Businesshala News Exclusive | Primary Wave Turns Up the Volume on Music Deals

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Music publisher Paul Rodgers invests in US song catalog and plans more acquisitions

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Music industry executives and lawyers say listener preferences for older music, tax benefits on catalog sales and high valuations driven by the idea that music is recession-proof and high-growth assets pushed investors and sellers into negotiations. Is.

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The America catalog, composed of songwriting by Gerry Beckley and Davey Bunnell, includes “A Horse with No Name,” “Sister Golden Hair,” “Ventura Highway,” and “Tin Man.” The deal also included several re-recordings of the band’s biggest hits, as well as some rights to the group’s name and likeness.

Mister Rodgers, a songwriter and instrumentalist, is widely regarded as one of the greatest rock singers of all time. Their agreement with Primary Wave includes their music publishing catalog as well as a recorded-music income stream, which spans their work with the bands Free & Bad Company, such as “Feel Like Makin’ Love,” “Shooting Star”. ,” “Wishing Well,” “Fire and Water,” and “Okay Now.”

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While listeners are increasingly streaming older rock tunes, Primary Wave chief executive Larry Mestel said that America, Free & Bad Company’s song catalogs have been commercialized. He sees opportunities to have the band’s songs in commercials, film and TV spots, as well as in biopics and other licensing.

More music deals are coming on the heels of several high-profile sales, executives say. Artists and their representatives raced through the holidays to strike deals before potentially higher tax rates on the biggest music-rights sales.

“There is a herd mentality in the music business,” said Mr Mestel. “When you see a Stevie Nicks make a deal and a Bob Dylan do a deal and a Bruce Springsteen do a deal, artists who may be on the fence” also consider selling, he said. . He said many actors and their advisors were concerned about potentially major changes to the tax law and were adamant they wanted to close in 2021. David Bowie’s estate, ZZ Top and John Legend are also recent sellers.

There is still appetite for deals this year, given the high valuations and uncertainty about the timing of possible tax adjustments. A special provision for musicians selling self-made works means they pay capital gains tax rates of 20% on the sale. This compares with normal tax rates of up to 37% each year on royalty income derived from streaming, licensing and other uses of their works. That artist benefit is unlikely to change in the short term because it is not part of significant pending legislation, but other tax laws may change.

President Biden’s Build Back Better bill, currently stalled in Congress, would impose a 5% tax on adjusted gross income above $10 million and an additional 3% on income above $25 million, and those rates would be capital-gains income. which will be applicable to the musicians. When they sell the rights to their songs. Under the version passed by the House last year, those increases were due to begin on January 1, 2022, and that effective date could still become law, even if the bill doesn’t expire for some time.

Artists who are closing deals this year are taking the risk that their income could be subject to higher rates. But with the law stalled, lawmakers may reconsider that date and other details. He hasn’t taken any decision yet.

For the primary wave, 2021 added to a record year, with 29 acquisitions closed – 10 of them in the last week of the year – a threefold increase from five years ago. The indie powerhouse has a $1 billion war chest, and is looking to spend $500 million to $600 million in 2022, Mr. Mestell said.

“I’ve been wondering how long it will be before things heat up again once I’m back in the office in January, and in the past week I’ve got five new deals that I’m working on,” he said. “2022 is going to be a very strong year for acquisitions for us.”

Primary Wave raised a $375 million investment from Oaktree Capital Management last year, and has raised about $1.5 billion through two funds since 2016, according to a person familiar with the matter, including a fund backed by BlackRock. Is. Inc.

As part of its pitch to artists, Primary Wave, which has had to compete with an influx of financial players eager to invest in song catalogs, has offered musicians a chance to share in their life’s work and use their songs. Lets keep saying something in the manner.

“We want artists to maintain a part of their legacy,” said Mr. Mestel. “We want them to be encouraged to work with us to create value, and we want artists to continue to benefit from it.

Messrs Beckley and Bunnell had met in high school in the late 1960s, with the late Dan Peake, a former American bandmate. The tight harmonies, incorporating Mr. Beckley’s melodic pop rock and Mr. Bunnell’s folk-jazz influence and Latin-like rhythms, propelled the trio to chart success. The group won a Grammy for Best New Artist in 1972. Messrs. Beckley and Bunnell worked as a pair five years later after Mr. Peak’s departure, with the 1982 smash single “You Can Do Magic” coming out.

“The music we have created over the past 50 years will be given new attention and exposure,” said Mr. Banell.

Since 1968, Mister Rodgers of the Free and Bad Company has written, recorded, released and produced 30 albums, which have sold over 90 million copies. The deal includes Mister Rodgers, creating an imprint distributed by Sun Records – acquired by Primary Wave in late 2020 – to sign new artists and curate compilations for the label.

Streaming music revenue has increased with the popularity of Spotify technology services Per,

Apple Inc.

and Amazon.com Inc.,

With classic tunes such as those found in the catalogs of America and Mister Rodgers find new listeners and generate new revenue decades after their release.

According to MRC Data, formerly Nielsen Music, on streaming services, music older than 18 months is a major growth area, accounting for about 70% of listenership consumption. Older hits are commanding higher prices than before the pandemic because they’re generally regarded as safe bets based on proven longevity, and they’ve seen an even bigger boom in streaming during lockdown as fans are familiar with. Leaning in on the nostalgia.

Write Anne Steele at [email protected]

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