Leibovitz Futures

‘One of the world’s most successful photographers essentially pawned every snap of the shutter she had made or will make until the loans are paid off’:

thus reported the New York Times on February 24 2009, breaking the now widely reported story of Annie Leibovitz’s financial difficulties and her need to raise cash.

The details of Leibovitz’s money problems are not publicy known, but must be significant, given that towards the end of 2008 the international auction house Phillips de Pury became the exclusive agent/dealer of her ‘Master Set’ (200 or so works chosen by her as representative of her oeuvre) and responsible for her archives. A selling exhibition of part of the set was held at the auctioneer’s London headquarters in October 2008, Annie Leibovitz The Master Set Part I, offering signed large-format prints at £20,000; and in the same month London’s National Portrait Gallery opened a major exhibition, ‘Annie Leibovitz: A Photographer’s Life, 1990-2005’.

Having previously mortgaged her houses to raise cash, the latest news is that Leibovitz has used copyrights in her existing and future works as collateral for loans from Art Capital Group (ACG): a Madison Avenue, New York-based company offering bespoke services to the art world, such as fixed term or bridging loans, advances and auction guarantees, acquisition financing, and collections advice and management. ACG’s interest rate is not publicly known, but is thought to be somewhere between 6% and 16%. The New York Times reports having seen loan documents at New York City’s Register Office in which Leibovitz has mortgaged her copyrights and photographic negatives and contract rights, existing or to be created in the future, as security for loans totalling US$15.5m.

The current global recession and credit crunch are forcing would-be financial suppliers and borrowers everywhere to re-think the value of any assets, and to seek new and better ways of using them to raise and secure capital. Copyright was invented early in the 18th Century as an economic right for artists and authors (and their publishers). It is the first and most important form of intellectual property for creators of original works, giving them an exclusive time-limited legal right to control their commercial reproduction and merchandising throughout most of the world. Normally lasting for the artist’s lifetime plus 70 years after death, copyright is a powerful intangible legal asset that can be bought and sold – just as tangible assets can be – and, as in the Leibovitz/ACG case, can be pledged to secure cash loans. Just as tangible assets such as real estate or artworks need to be independently surveyed/appraised and valued for mortgage purposes, so do copyrights; but doing so is a very different and fiendishly tough exercise.

We know there are tried and tested ways of establishing a fair market value of land and buildings, even of art sold at public auction, but such methods are by no means scientific or certain because markets can and do fluctuate – sometimes unforeseeably rapidly. Where artworks have already established sales in the marketplace, those values can offer a reference point for considering the potential value of copyrights in them – if such works were to be reproduced and merchandised in the future.  Copyright valuation is less problematic, though still difficult, where reproductions and other merchandising of artworks have already taken place and established their own separate market value. Whatever the case, reliable projections of the future value of such copyrights – over what could be a further 100 years or so – are impossible to predict. Educated best guesses of their current and future value are all that can be made, and can be informed through consideration of several relevant matters.

Key questions for consideration include the following. How many works have been made to date? Have they established a market value as unique or limited-edition tangible objects? Have they also established a market value as reproductions or other merchandise? Is the artist still making work for sale? How long are they likely to live, and how many marketable works are likely to be produced until the artist’s death? Is it likely that the artist’s works will follow the normal pattern of increasing in market value after death, and the end of production? The answers to such questions should inform and influence not only the current and potential value of copyrights in artworks, but also the putative financier’s crucial decision: whether there is less risk in buying the copyrights outright, than there is in lending the artist money on capital and interest repayments terms, with the copyrights as collateral. In either case, the copyrights may turn out to be so-called ‘toxic assets’: they may have an already established market value which may diminish over time; they may have no current market value, and may never establish one.

These may be desperate financial times for Leibovitz, and the measures she has taken to secure lines of credit from ACG may likewise be desperate, but there is much to be said for the insight and acumen of both parties in recognising that copyrights in an internationally established artist are actual or potential assets, and in believing that they have sufficient current and future market value to collateralise substantial cash loans. Although this art-mortgage model may be rare, if not unique, there are sound precedents for its successful employment elsewhere in the arts.

In 1997 the singer/songwriter and performer David Bowie sold $55m ‘Bowie Bonds’, which were collateralised by the then current and future market value of copyrights in his back catalogue of original songs. He then used some of the money to establish his Ultrastar technology company, the Bowienet internet service provider, and Bowieart.com young artists’ online dealership. It is important to stress that Bowie did not sell his copyrights, but used their value to support the sale of investment bonds in order to raise working capital.

An outright sale of copyright is almost always a very bad move, because only the marketplace can determine its true value; as demonstrated by the celebrated and sorry saga of the sale of their song publishing rights by Lennon/McCartney, – which began as early as 1963 when they transferred their rights to a song publishing company called Northern Songs, owned by music publisher Dick James. Lennon and McCartney each held 15% Northern Song shares, with James and his partner together holding 37.5% – and overall control. In 1969 James sold Northern Songs to Associated Television (ATV); the songwriters were given stocks in ATV Music Publishing to replace their shares. In 1985, the singer/songwriter and performer Michael Jackson bought ATV Music Publishing for $47m, including the rights to over 200 Lennon/McCartney songs – half of which company he sold in 1995 to Sony and of which he is now joint owner. Given that the annual global income earned by those songs currently runs into millions, that McCartney is 66 years of age and his joint copyright with Lennon will expire 70 years after his death – say 100 years from now – it is unsurprising that McCartney and Lennon’s widow, Yoko Ono, have made several attempts to buy back their song publishing rights (and equally unsurprising that they have failed, to date): they were valued in 2005 at around $500m.

The radical effect of an artist’s death in ‘fixing’ the amount of available work, and kick-starting the escalation of prices, is long-established. By adopting practices developed in the financial futures marketplace, Leibovitz’s action is moving the bar.
© Henry Lydiate 2009

This article is from the Artlaw Archive of Henry Lydiate's columns published in Art Monthly since 1976, and may contain out of date material.
The article is for information only, and not for the purpose of providing legal advice.
Readers should consult a solicitor for legal advice on specific matters. Artists can get free online legal information from Artquest.