Was Bob Dylan’s sale of his massive music catalog a tax maneuver?
This type of deal—a windfall—would generally be subject to a capital gain tax rate of 20% under current law. However, with President-elect Biden’s proposed tax proposal regarding capital gains looming in the balance, this type of deal would be subject to a higher tax rate. This type of increase is an incentive to get deals like this one done quickly, preferably by New Years Eve.
If Bob Dylan and UMG do not get this deal complete by New Years Eve, the tax could double. Josh Escovedo, a lawyer for the Weintraub law firm, stated that he has dealt with multiple clients that were pushing to have deals completed before the end of the year because they fear the new administrations proposed tax agenda.
Also, the value of music catalogs have increased dramatically over the last few years, providing another incentive for Bob Dylan to sell now rather than later. There are also reports that Stevie Nicks of Fleetwood Mac sold an 80% interest in her catalog for $100 million. It appears that this has become a trend in the music industry and musical talent groups are not the only investors buying in.
According to Escovedo, Spotify has allowed artists and companies to figure out the value of artists’ income streams, making it easier to quantify musical value. Further, with the ability to stream, the income stream is long lasting.
According to Dotan Oliar, an intellectual property professor, “Dylan’s copyrights on his work before 1978 expire 95 years after publication.” Further, copyrights on songs on or after January 1, 1978, “will expire 70 years after his death.”
It appears that the Universal Music Group has made quite the long-term investment.
See Geoff Colvin, Was Bob Dylan’s sale of his massive music catalog a tax maneuver?, Fortune, December 8, 2020.
Special thanks to Mark J. Bade (CPA, GCMA, St. Louis, Missouri) for bringing this article to my attention.