Bruce Springsteen has just proven he is the “boss” of music catalog sales.
According to a first report revealed by the Wall Street Journal, Bruce Springsteen sold the rights to his music catalog to Sony Music Group. Price?
$500 – $600 million
Wherever the final numbers go, Bruce’s deal is the largest-ever transaction for an artist’s lifetime work. Bruce top was the previous record holder, Bob Dylan, who sold the rights to his catalog almost a year ago to this day. Bob’s payday is reported to be $300-400 million.
Bruce’s deal rates his portfolio at excellent 30X its annual royalties. Just a few years ago, artists regularly sold their catalogs for 5-10 times more annual royalties.
Assuming 30X is based on $600 million, that means Bruce made $20 million EVERY YEAR in royalties!
Crucially, Bruce closes his sale two weeks before 2021 ends. That decision has several important tax implications.
First of all, as a resident of New Jersey, Bruce will be subject to the state’s 10.75% long-term capital gains rate regardless of what I’m about to explain. Just keep that in mind for a moment.
Under today’s loophole in the federal tax code, when an artist sells their music portfolio, they’re eligible for the IRS’s long-term capital gains rate. That means they only pay 20% in taxes to the federal government. If it were considered short-term gain or ordinary income, the sale would be subject to an IRS tax rate of about 37%. Many tax advisors believe that this loophole in selling music catalogs will be closed in the coming years.
But that’s not all.
The current version of President Biden’s Build Back Better (BBB) tax plan, still being passed by Congress, calls for a 5% tax on all income over $10 million. The plan adds an additional 3% tax on income over $25 million. So if the BBB were to pass, starting January 1, 2022, a deal like this would come with an 8% tax preparer that doesn’t exist to this day.
In other words, next month the tax rate on this deal could very easily be 28%. If this really was a $600 million sale, Bruce could have saved himself 48 million dollars tax.
And if the longstanding tax loophole on music catalog sales is finally closed, the same deal in the future could come with a federal tax rate (37 + 8) of 45%. In this case, making the deal today saved Bruce 150 million dollars.
Under today’s tax code, Bruce would pay 20% to the federal government and 10.75% to the state of New Jersey. That would equate to a total tax bill of $184 million (assuming $600 million is the full agreement amount today). So he will make $415.5 million free and clear.
We previously assumed that Bruce’s portfolio was worth $300 million when calculating our previous $500 million net worth estimate. When including the after-tax profit from today’s trade, believe that Bruce Springsteen’s net worth is now $650 million.
https://www.celebritynetworth.com/articles/entertainment-articles/bruce-springsteen-sells-catalog-for-500-600-million-absolutely-smashes-the-music-catalog-sale-record/ Bruce Springsteen Sells Catalog for ‘$500 – $600 Million’ – Totally Breaks Music Catalog Sales Record