azoff ’s Iconic Artists Group to such institutional investors as Shamrock Capital and Vine Alternative Investments.
“I got a call from a friend of mine who just went in-house at a mini-major publishing house, and he’s looking to farm out a bunch of work,” says Biederman. “It all bounces around, so one of us is on sell side one day and on buy side the other.”
Consultant and music rights specialist Vickie Nauman notes that banks have come to see music as a reliable asset class, but for some investors, these deals represent status, too.
“Investing in music is like the new yacht. You’re at the dinner table with all of your high net-worth peers, and you used to say you have your yacht in Marina del Rey or the South of France, but now you want to be able to say that you’ve bought into some artist’s catalog. You get those kinds of bragging rights.”
A key step in the process is the establishment of a data room, a secure site where parties can see all the numbers, analysis and contract details. For artists with decades-long catalogs, a high-level summary will be prepared for circulation. Davis says these decks generally cost in the five figures.
Aside from attorneys representing the buying and selling parties, the cast of characters in these deals include business managers or artist managers. Appraisers and investment bankers have roles, and if the artist or writer’s business manager isn’t in the mix, accountants are drafted.
Citrin Cooperman is among the business management firms that include a valuations assessment team, which can be hired by parties who are not clients.
Another player who might be involved is what lawyers call a “finder” or “broker,” some affiliated with sellers, others with buyers. Davis often values their contributions.
“When you have eight to 10 catalog deals at any one time, you do need the assistance managing all the conversations, answering all the questions on due diligence that a potential purchaser may ask,” he says. “There’s a lot of details you need to hand over and it’s very time consuming, so the more people on board the better it is.”
“There’s some finders who are really sophisticated and smart about it,” says Custer. “They really understand the publishing world; some of them used to work for publishing companies. There are others on the younger end of the spectrum who are trying to throw out 10 million emails and hope they get a bite to make a fee. The porch light is on and the moths are flocking.”
Adds Davis: “I’ve been doing it for a few years now, so when I get approached by a so-called finder or broker and they say vaguely that they have access to capital and we have to do some sort of exclusive contract with them but they won’t disclose who the capital sources are, of course I’m suspicious.”
Courtney Barnes transitioned from publicist to publishing specialist six years ago. With the Isley Brothers and members of the DeBarge family among his clients, he strives to add value to the proceedings.
“I will go through the last several years of the writer’s statements from their publisher,” Barnes says. “Based on the quality of songs and amount of income for any combination of those assets, I will come up with a value for those assets in the marketplace.”
Biederman cautions that using finders adds to the client’s expense. “Suddenly, you’re paying twice, because finders aren’t lawyers. You’re essentially paying the finder 5% and the lawyer 5%, you’re paying twice for the same service. Then if a business manager or a personal manager is involved, suddenly all the commissions start adding up and it’s a significant chunk.”
Speaking of money, when you read the next headline about a huge catalog deal, Davis suggests you digest those numbers with grains of salt.
“Everybody lies about the size of their deals,” he says. “Anyone who’s sold a catalog wants to go around and say they got a bigger check than they got, so there’s pie-in-the-sky aspirations.
“They all involve NDAs,” he adds. “These are probably the most gossip-secure transactions I’ve ever done. If somebody were to call and ask me if it’s true a client got a certain number, and the number was so much higher, I can’t confirm it, and if the number’s much lower, I can’t deny it.”