Yahoo Finance's Alexandra Canal breaks down Hipgnosis’ music publishing acquisition of the Red Hot Chili Peppers.

Video Transcript

KRISTIN MYERS: Welcome back. Now the Red Hot Chili Peppers are selling their entire song catalog. And it could be worth as much as $150 million. We have Yahoo Finance's Alexandra Canal hear with all of those details. What is going on here?

ALEXANDRA CANAL: There is so much money to be made by selling the rights to your song catalogs. We're seeing it with the Red Hot Chili Peppers. They're selling their entire catalog for a reported $140 million. Now the buyer of this is UK-based music investment company Hipnosis. And they're going to acquire the catalog and add to their already impressive roster of deals that include Neil Young, Shakira, along with former Fleetwood Mac guitarist Lindsey Buckingham.

Now just to put this deal in perspective, the catalog currently generates between $5 and $6 million a year for publishers. That's according to Billboard. And this is 25 times that amount. So a lot of money in the pockets of the Red Hot Chili Peppers. And what you're seeing on your screen now is some recent big name performers that have gone this route. Last year, we saw Bob Dylan sell over 600 copyrights to Universal. That deal was reportedly valued anywhere from $200 to well over $300 million. Prior to that, Stevie Nicks sold a majority stake in her songwriting for a reported $100 million.

And it's a trend that I think we're going to be seeing more and more of, especially amid the coronavirus pandemic. When these performers, they can't go out, they can't perform live, that's really how they make the bulk of their income. In addition to that, streaming has really ballooned the value of a record, the value of a song. So because of that, these artists are able to sell these records and catalogs for a really high amount and make quick, instantaneous, easy cash.

And on the side of the buyer, their incentive is that the long-term play for music publishing can actually be quite lucrative, although of recording, we're not talking about recordings. We're talking about the melodies, the lyrics, things like that, although it's valued less than the actual recording. You think about movie licensing, if you think about radio play, advertising, that can actually add up to quite a lot of cash over time. So it's a very interesting business model. I'm going to be talking to a music expert later today to kind of get a sense of why this is all happening right now. But it's certainly something that I think you're going to see more and more A-list performers do.

KRISTIN MYERS: Absolutely, and keep us updated. I'm still waiting for a Red Hot Chili Peppers NFT to go on sale since that's their--

ALEXANDRA CANAL: Yes, it's coming.

KRISTIN MYERS: --main thing.

ALEXANDRA CANAL: I'm sure.