A Review of the Funds in the Music Rights Acquisition Space
HarbourView, Hipgnosis, Iconic Artists Group, Iconoclast, Influence Media Partners, Kilometre Music Group, Litmus, Opus Music Group, Primary Wave, Shamrock Capital 🎶💰🎶💰
“It’s not gonna stop. Once capitalism gets involved, there is no moderating it. We are going into corporatized ownership. It’s an arms race. And it’s just gonna keep going. Capitalism will find its way into the cracks.” ~ Gerry Cardinale (RedBird Capital Partners)
No, Gerry was not talking about the music IP acquisition space but rather buying sports teams. Nonetheless, there seems to be some similarities between the two.
In the past six years, the landscape of music IP investment and song management has markedly evolved, capturing significant attention and interest.
Merck Mercuriadis and Hipgnosis have played a crucial role in highlighting this specialized market, effectively showing that music can be a powerful alternative investment class. Mercuriadis's claim — that hit songs are stable, enduring investments unaffected by economic ups and downs, and set to appreciate as music streaming grows worldwide — has received widespread endorsement and support, despite his company's several mistakes and dubious choices.
Yet, the influx of capital raises pertinent questions.
What implications arise when capital becomes more widely accessible?
How does the dynamic shift when newcomers to the music industry, armed with investment dollars, enter the fray?
What happens if these funds lose their backers just like Marc Lore & Alex Rodriguez experienced with The Carlyle Group and the purchase of the Minnesota Timberwolves?
Or when the initial considerations for artists, managers, and lawyers pivot strictly to financial multiples?
Significant developments have unfolded since my initial exploration of this sector and its financiers a year ago.
Capital has been steadily flowing into the sector, but tracking the sources and recipients of these funds can be challenging. Let's identify which financial institutions are providing capital and to whom.
Private Equity Flowing into the Music Rights Ecosystem
Although some investments in the music industry are older, many recent developments highlight the sector's dynamism. Irving Azoff's Iconic Artists Group secured $1 billion in new capital from HBS Investment Partners. Larry Jackson's gamma received over $100 million in funding led by Alpha Wave, while Sherrese Clarke Soares' HarbourView Equity Partners raised $500 million in debt financing from KKR.
Several funds are currently in the process of raising additional capital.
While some funds are receiving high evaluations and are increasingly investing in this sector, others are looking to exit.
KKR recently divested its stake in Chord Music Partners, selling it to Universal Music Group and another current shareholder, Dundee Partners.
Providence Equity Partners' Tempo Music has been intermittently up for sale for several years.
Elliott Management's Opus Music, known for owning catalogs of artists like Juice WRLD and Maluma, is rumored to be in the process of selling its assets.
Market consolidation is anticipated, and success hinges on the specifics. Key considerations include:
Whether the fund secured equity or debt financing and at what interest rate.
The fund's life cycle stage.
The use of permanent capital in investments.
Shareholder expectations and pressures.
The nature of the music rights acquired, whether active or passive.
The type of acquisitions made, between royalty streams or entire catalogs.
The thoroughness of due diligence conducted on the music acquisitions.
The potential for overpaying in competitive deal situations.
Given the complexity and nuances of each case, it's essential for the music rights funds to possess a deep understanding of the music industry. This knowledge enables them to enhance the value of the music rights they acquire.
Each situation is unique with lots of nuance so for the private equity companies that are supplying capital to these music rights funds, it’s integral that the partners have a firm understanding of how the music business works and how they can increase the value of the music rights that are being acquired.
High-Profile Catalog Acquisitions + Partnerships from 2023
Music is how we express ourselves daily. Songs are the fabric of our society. A lot of great catalogs have been acquired. Here’s a look at some of the bigger acquisitions of 2023.
Several incredible artists sold a portion or their whole catalogs in 2023 to funds backed by private equity and despite what some think, it’s not a bad thing. Shouldn’t songwriters, producers, and artists be able to sell the music they create to whomever they want to?
This includes:
There were plenty of other deals, some announced and some unannounced.
Why are Private Equity Companies investing in the space?
The music industry is experiencing growth, fueled by factors such as rising streaming service prices, higher royalty rates, and the potential for enhanced monetization through emerging platforms. As streaming continues to expand as a revenue source—despite a slowdown in its growth rate—and digital distribution costs decrease, profit margins are on the rise. Additionally, Private investors continue to be drawn to the music sector, recognizing its fundamental role in the human experience. This attraction is due to the consistent cash flows and the sector's general resilience to economic downturns, making it a stable investment.
Now that we've identified the key factors, let's take a closer look at each company and explore the strategic moves they've been making.
HarbourView
During 2023 and the first 90 days of 2024, HarbourView has made significant strides in the music IP acquisition space, marked by notable transactions and strategic financial maneuvers.
