In Digital Times, One Catalog Yields Two Sales.

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Author: Christman, Ed echristman@billboard.com

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In what appears to be a first, at least in the United States, a record label's catalog has been sold in two piecesâ€"master recording and digital rights ownership and physical music salesâ€"simultaneously.

Interestingly enough, it was not the seller that orchestrated this first; it was the buyer.

Last week, the publicly traded Digital Music Group closed on its deal to buy the Green Linnet Records catalog. At the same time, it sold to Compass Records the exclusive rights in perpetuity to sell physical goods formats of the label's titles to brick-and-mortar stores, e-tailers and mail-order businesses.

In doing so, Sacramento, Calif.-based DMG retained ownership of the catalog's digital sales and the master recordings.

Green Linnet's catalog includes more than 200 albums from many Celtic artists such as Niamh Parsons, Altan, Eileen Ivers, Cherish the Ladies, Tannahill Weavers and Martin Hayes & Dennis Cahill.

Terms of the deal weren't disclosed, but sources say Green Linnet had annual revenue of about $350,000. Billboard estimates that the label was valued at approximately $850,000-$1 million in the transaction.

"Our business is in owning and licensing for a long period of time the digital rights to sound recordings," DMG COO Anders Brown says. "The two transactions were tightly coupled . . . so as we acquired [Green Linnet] we conducted the sale of the physical distribution rights."

This was "kind of a pioneering" deal, Brown says. But as digital sales grow and digital-only players become more active in the music marketplace, this deal could become the template for future catalog acquisitions.

Green Linnet didn't plan it, but it might have been the inadvertent beneficiary of how things played out. The label has been for sale for a couple of years, and several suitors have looked at it. Some put in bids too lowâ€"none were above the $700,000 mark. Others were dissuaded by either what they termed a "due diligence" nightmare or pending artist royalty disputes.

Compass itself was attempting to navigate those difficulties when it discovered from Green Linnet owner Wendy Newton that another interested party, which turned out to be DGM, was also looking at the label.

"It was a challenging deal to begin with for many of the reasons that you are aware of," Compass president Gerry West says. "So when the new party popped up, it was just another challenge to work around so we could structure the deal to benefit all the parties."

Making the deal more complicated, a 4-year-old royalty dispute needed to be settled so five acts that sued the label would get paid at the closing of the deal.

In 2003, those actsâ€"Ivers, Altan, Cherish the Ladies, Mick Moloney and Joanie Maddenâ€"filed suit in the New York State Supreme Court and staged what was considered a first for the U.S. music businessâ€"a protest concert outside the label's headquarters in Danbury, Conn., with a giant inflated rat in tow (Billboard, Oct. 25, 2003), to help demand royalty payments.

One reason Compass chased the dealâ€"the two catalogs work well together and some artists in the Green Linnet catalog are now on Compass. West hopes to reissue catalog albums with a bonus track where they are available or new ones if it can be arranged. Likewise, there could be artists on Green Linnet contracted to make more albums.

Either way, the question arises as to whether DMG or Compass will pay and shepherd those releases into the market. Executives on both sides are confident they will work it out.

As for other aspects of the deal, it appears they have already drawn some lines. For example, with kiosks, if any Green Linnet music is sold through "topping off" a portable player, DMG would likely benefit since that is a download. But if the kiosk burns a Green Linnet song or album onto disc, a physical sale, it appears Compass would receive the revenue.

PHOTO (COLOR): CHERISH THE LADIES

PHOTO (COLOR)

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By Ed Christman, echristman@billboard.com