When confronted with instability, investors smartly flock to stable assets that can withstand the winds of economic change. Although these assets tend to be stable financial instruments like treasury bills or commodities like gold, money has recently been flowing into an even older, more human, asset that we can all appreciate: music (or more specifically, music rights).
Recently, it was announced that Bob Dylan sold his entire songwriting catalog to Universal Music Publishing Group, just a week after the world learned that Stevie Nicks sold a majority stake (80%) of her own catalog to Primary Wave Music. These are not standalone events – there are specialized investing groups dedicated to purchasing and leveraging music catalogs as a core piece of their investment strategy. For example, during a 6-month stretch in 2021, Hipgnosis Songs Fund spent ~$670 million on the rights to over 44,000 songs. As sophisticated financial institutions collect a larger percentage of iconic music catalogs, an overarching question arises: in what ways will the new owners of these rights treat third-party use of their property differently?
Theoretically, the interests of artists and the newly minted owners of their catalogs should be aligned. Copyright owners tend to pursue legal recourse when a third party uses their work without permission in a way in which the owner is harmed – usually, in the form of reputational damage or market loss. Will the new owners of these music catalogs view third-party use in the same way as their owners? The party line would suggest so. Implicitly referencing any concerns about distasteful use of Dylan’s catalog, Universal assured the public that it recognized how its “cultural importance can’t be overstated” and to represent the work “is both a privilege and a responsibility.” To take these words about Universal’s intended use at face value and apply them to potential copyright litigation against unauthorized third-party use, we may think that the new owners would – with great sensitivity towards their responsibility as stewards of prominent intellectual property – only pursue litigation that the artists themselves would pursue. However, new ownership creates new incentives, which leads to anticipated changes in copyright litigation.
Consider the case of Stevie Nicks. Larry Mestel, Chief Executive Officer of Primary Wave Music, promoted the purchase with an explicit reference to his firm’s business goals, namely that Nicks’ music “is still very under commercialized and undermarketed” and commands “enormous upside potential . . . to be reinvigorated and introduced to youth culture.” If Primary Wave is confronted with potential copyright infringement of Nicks’ work, they are likely to view potential litigation strategies primarily through this lens. They will probably ask themselves a key question: does the third-party use inhibit or promote our strategy to commercialize and market Nicks’ music to a younger audience?
This question branches into many sub-inquiries, likely focused around the two concerns mentioned earlier in this post: reputational damage and market loss. And while Nicks herself would probably view potential litigation with reference to the same two concerns, those concerns may not be as closely tied to the specific strategy of increasing commercialization and marketing to a younger audience (i.e., a third-party use may be seen as damaging to her reputation if her goal is to appeal to a younger audience but may not be damaging to her reputation if that is not her goal). So, because Nicks and Primary Wave’s business incentives are not necessarily identical, Primary Wave may view a specific third-party use as infringement and worthy of legal recourse, while Nicks may have made the opposite decision.
Of course, there is a valid counterargument that the catalog sale itself represents an alignment of incentives and business goals between the artist and new catalog owner. If Nicks and Primary Wave did not agree on how her music should be used and protected, then why would she sell it to them? While it is likely that there is some alignment on issues of copyright protection and litigation, and perhaps even some explicit terms in the contract that provide guidance on potential actions, it is more likely that such alignment is not perfect and the change of ownership will, by definition, alter the incentives and goals governing the use and protection of the music rights.
Whether the change in ownership of iconic music rights will increase or decrease copyright litigation is unclear. At a gut level, it makes sense that litigation will increase. While artists are interested in protecting their reputation and market share, they do not have the same financial skin in the game that the new owners do. An institution that has invested tens of millions of dollars in a music catalog has investors to answer to. As such, it makes sense that the new owners will be quick to use litigation (and will have the money to finance costly litigation) to protect their investment from any potential damage posed by third party use.