For numerous causes, late 2020 would be the absolute optimum second to promote a top-tier music catalog, and Bob Dylan’s catalog is arguably on a tier of its personal close to the very high. Common Music Group introduced on Dec. 7 that it had purchased Dylan’s catalog of some 600 songs; whereas UMG didn’t disclose the worth, hypothesis within the business hovers round $300 million.
The deal’s worth to Dylan is determined by how the proceeds get taxed. A huge windfall like his would usually be taxed as a capital acquire at a fee of 20% underneath present legislation. However President-elect Biden has proposed taxing capital features as odd revenue for taxpayers with revenue over $400,000. The highest odd revenue fee is now 37%, and Biden has proposed elevating it to 39.6%. If the Democrat candidates win each senatorial elections in Georgia, giving the celebration a Senate majority, vital adjustments to tax legislation develop into a believable state of affairs.
Such adjustments not often occur shortly, however adjustments to tax legislation have typically been retroactive to the start of the yr during which they’re enacted. The Skadden Arps Slate Meagher & Flom legislation agency is warning purchasers: “The potential elimination of the capital features fee desire, together with the anticipation of a possible company fee enhance, might additionally function potential catalysts for taxpayers to shut M&A offers this yr in the event that they anticipate that these proposals may very well be enacted within the first yr of a Biden presidency, with the potential for a retroactive efficient date of January 1, 2021.”
Backside line: The tax on a deal like Dylan’s might virtually double if it doesn’t get accomplished by New 12 months’s Eve. “I’ve numerous purchasers who have been making an attempt to do offers earlier than the primary of the yr as a result of that they had concern of the brand new administration pushing its tax agenda,” says Josh Escovedo, a lawyer whose specialties on the Weintraub Tobin legislation agency embrace copyright and trademark points. “It’s fairly potential” that these concerns might have influenced Dylan’s deal, he notes.
Dylan had one other wonderful purpose for promoting now: The previous few years have been growth occasions for music catalogs. Simply days earlier than Dylan offered his catalog, former Fleetwood Mac singer Stevie Nicks reportedly offered an 80% curiosity in her catalog to a publishing and expertise administration agency known as Major Wave in a deal that valued the catalog at $100 million; the Wall Road Journal initially reported the transaction. Buyers with little music business expertise, together with Morgan Stanley and Google Ventures, have been transferring into the sector. Hipgnosis Songs, based by former expertise supervisor Merck Mercuriadis, has raised and spent over $1 billion on catalogs over the previous 29 months.
The reason for all this exercise, in a single phrase: Spotify. “It’s a disrupter,” says Escovedo. “Spotify has caused a extra quantifiable and predictable mannequin for the business, so firms can deliver within the fits and determine the worth of [artists’] revenue streams.”
These revenue streams can final a very long time, one other attraction for buyers. “Dylan’s copyrights on his work earlier than 1978 expire 95 years after publication,” says Dotan Oliar, a professor on the College of Virginia Legislation Faculty who focuses on mental property. So the earliest songs in Dylan’s catalog, from 1962 (“Blowin’ within the Wind,” for instance), might produce revenue till 2057. Copyrights on songs written on or after Jan. 1, 1978, Oliar says, “will expire 70 years after his demise.” Dylan, 79, appears to be in wonderful well being, however even he can’t really stay perpetually younger, so let’s say he’s round till age 95. His post-1977 songs might then produce revenue till 2106.
Fashionable music is a fickle, risky enterprise, however it could be exhausting to call any firm making a longer-term funding than the one Common Music Group simply made.
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