The American rock band Red Hot Chili Peppers was formed in Los Angeles in 1983. Their music incorporates elements of alternative rock, funk, punk rock and psychedelic rock. With over 80 million records sold worldwide, the Red Hot Chili Peppers are one of the best-selling bands of all time, with the most number-one singles (13), most cumulative weeks at number one (85) and most top-ten songs (25) on the Billboard Alternative Song chart. Having won six Grammy Awards and being inducted into the Rock and Roll Hall of Fame, the band has had a long and successful journey.
Now, the Red Hot Chili Peppers becomes another classic group to sell their rights to their song catalog. The London based music Investment Company Hipgnois will acquire the catalog for $140 million which includes hits like “Californiacation” and “Scar Tissue.” This deal will add to the firm’s already impressive roster of such deals with Neil Young, Shakira, and former Fleetwood Mac guitarist Lindsey Buckingham.
To put this $140 million purchase price into perspective, on average the Red Hot Chili Pepper’s catalog generates between $5 and $6 million a year for publishers, and now has been sold for approximately 25 times that amount. According to Visionaly Music Group Founder Chris Zarou, told Yahoo Finance that catalogs “have become a really interesting asset class to a lot of investors and hedge funds and that’s created the space to heat up a bit and for multiples to increase.” Zarou also explained that securitizing music catalogs is “an amazing way for an artist to monetize their life’s work and to capitalize on beneficial tax incentives.
Zarou, who manages multiple artists, including Grammy-nominated singer, songwriter and record producer Logic, explained that securitizing music catalogs is “an amazing way for an artist to monetize their life’s works and to capitalize on beneficial tax incentives.” Buyouts are often looked at as long-term capital gains in the U.S., whereas continuing royalties are counted as ordinary income, according to the music veteran — and the best of all possible worlds. “I look at it as a win-win for everyone…it’s a cool evolution,” Zarou added.
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