“If you sell your catalog, it can be exploited in ways you might not approve of,” Block notes. “That's why you should work with your team to research the prospective buyer to see how they have leveraged catalogs they have purchased in the past. You may also be able to build stipulations into the contract that limit how your catalog can be used or allow you to buy back your catalog.” When selling the publishing rights to your songs, the new owner can choose how to license your songs, including partnering with brands and political organizations. If your catalog ends up in the hands of an investor who uses it for causes that are not aligned with your values, you may want to think about how it might impact your reputation.
Under the 1976 Copyright Act, when a musician sells a copyright to a song, they can terminate the buyer’s rights and claw back the copyright into their own name 40 years after selling it. The law requires the artist who sold the copyright to file a notice of termination between years 35 and 40 after the sale. “This means that younger artists could have a second bite of the apple,” explains Michael Duffy, Managing Director, Wealth Strategist, Merrill Wealth Management. “For example, a young successful artist could sell their catalog today for $200MM and then 40 years from now terminate the seller’s right and then sell the catalog again, perhaps for a multiple of the original sale! Many musicians who have sold their copyrights don’t know that they have a termination right and if even when they do, many haven’t considered how to properly pass these rights to heirs,” says Duffy. The statute is very specific and requires that an artist pass their termination rights through a traditional last will and testament and not through a trust structure. Failure to properly pass termination rights to heirs will result in those rights passing to default heirs that are laid out in the Copyright Act, which could end up passing a right to an heir that you intended to disinherit.
Just as your band is made up of professionals with skilled talent, the group you form to sell your music catalog should be composed of professionals in every aspect of the sale. Your group should include a financial advisor, tax advisor, attorney, and all parties who can claim ownership over the publishing and recording rights of the music. Members of this group can help you collect revenue history and projected revenue that prospective buyers will want to review, draft a contract that includes your stipulations, determine the allocation of profits from the sale, and maximize your earnings with smart tax strategies. A Merrill Sports & Entertainment Advisor can help you make informed financial decisions, helping you understand the potential results of each decision.
Selling your music catalog involves more than receiving a lump sum from the sale of your creative assets. This opportunity comes with several financial considerations that are best explored with a financial advisor who understands the nuances of the sale. To continue the conversation, reach out to a Merrill Sports & Entertainment Advisor.