Red Hot Chili Peppers Shopping Recorded Music Catalog

The Red Hot Chili Peppers‘ recorded masters catalog is up for sale, and sources say the band is seeking upwards of $350 million from suitors. The catalog includes such hit songs as “Under The Bridge,” “Dani California,” “Snow (Hey Oh), “Californication,” “Otherside,” “Can’t Stop” and “Give It Away.”

Sources say the band owns the 13 studio albums and other releases issued by the Warner Music Group (WMG) in the U.S. Billboard couldn’t determine if the band also owns its first four studio albums, which were issued through EMI in the U.S., although one source says they do. Whatever rights the band owns in those EMI records, those rights are also a part of what’s being offered for sale, sources say.

Billboard estimates that the Red Hot Chili Peppers master recording catalog generates about $26 million in revenue annually, with the bulk of that coming from the WMG portion of the catalog and about $1 million in revenue coming from the EMI portion. While some sources suggest that a potential deal for the recorded music assets has already been reached and that WMG is the most likely buyer, other sources say a deal has yet to be struck.

The news comes four years after the band sold its music publishing to Hipgnosis for about $140 million to $150 million. That means that if the Red Hot Chili Peppers realizes its $350 million asking price for the recorded music catalog, it will have snared about $500 million for selling its music assets. Sources say Eric Greenspan of the law firm Wyman Greenspan Fox Rosenberg Mobster Younger & Light has been shopping the band’s recorded music catalog deal, just as he did for its publishing assets. 

While sources say the deal includes all of the rights for the band’s recorded music catalog, Billboard couldn’t determine if the deal also includes merchandising and name, image and likeness rights. 

What’s more, it’s also unclear if all the suitors were shopped the same set of recorded music assets, based on the math involved in the deal. With $26 million in revenue, after subtracting production, distribution, shipping, warehousing and reserve expenses, Billboard estimates that net label share (NLS), or gross profit, for the catalog would be about $20 million. But non-strategic suitors who are aware of the assets say that they hear that the catalog’s NLS is about 3/4 of that, or about $15 million.

While the band is seeking upwards of $350 million, it’s more likely the deal will go for $325 million to $340 million, some sources say. If the band were to achieve $340 million for the sale of its recorded catalog, on a NLS of $20 million, that would imply a 17-times multiple, which is pricey for recorded music assets — even for a steady high revenue earner like the Chili Peppers. Moreover, at the $15 million NLS cited by some sources, a $340 million potential sale price would work out to a 22-23 times NLS multiple, which music asset traders would describe as a “frothy” valuation. Consequently, sources suggest that the deal makes more sense for a strategic suitor, like one of the majors, than a private equity firm or a music asset buyer backed by private equity.

WMG declined to comment for this story. Greenspan, the band’s lawyer, didn’t respond to requests for comment.