It's alright, Ma (I'm selling 'em all)


I read today that Bob Dylan has sold the copyrights to more than 600 of his songs, pretty much all of them, to Universal Music for a reported $300 million. It sounds like a lot of money, but scrolling down in one of the stories, I saw that Stevie Nicks recently got $80 million for hers. Heck, Dylan is not even four times Stevie Nicks? It does not compute. Maybe he sold too cheap.

Anyway, this news causes my alleged mind to turn to a time-honored pastime among tax types: allocating the mega-purchase price among the various songs. The whole catalog is worth the overall price Universal is paying, but how much would you pay for, say, just "All Along the Watchtower"? Tax people have to unbundle packages this way all the time. The packages just aren't usually as cool as this one.

Admittedly, in this case, it might not be necessary to break the overall value down song by song, at least not right away. If I'm not mistaken (and don't take that to the bank), the copyrights will all expire at the same time, many years from now. Because they all have the same life ahead of them, Universal may treat them all the same for tax purposes. But if they ever sell off less than the whole batch of songs, they'll have to go back and figure out how much of the $300 mil they paid for the songs they sold off, versus how much of that sum they paid for the songs that they held onto.

I don't think Dylan needs a tune-by-tune breakdown for tax purposes. All that dough is probably income, no matter which ditty fetched what. But the buyer may eventually need to parcel out the purchase price among the songs.

Now, just talking round numbers, the purchase price that people are speculating about averages out to $500,000 per song. But not all songs have the same value, of course. "Blowin' in the Wind" – that one's gotta be way above average. Ditto "Like a Rolling Stone," or "Tangled Up in Blue." Meanwhile, there are some clunkers at the bottom of the pile. "Wiggle Wiggle" is probably only worth $87.50. "When Dogs Run Free," the proverbial buck-380.

Probably the most scientific-looking way to divvy the $300 million up would be to project out the future royalties from each song, and then discount that amount back to present value. Although they are not public, the records of past royalties, song by song, are probably easy for an outfit like Universal to get, if they ever need to. From that, they can make a pretty educated guess about the future revenue streams.

Maybe they looked at the royalties from individual tunes in figuring out how much to pay Dylan. But not necessarily. They may have set the price they were willing to fork over for the whole catalog based on how much business the whole catalog has been doing these days, and what it can be expected to do in the future. For instance, they might have seen that royalties have been running at a steady total of $15 million a year, and they figured they could pay Dylan 20 times that.

So much for the tax nerd questions. The bigger mystery: What will Dylan do with a sudden cash inflow of $300 million? He's such an odd guy, I can't imagine. I know voice lessons are likely a no.

Another puzzler: Why is he selling now? The income tax hit will be massive. Maybe he's thinking his tax rates are going to go up next year under Biden, and in whatever state he calls home. And maybe he's getting a better tax rate by selling than he would get by continuing to collect annually. But still, he's setting up a nice payday for the IRS if he's cashing in all his chips at once. (Maybe he's getting paid out over a few years, which might allow him to spread the tax hit out a bit over time.)

And where will he park all the after-tax money? The stock market? Real estate? Pot farms? Maybe he'll buy the Portland Trail Blazers from Paul Allen's sister. That would be something.

Comments

  1. I stopped reading this after the 4th paragraph of tax nerddom (😘) but Girl from the North Country needs to be up there.

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  2. "Why is he selling now?" I hate to think of a world without Bob Dylan in it but he does turn 80 in 6 months. Maybe this is part of preparing his estate for his kids, etc...As far as the monetary value of his catalogue I'd go with priceless. In my opinion he's every bit as important as Shakespeare. That reminds me: When he got the Nobel Prize for Literature there were complaints that song lyrics aren't literature. They're just a description of a song - not the final work of art.

    But when you think about it Shakespeare's plays are meant to be performed live on a stage so his written words are just a description of the final work of art as well. The written words are like the lyrics of a play.

    Oh well. Good luck putting a price on this:

    "Though I know that evening's empire has returned into sand
    Vanished from my hand
    Left me blindly here to stand, but still not sleeping
    My weariness amazes me, I'm branded on my feet
    I have no one to meet
    And the ancient empty street's too dead for dreaming."

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  3. Copyrights accrue when the song is first published right? Does that make these assets in the sense that his tax pros can try for long-term capital gains treatment, rather than ordinary income (capital assets with a basis of $0)? Otherwise, what difference does it make whether you take $300M over 10 years or 1 — you’re paying top rates each year either way on all but the first few hundred thou, right? (Right? Please don’t tell me that there’s a way for someone to get $300M and not pay top rate on it, except for our insane treatment of capital gains.)

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    1. Once upon a time, the income on selling one's songs was ordinary income. But these days, it's capital gain, taxed at highly favorable rates. Biden has proposed ending the favorable rates for capital gain among high-income taxpayers, which Bob surely is. And so if he waited until next year to do this deal, the tax hit may have been higher.

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  4. What I don't know about tax would fill an ocean, but it's a fascinating topic. I found myself thinking that the catalogue was a bit undervalued. Like you, I wonder what actually possessed him to do this.

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