When music sales last boomed in the 1980s and 1990s, with many fans snapping up CD versions of the albums they already owned on cassette and vinyl, record companies quietly offered a rare concession to some of their top-selling ’70s and ’80s stars in order to re-sign them: they granted the artists ownership of their earlier albums. Now, as streaming fuels another boom, the major labels are paying handsomely to get those classic albums back.
The latest such in-the-works purchase is Sony’s negotiations to acquire Bruce Springsteen’s album catalog, sources say. While it is unknown what the asking price is for Sony to acquire complete ownership of his masters — which could mean no longer paying royalties to Springsteen depending on how the deal is structured — Billboard estimates that the albums carry a valuation of between $145 million and $190 million.
Sources say Springsteen is also shopping his publishing catalog, with some of those sources adding that the Springsteen camp had been looking for upwards of $350 million for both the publishing and recorded masters catalogs.
The Springsteen album catalog, which has racked up 65.5 million sales in the United States according to the RIAA website, and which includes the 15-times platinum Born In The U.S.A. and the five-times times platinum The River, still has plenty of firepower, as his music has generated 2.25 million album consumption units in the U.S. since the beginning of 2018, according to MRC Data.
While Springsteen has long been associated with Columbia Records and Sony Music, he was among a handful of superstar artists like Garth Brooks, AC/DC, Pink Floyd and other Sony artists Neil Diamond, Bob Dylan and Michael Jackson who all managed to win back ownership of their recorded masters in the last decades of the 20th century.
But now seems to be the perfect time for artists who own their copyrights to cash in and sell them and the income streams they generate — especially older artists who need to begin thinking about estate planning. In the past few years, music assets have been generating the highest multiples in history, with iconic song catalogs selling for 25 to 30 times net publishers share (gross profit), while superstar recorded masters are selling for a 15 to 20 times multiple of net label share (also gross profit, but with more complicated cost-of-goods expense deductions than publishing).
Besides that, with the Democrats in power in Washington, there is a movement to increase capital gains taxes well above their current 20% level. So despite a widespread fear that any capital gains tax increases will be retroactive, plenty of sellers are scrambling to get deals done before the end of the year in the hope that the increase won’t apply until 2022. It looks like Springsteen is about to accomplish that — at least for his master recordings.
Billboard estimates that the Springsteen catalog generated about $15 million in revenue in 2020 in a year that saw his catalog activity buoyed by a new release — last October’s Letter To You — and the carryover from 3 albums that were released in 2019: Western Stars, the Western Stars soundtrack and the Blinded By the Light soundtrack.
By averaging the last three years of financial statistics from the Springsteen catalog — a common strategy used in determining valuations — Billboard estimates the Springsteen master recording catalog averaged about $12 million in sales. After deducting production and distribution costs of 20% of revenue, Billboard estimates the Springsteen catalog produced a gross profit of $9.6 million. At a 15-times multiple, that would suggest a $145 million valuation; at a 20-times multiple that would put the valuation at about $190 million.
Further, Billboard estimates that Springsteen’s publishing catalog brings in about $7.5 million a year. Consequently, the estimated value of the Springsteen publishing catalog is between $185 million (at a 25-times multiple) to $225 million (at a 30-times multiple).
However, it’s unclear if Springsteen has settled on a buyer for his publishing catalog. Some sources suggest Sony is acquiring the publishing catalog along with the master recordings; others say the publishing catalog might still be in play. According to those latter sources, the publishing catalog is being looked at by one or more of the big, private-equity-backed publishing companies.
In any event, sources say the Springsteen camp was very selective about who they shopped his rights to and, in fact, some suggest that big private equity firms might have been approached so they could be used as a stalking horse in obtaining the desired pricing target from Sony.
All told, if Springsteen is selling all of his rights, that means his pay day could be anywhere from $330 million to $415 million, according to Billboard estimates.
Sony declined to comment, while a representative for Springsteen was unable to provide any information.