Universal Music buys Bob Dylan’s entire back catalogue
CAN A SONG be a financial asset? Universal Music believes it can. On December 7th it announced it had bought the rights to Bob Dylan’s entire back catalogue for an undisclosed fee. The music publisher (majority-owned by Vivendi, a French conglomerate) now possesses every song that Mr Dylan has written and released, from the tracks on his debut LP, called simply “Bob Dylan”, in 1962 to the “Rough and Rowdy Ways” album 58 years later. (The agreement contains no provision for future recordings.) The deal is reported to have cost Universal more than $300m, reflecting its confidence that songs can generate a healthy return.
Music royalties are a complicated business. When a song is recorded, copyrights are created both for the composition of the song and the recording itself. Each of those rights is in turn split into mechanical rights (generated when a song is sold in a physical format or streamed), performance rights (when it is played on the radio or live at a concert) and synchronisation rights (when it appears in a film, television programme or a video game).
Universal has bought Mr Dylan’s composition rights. These were particularly highly prized for three reasons. First, his songs provide much of the bedrock of the contemporary rock and folk music canon. (His lyrics even won him the Nobel Prize in Literature in 2016.) Second, cover versions by other artists, which also yield income for the writer, are popular too. Last, Mr Dylan tended to compose his songs alone; the royalties for these do not need to be split with collaborators, making them even more lucrative.
The idea of investing in royalties is not new. In 1985 Michael Jackson forked out $47.5m for the rights to the recordings of around 250 songs by The Beatles; Taylor Swift is trying to buy the rights to some of her master tapes after her previous record label was sold. But there are several reasons why music royalties seem attractive at the moment. Anthony Martini, a partner at Royalty Exchange, an online marketplace that connects songwriters looking to sell their rights and potential investors, believes songs offer a rate of return that is insulated from macroeconomic trends. Music royalties also offer a predictable stream of income—people tend to tune in no matter what the economy is doing. Owning a song is more fun than buying a slice of a company. And once they have been bought, songs need not require much attention.
Not everyone agrees that buying royalties should be a passive business, though. In 2018 a former manager of Iron Maiden and Guns N’ Roses, Merck Mercuriadis, founded an investment company called Hipgnosis. Since then it has spent more than £650m ($870m) buying the rights to over 13,000 songs. It now owns a share of eight of the 25 most played songs of all time on Spotify, a streaming platform, including tunes co-written with Ed Sheeran (“Shape of You”) and Justin Bieber (“Love Yourself”). One of its rivals, Round Hill, has spent more than $240m acquiring a library of over 100,000 songs in recent years, including those of Elvis Presley.
Hipgnosis and Round Hill seek to promote their song catalogues by trying to place them in films, TV programmes and streaming playlists. Since Hipgnosis went public in July 2018, the cumulative return on its net asset value has been just shy of 40%, suggesting that songs are starting to be taken seriously as an asset class. Universal’s knocking on Mr Dylan’s door provides further proof.
Editor’s note (December 7th 2020): A version of this article appeared in the print edition of December 5th 2020, under the title “Tuning In”. It has been digitally remastered to reflect the sale of Bob Dylan’s catalogue.
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