I just read that Sony bought the rights to Pink Floyd’s catalog for something like $400 million. They also bought Bruce Springsteen’s catalog for around $500 million. That’s close to $1 billion for just two artists. There’s a whole bunch of other artists who are also getting bought out which brings the grand total to billions of dollars.
How are these companies getting the money to pay these crazy sums?
What is their plan to make that money back? Commercials and film placement?
Seems like you’d have to wait a veeeery long time to recoup these investments.
In: Economics
First – have a lot of money
Seconds – if you don’t have a lot of money; have the ability to secure a loan
Sony has a crap ton of money
Just like any asset; spend a lot of money on asset (music). Then collect future royalties/sales for the next 100 years. At some point turn the cost of purchase into profit
These artists keep selling and keep getting airplay. Pink Floyd is only going to lose popularity when weed goes out of fashion. They do the sums and buy the art.
They are playing the long game. Artist gets major cash during their lifetime, record company banks on future sales and residuals into the unforeseeable future.
Sony is a massive company that brought in over 80 billion last year. That’s just one year. They could easily afford a billion dollar investment.
Second, copyright lasts a crazy long time, 70 years after the death of the artist. Springsteen might not be young, but he’s still alive.
Streaming, album sales, and licensing only needs to cover 10 million a year to “break even.” Music by these major artists is used all the time, for thousands of dollars in fees.
Sony might also not expect to retain the rights for the entire duration. Maybe they feel that they can pay 1billy today, make 100mil over 20 years, then either sell it for a profit, or at a loss smaller than the gains.
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Huge catalogs that command millions per use for commercials/movies/TV. I bet both return profit within a decade or less.
companies are like rich kids with an endless allowance they know music catalogs are gold mines for streaming sales movies ads and more. they’re betting on the future so even if it takes time they believe it’s worth it long run. plus nostalgia is a cash cow everybody loves a good throwback
these companies are kinda like really rich collectors but with a business plan. they’ve got streaming platforms commercials and licensing making bucks from these hits. plus nostalgia sells man. people love those classics so it’s a long game but it pays off big time.
You wouldn’t believe how beneficial a major loan looks on an income statement when it secures an asset like this as long as they are able to monetize it. (They will).
The companies have a pretty good idea of what kind of income stream to expect off the music. Pink Floyd has been earning royalties off their music since ~1967 so they have a pretty good idea what it’s going to earn per year. If you know that it’s easy to calculate how much that income stream is worth as a lump sum payment. In essence they’re doing the same thing as J.G. Wentworth, but instead of an annuity or lawsuit payout, Messrs. Gilmour, Mason and Waters have just sold the rights to their royalties instead of their rights to a lottery payout.
Also, I bet those royalties are way more than you think per year.
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