Expansion of Credit Facilities: In December, HarbourView expanded its credit facility to $300 million, with major banks including Bank of America, Barclays, and First Bank & Trust Co. joining the syndicate. This expansion followed an earlier credit facility increase, signaling a robust financial strategy to support its acquisition endeavors.
Debt Financing for Acquisitions: A few weeks ago, the company secured approximately $500 million in debt financing through a private securitization backed by its catalog of music royalties, with KKR leading the debt financing. This significant move was facilitated by Guggenheim Securities, LLC, as the sole structuring advisor and co-placement agent alongside Barclays, underscoring HarbourView's aggressive stance on expanding its portfolio.
2023 high-profile catalog acquisitions and partnerships include:
Select Nelly Catalog assets in a $50 million transaction.
Securing rights to Wiz Khalifa's catalog, including notable hits.
Blackbear sells select music assets
Purchasing stakes in the catalogs and publishing of Pat Benatar and Neil Giraldo
Additionally, they invested in Charles King’s Macro. They brought 2023’s momentum into 2024 with the announcements of acquiring Jeremih’s catalog, production team, Full Force’s catalog and an investment in Mucho Mas Media.
The Takeaway: These moves reflect HarbourView's strategic focus on acquiring diverse and valuable music IPs, capitalizing on the growing value of music royalties in the streaming age. The company, led by former Morgan Stanley executive, Sherrese Clarke Soares and backed by Apollo Global Management, has positioned itself as a significant player in the music IP acquisition market, with a portfolio that now spans genres and includes both legendary and contemporary artists. The firm's aggressive acquisition strategy, bolstered by substantial financial backing (both debt and equity), suggests a forward-looking approach to investing in the intrinsic and long-term value of intellectual property in the music industry.
Hipgnosis
2023 was a tumultuous year for Hipgnosis, marked by significant financial reevaluations, shareholder dissatisfaction, and strategic upheavals. Here's an abbreviated summary of what's been happening:
2023 high-profile catalog acquisitions and partnerships include:
Purchased Justin Bieber's music publishing and recording catalogue shares for $200 million
A song catalog from TMS - the British songwriting and record production trio of Tom ‘Froe’ Barnes, Benjamin Kohn and Pete ‘Merf’ Kelleher
Acquired the writer’s share of performance income for all songs written by Canadian songwriter, composer, musician, arranger and producer, David Foster
Controversies & Shareholder Response:
Early in the year, Hipgnosis faced a considerable setback when shareholders overwhelmingly voted against the continuation of the song investment fund, signaling deep dissatisfaction with the management and direction of the company. This crisis of confidence was exacerbated by a failed partial asset sale to Blackstone, leading to the resignation of key board members and sparking a broader conversation about the fund's future and leadership under Merck Mercuriadis.
Strategic Review and Legal Challenges:
Amidst the fallout from the shareholder vote, Hipgnosis announced a strategic review, planning to appoint independent advisers to evaluate the company's assets and explore alternative proposals for its future. This period also saw the company facing legal challenges, with Hipgnosis Music Limited (in liquidation) serving proceedings against the company's investment adviser and the company itself, alleging diversion of business opportunity. This legal action indicates internal strife and complicates the company's path forward.
Compounding these challenges, Shot Tower Capital conducted an independent valuation of Hipgnosis's assets, revealing a portfolio worth significantly less than previously reported. This valuation, pegging the portfolio at $1.95 billion, 26% lower than Hipgnosis's own figure, underscored issues with the fund's acquisition strategies, management of music rights, and financial reporting. Shot Tower’s critical analysis pointed to overly optimistic growth forecasts, acquisition prices exceeding the assets' worth, and a lack of standard industry practices in tracking and managing song royalties. Moreover, the review highlighted potential conflicts of interest, particularly concerning transactions meant to 'cherry-pick' high-performing catalogues for sale, raising questions about the fund's governance and transparency.
The Takeaway: Moving forward, the path for Hipgnosis involves significant restructuring and strategic realignment. The company must address the criticisms laid out by Shot Tower Capital by enhancing its asset management practices, improving financial transparency, and resolving any conflicts of interest. Furthermore, Hipgnosis's leadership, particularly Merck Mercuriadis, faces the task of rebuilding trust with shareholders and the wider music industry. This will likely involve not only operational changes but also efforts to justify the fund's investment strategy amidst a changing music rights landscape. As the company navigates these challenges, the broader implications for the valuation and management of music catalogues in the investment community will continue to unfold, potentially setting new standards for the industry.
Iconic Artists Group
Irving Azoff’s Iconic Artists Group started 2024 with a splash. They announced $1B in new capital courtesy of HBS and the acquisition of Rod Stewart’s catalog.
