Bruce Springsteen bought his complete music catalog to Sony for $600 million. Bob Dylan lower a cope with Common Music Group value close to $400 million. Sting struck an settlement with Common for around $300 million. Even Justin Bieber, who’s barely in his 30s, bought his music rights to Hipgnosis Songs Capital in a deal valued at about $200 million.
These offers, and mainly each deal you’ve got ever heard of up up to now, have one huge factor in widespread: the artists solely acquired their large paydays by SELLING their catalogs. As soon as the cash was wired into their accounts, the labels or traders walked away proudly owning the music eternally. For Springsteen or Dylan, legends with a long time of hits and nothing left to show, that sort of transaction is sensible. For youthful acts like Bieber, it raised eyebrows — why quit possession so early simply to entry liquidity?
That is what makes the newest transfer by The Weeknd so fascinating. Quite than promote his music, the Canadian celebrity is engaged on a plan to boost $1 billion utilizing his catalog as collateral. In different phrases, he is on the lookout for one of many greatest music paydays of all time… WITHOUT promoting his catalog.
(Photograph by Pascal Le Segretain/Getty Photographs)
How The Deal Works
So how do you pull off a billion-dollar payday with out truly promoting your songs? On this case, The Weeknd is basically treating his music catalog like a home. As in, he is seeking to take out a mortgage backed by his future track royalties and rights. As an alternative of transferring possession of the catalog, he would pledge his rights as collateral for an enormous financing package deal.
The construction, in line with stories, is being spearheaded by New York-based Lyric Capital Group. Their plan requires $500 million in senior debt (the most secure loans for traders), $250 million in junior debt (riskier, however increased yielding), and $250 million in fairness from traders who desire a shot at upside. The mixed package deal: $1 billion.
Buyers would receives a commission again from the predictable, ongoing income streams generated by his music. Each time “Blinding Lights” racks up one other 10 million Spotify streams, each time “Starboy” will get licensed for a business, each time radio performs “Cannot Really feel My Face” — that money movement helps service the debt. In contrast to Bieber or Springsteen, The Weeknd would not be handing over the keys to his life’s work. He’d simply be borrowing towards it.
Why It Issues
If accomplished, this is able to be one of many largest financing offers in music historical past. It underscores simply how invaluable The Weeknd’s catalog has develop into — he has greater than 110 million month-to-month listeners on Spotify, placing him on the very high of world streaming rankings. These numbers translate right into a dependable income machine, and Wall Road loves predictable money movement.
The transfer additionally alerts a shift in how youthful artists take into consideration their work. Quite than money out completely, they’re discovering methods to unlock large sums whereas nonetheless controlling the rights that may outline their legacy. For somebody like The Weeknd, who remains to be within the prime of his profession, maintaining possession may very well be much more profitable in the long term.
Not The First Time
If this all sounds model new, it isn’t. The concept of elevating cash by securitizing music royalties goes again almost three a long time, and it began with none aside from David Bowie.
In 1997, Bowie was anxious about the way forward for his earnings streams. With piracy exploding by means of Napster and Limewire, he feared his royalties would possibly dry up. Quite than promote his catalog, he labored with a banker to invent what grew to become often called “Bowie Bonds.” Utilizing 25 albums and 287 songs recorded earlier than 1990 as collateral, Bowie raised $55 million from Prudential Financial. $55 million! That is pocket change to in the present day’s artists.
The deal labored like this: for 10 years, Bowie’s royalty earnings flowed to the bondholders as an alternative of his checking account. In alternate, he bought a large upfront payday and even purchased again songs that had been managed by his former supervisor. When the bonds matured in 2007, his royalty rights reverted again to him. Bowie basically mortgaged his music, bought his cash, and stored possession in the long term.
The Weeknd’s deal could be the fashionable, supersized model of Bowie Bonds. Solely this time, the potential payday is not $55 million… it is $1 billion. And to be clear, this deal has not formally been consummated but. Rumors of the deal had been reported anonymously by insiders to Bloomberg over the weekend. It also needs to be famous that, in line with Bloomberg, The Weeknd had beforehand tried to boost $1.3 billion utilizing his catalog as collateral however was not profitable.
In different phrases, for now, it is nonetheless simply discuss and rumors. But when The Weeknd pulls this off, he will not simply be part of the ranks of Springsteen, Dylan, and Bieber — he’ll leapfrog them with some of the audacious music offers of all time.
