“Last week, Bruce Springsteen made headlines for selling his entire music catalog to Sony Music Entertainment in a reportedly $500+ million deal. A number of fans are now asking, “Why did Bruce Springsteen sell his music rights?”
Digital Music News’ recent article entitled “Why Did Bruce Springsteen Sell His Music Rights? A Breakdown of the Decision” looks at what could have prompted the Born to Run creator to cash in on his catalog:
Money. Cash is perhaps the leading contributor to the New Jersey-born Bruce Springsteen’s decision to sell his music intellectual property. Few would turn down a half-billion-dollar (or larger) paycheck – especially when the sum reportedly represents 30 times the annual royalty payments that the 20-time Grammy winner received.
There are a number of other artists, such as Stevie Nicks, Paul Simon and Bob Dylan, who have exchanged all or some of their song rights for massive compensation.
Estate Planning. This is another important consideration regarding Springsteen’s decision to sell his music rights. Cash, property and similar physical assets are much easier to pass on to heirs than a complex collection of music intellectual property, copyrights and licensing agreements. This may have been a part of the 72-year-old Springsteen’s decision to sell.
The estates of artists, such as James Brown, have been engaged in legal battles. In fact, Brown’s estate was in litigation for over 10 years, before finally settling over the summer.
Tax Planning. Finally, there are tax-planning advantages associated with the transaction’s timing. Right now, the federal capital gain tax rate is currently 20% (with a possible 3.8% addition under the Affordable Care Act). The White House has also proposed increasing that rate to 43.4% for those who earn more than $1 million.
Due to this potential change and other possible tax-rate hikes, as well as the fact that royalties are already taxed as “ordinary income,” at a comparatively substantial 37% federal rate, Bruce Springsteen’s deal looks to have brought with it several perks on the taxation side.
Reference: Digital Music News (Dec. 20, 2021) “Why Did Bruce Springsteen Sell His Music Rights? A Breakdown of the Decision”