2023 high-profile catalog acquisitions and partnerships include:
Song rights of Dan Fogelberg
Range of Cher’s music assets
Graham Nash’s music catalog
Acquire Joe Cocker’s catalog
In addition, to Rod Stewart, Iconic Artists Group has started off the year with another key additions to their repertoire: Bryan Ferry from Roxy Music’s catalog in March.
The Takeaway: Throughout decades in the music industry, Irving Azoff has cemented his status as one of the most powerful and important figures. His reputation has fostered a deep level of trust among both investors, who confidently allocate their funds, and artists, who entrust their invaluable legacies to his stewardship. Azoff’s strategy prioritizes quality over quantity, a philosophy that is evident in the selective yet impactful acquisitions made by his company. With a dozen announced acquisitions to date, each carefully chosen to enhance and preserve the rich legacies of iconic artists, Azoff's Iconic Artists Group stands as a beacon of dedication and excellence in the music IP acquisition space.
Iconoclast
2023 high-profile catalog acquisitions and partnerships include:
Switch’s publishing catalog
The producer royalties from Giorgio Moroder
Mad Decent’s publishing catalog
The music publishing catalog from Nick Monson
Additionally, a few weeks back, Iconoclast announced the acquisition of select music assets, NIL, and archives/memorabilia from Tony Bennett.
The Takeaway: Olivier Chastan, formerly the CEO of Irving Azoff's Iconic Artists Group, continues his commitment to supporting a broad range of artists and assets. Since its inception in 2021, the rights management firm has made approximately ten deals public, with much of the information about the company emerging through statements from the founder of one of their acquisitions, Irving “Gotti” Lorenzo. Gotti, making several surprising remarks on Earn Your Leisure, highlighted that Chastan offers the highest payments for master recordings. He claimed that Chastan provided him with a 27x multiple for his $300 million deal, which included $100 million for his catalog and a $200 million credit line, and mentioned that Pimco (Pacific Investment Management Company) backs Iconoclast as a limited partner.
Influence Media Partners
Throughout 2023, Influence Media, led by Lylette Pizarro, made significant progress in the music intellectual property acquisition landscape. This success was supported by substantial deals, unique partnerships, and strategic use of funds. Pizarro has been at the forefront of championing that NIL rights can drive significant alpha to royalties deals that otherwise might generate predictable returns.
2023 high-profile catalog acquisitions and partnerships include:
Logic’s Catalog - which includes “1-800-273-8255” which has 1.3B streams on Spotify alone
Enrique Iglesias’s song catalog and rights to his Name, Image, and Likeness in a rumored to be nine-figure deal
Publishing catalogs of Grammy-winning producers 30 Roc and Dre Moon
Two-time BMI songwriter of the year, Jesse Frasure’s publishing catalog in partnership with Warner Chappell Music
The Takeaway: Influence Media is swiftly establishing itself as a pivotal entity in the realm of music intellectual property acquisitions. With $750 million in funding from BlackRock and Warner Music Group, the firm's deliberate investments and partnerships highlight a strong dedication to promoting diversity, supporting a broad spectrum of artists, and acknowledging the enduring impact of music across generations.
The investment by BlackRock in several high-performing companies within the music industry signifies a robust endorsement, given its status as the world's largest asset manager. This confidence is further underscored by BlackRock's substantial financial backing of Influence Media, amounting to hundreds of millions of dollars.
Influence Media’s portfolio includes artists such as Future and Tainy, who are consistently top global music charts. According to Luminate, Future was the fifteenth most-consumed artist in 2023, a notable achievement given his lack of new releases for the year. Super producer Tainy played a significant role in the success of Bad Bunny's album, "nadie sabe lo que va a pasar mañana," contributing to nine of its twenty-three tracks. Additionally, Smash David, another producer in Influence Media's roster, produced six tracks for the same album.
The founding team of Lylette Pizarro, Lynn Hazan, René McLean, and Jon Jashni brings a wealth of experience in supporting artists, prominent brands, and in crafting timeless intellectual property. Pizarro, who led RPM Group, a boutique agency, has worked with luxury and tech giants like LVMH, Apple, Verizon, and Pepsi, providing music and strategic guidance. McLean boasts a rich history with major label groups and is the founder of the renowned MixShow Power Summit. Hazan, who played a crucial role as the CFO & GM of Epic Records, contributed to the label's success with artists such as Future, DJ Khaled, Fifth Harmony, Yo Gotti, and 21 Savage. Jashni, on the other hand, has an extensive background in film and media, having served as President and CCO of Legendary Pictures for ten years before its $3.5 billion sale to Dalian Wanda Group Co.
Kilometre Music Group
In 2023, Kilometre Music Group pursued its commitment to fostering and collaborating with Canadian musical talent. Complementing their existing investment from Barometer Capital, they secured an additional $50 million credit facility from Pinnacle Financial Partners to further support their objectives.
