First published in the Financial Times on 22nd October 2013.
The way in which music rights have risen in value is astonishing
What would be the business asset I would most like to own? It seems to me the best copyrights are pretty hard to beat. They can be plays, books, films or music compositions. Such properties require little, if any, further investment; they can yield an income for decades; they can generate cash internationally; and are often pure profit.
In his autobiography One Way or Another, released last week, music mogul Chris Wright tells how he signed a share of the publishing rights to 75 songs by David Bowie in 1969, after “Space Oddity” had been a hit. It cost Wright’s fledgling business Chrysalis Music an advance of just £5,000, and would include all the tracks on Space Oddity, The Man Who Sold The World, Hunky Dory, Ziggy Stardust, Aladdin Sane, Diamond Dogs and tracks that ended up on Young Americans and Low. Taken together, the songs must rank as one of the best music catalogues of all time.
The way in which the finest music copyrights have risen in value is astonishing. The core Beatles catalogue was owned by Northern Songs. Dick James sold roughly 37 per cent of the business in 1969 for £1.53m to ATV. Within three decades the value had risen at least 100-fold, even though it was a public company at the time, and hence should have had a pretty visible worth.
Despite traditional recorded music revenues having declined with piracy, other opportunities have arisen thanks to licensing for use in films, TV and adverts, and even mobile ring tones.
Copyrights last a great deal longer than most forms of intellectual property. Compare songs with drug patents. Songs give the author (and his estate) exclusive rights to their creation for 50 or even 70 years after their death, depending on the territory, but drug patents only last 20 years from filing. Post trials, a pharmaceutical firm might have only five to 10 years to exploit a discovery exclusively.
Of course the rewards can be considerable – a charity I chair discovered a drug 15 years ago that now generates billions of dollars of very high-margin sales – but clearly drug patents are only an opportunity for companies with deep pockets. By contrast, the melody for Paul McCartney’s “Yesterday” came to him in a dream. That dream is still paying out, 48 years and £30m later.
Owning and policing a decent copyright is neither straightforward nor cheap. It can require paying fees to characters such as David Pullman, the flamboyant banker who created and trademarked the Bowie Bond.
In 1997 Mr Pullman helped the singer to securitise 287 songs from his back catalogue, swapping the next 10 years of royalty income in return for a $55m cheque. Mr Pullman went on to arrange similar deals on the work of James Brown and Marvin Gaye, but lawsuits were never far behind him – it is no coincidence that quite a few copyright-holding companies are run by ex-lawyers.
In these circumstances, it is no surprise to see publishers turning to creative works that are already in the public domain. Not only are no royalties payable; but you do not have to consult with the author – or their agent – to gain approval to use the material.
Book publishers ceaselessly reissue out-of-copyright classics such as Machiavelli’s The Prince and Adam Smith’s The Wealth of Nations. I’ve been involved in helping to produce various classic plays over the years, and the biggest issue is frequently not the cast or theatre, but dealing with the descendants of the playwright and their representatives.
Some estates have trustees strongly opposed to development, such as James Joyce’s grandson Stephen.
Other copyright holders are more forward-looking: the Fleming family’s copyright on the James Bond franchise is set to expire in 2039, which helps account for recent brand extensions such as Charlie Higson’s Young Bond and Sebastian Faulks’ new instalments.
The issue is always whether the material has enduring appeal. At the end of last year BMG bought various music portfolios (including songs such as Nirvana’s “Smells Like Teen Spirit” and Iggy Pop’s “The Passenger”) for $150m in the wake of the break-up of EMI. This represents a multiple of about 12 times the publisher’s share of net income. If those songs can endure, that price might prove low.