Katy Perry sells music catalogue: Why do stars do it and how does it work?

Katy Perry has become the latest musician to cash in on millions by selling the rights to her music back catalogue.

The 38-year-old singer has struck a deal with The Carlyle Group investment firm for an estimated £181m [$225m] for the musical copyright to her songs and albums released between 2008 and 2020. This includes hits I Kissed A Girl, Firework, Dark Horse and California Gurls.

Perry is the latest in a succession of music stars to make the decision to give up ownership of their songs in exchange for a cash lump sum.

• Read more: Katy Perry becomes latest star to sell music catalogue in deal worth ‘$225m’ (Independent, 3 min read)

She follows in the footsteps of the likes of Justin Bieber, Bruce Springsteen, Bob Dylan, Blondie, Justin Timberlake and the Red Hot Chilli Peppers.

So what does it mean for the stars and their rights to perform their own songs, and why do they choose to do it?

Here's a quick guide to music back catalogue sales.

Who started it?

David Bowie was the first star to make the move. Just as he was a seminal musician, he became a financial pioneer - cashing in on the royalties potential of his music before his death from liver cancer in 2016 aged 69.

The Heroes singer struck a deal with Prudential Insurance Company of America in 1997 for what he called "Bowie Bonds", making around £44m for the rights to all his hits before 1990.

• Read more: How David Bowie changed finance (Yahoo Finance, 1 min read)

What does it mean?

Music is copyrighted to its creator, meaning every time a song is performed or played, a royalty payment must be made to the owner of the track. The coronavirus pandemic really pushed the trend of selling music back catalogues, when musicians needed to combat the losses they were incurring from not being able to tour and perform live.

Financial investors are keen to pay big money for the rights to hit songs, gambling on the chance they will make a profit through the royalties paid to them every time the tracks are used - be it performed live, played on the radio, streamed or used in TV, films and adverts.

Copyright of the musical composition lasts for 70 years after the death of the creator, so the owner of a song stands to keep making money for some time. But there is risk involved — because the song has to endure as a hit to keep the cheques coming in.

After selling out the stars themselves even have to pay royalties to perform their own music. But after banking a multi-million lump sum, it is deemed to be worth it.

• Read more: Why legendary music artists are selling the rights to their songs (abc News, 3 min read)

Who else has done it?

After Bowie lit the flame, other influential names in music began to follow suit.

Bob Dylan, 82, sold his musical back catalogue to Universal Music for a reported £322m in 2020. Then in 2022 he made a further £161m selling his master recordings to Sony.

• Read more: Bob Dylan sells recording catalogue to Sony in latest music acquisition deal (Sky News, 2 min read)

Neil Young, Barry Manilow, Blondie, Stevie Nicks, Chrissie Hynde, Sting and the Beach Boys are also among the veteran musicians joining the back catalogue flogging trend.

But young artists are also jumping on the band wagon.

Justin Bieber, 29, sold the rights to all his music recorded before December 2021 for an estimated £162m including global hits Baby, Sorry and Love Yourself.

• Read more: Justin Bieber sells his back catalogue for £162m (Sky News, 1 min read)

Iggy Azalea, Timberland, Justin Timberlake, Shakira and John Legend have also made the decision to give up their copyright in exchange for ready money.

Which stars are holding on to their hits?

Taylor Swift's early back catalogue were acquired by former manager Scooter Braun when he bought Big Machine Records in 2019. He then sold them on to Shamrock Capital for £242m in 2020. The Shake It Off singer has responded by re-recording new versions of all her early songs so that she does not have to pay royalties to perform them.

• Read more: Why is Taylor Swift rerecording her old albums and which does she have left to record? (Evening Standard, 2 min read)

Glam rock star Alice Cooper claims he has turned down lucrative offers for his back catalogue as he does not need the money and wants to pass his legacy on to his children. He said: "The amount of money is just ridiculous, but if I don't have to do it I'd rather keep it."

Pink Floyd were rumoured to be in talks to sell their back catalogue for around £403m, before the deal broke down due to alleged disagreements within the band. Drummer Nick Mason said: "I think it's so easy to have a huge payout and lose half to tax and the other half to frauds and con men. So I'm not sure about it at all. I think it was an interesting idea, but I’m not sure it's the way to go."

• Read more: Pink Floyd’s $500 Million Catalog Sale Is ‘Basically Dead’ - Or Is It? (Variety, 6 min read)

Watch: Katy Perry is the latest artist to sell the rights to her songs