2023 high-profile catalog acquisitions and partnerships include:
The catalog of producer & songwriter, Tourist including his share of Sam Smith’s “Stay With Me” which has over 2 Billion streams on Spotify.
Highlights:
Kilometre Music Group's website highlights that in 2023, their affiliated songwriters amassed a total of 4.2 billion streams. Additionally, their artists were honored with five Grammy nominations. Among these achievements, their writer/producer Mido was awarded a Grammy for Best Contemporary Christian Album for his contributions to Lecrae’s “Church Clothes 4: Dry Clean Only.”
The Takeaway: Canadian Music Hall of Famer Michael McCarty, alongside his partner Rodney Murphy, is deeply committed to nurturing Canadian talent. They have been expanding their roster, which includes notable names like Bryson Tiller, Belly, Weeknd collaborator Prince85, Drake and OVO producer Nineteen85, and the esteemed producer Murda Beatz, among others. With the continuous surge of talent emerging from Canada, Kilometre's strategic acquisitions could position them favorably in the industry.
Litmus
Litmus Music had a notable year in 2023, marked by two high-profile acquisitions and strategic growth under the backing of Carlyle Global Credit. Here are some of the key highlights and insights into their activities over the year:
2023 high-profile catalog acquisitions and partnerships include:
Acquisition of Benny Blanco's Catalog: Litmus Music made a significant move by acquiring a portfolio of compositions from Benny Blanco, encompassing numerous multi-platinum hits like Rihanna’s “Diamonds,” Halsey’s “Now or Never,” and Maroon 5’s “Moves Like Jagger.”
Katy Perry Catalog Acquisition: In one of the year's most talked-about deals, Litmus Music acquired the catalog of Katy Perry for a reported $225 million. The deal covered her five studio albums, including hits such as “Roar,” “I Kissed a Girl,” and “Firework.”
The Takeaway: The company's leadership, co-founded by Hank Forsyth and Dan McCarroll, brings a wealth of experience from various roles within the music industry. Forsyth has held executive roles at Warner Chappell Music, EMI Music, and Blue Note Records, while McCarroll has served as President of Warner Brothers Records and Capitol Records.
Since its inception, Litmus Music, bolstered by a robust $500 million investment from Carlyle Global Credit, has quickly emerged as a formidable force in the arena of music rights acquisitions. Their strategic emphasis appears to be on acquiring a curated selection of premium music IPs, rather than pursuing a broader volume of transactions.
Opus Music Group
Opus Music Group started off the year with a bang and then had a relatively quiet remainder of 2023.
2023 high-profile catalog acquisitions and partnerships include:
Juice WRLD’s Catalog - including 90% of his master income interest and 90% of publishing ownership interest.
The Takeaway:
Rosie Lopez, CEO of Opus Music Group and a seasoned professional from Tommy Boy, has spearheaded the company's notable acquisitions, including the portfolios of Juice WRLD, Rauw Alejandro, and Maluma. She collaborates with Michael Minnick and Carlos Melcer, who both bring financial expertise to the table. Unlike its competitors, Opus Music Group maintains a low profile, often eschewing the public announcements commonly associated with industry acquisitions and fundraising activities. Notably, there were no press mentions for two of their three announced artists, Maluma and Rauw Alejandro. Despite being backed by Elliott Management, a firm with $65 billion in assets under management (AUM) and a frequent subject of media coverage, Opus Music Group has rarely featured in press mentions alongside its financier. Amidst a landscape ripe for consolidation, rumors have circulated suggesting that Opus might be in the process of selling its assets.
Primary Wave
2023 high-profile catalog acquisitions and partnerships include:
A publishing deal with the estate of Isaac Hayes that includes the opportunity to market his name, image and likeness
Catalog from Dennis DeYoung, one of the founding members of STYX
Publishing and recording catalog of Christian rock band Skillet
Song-writing and recorded music catalog of Sarah McLachlan
Acquires the music rights of Robby Krieger and the estate of Ray Manzarek of The Doors
Additionally, Primary Wave has started 2024 by announcing the acquisition of Scott Weiland’s catalog and in a separate transaction, the catalog of the Village People.
The Takeaway:
Larry Mestel and his company continue to excel in their area of expertise: forming partnerships with legendary artists. Bolstered by the substantial capital from Brookfield's $2 billion partnership announced in October 2022—with $1.7 billion of that being permanent capital—the independent publishing and entertainment company is poised to implement innovative marketing campaigns, create new content, and collaborate on projects that reintroduce classic hits to new generations. Their initiatives range widely, from producing musicals to designing holiday-themed cookies, and securing sync placements for music in films and advertisements. Their knack for innovation in music rights management, coupled with a profound respect for the legacy of artists, sets them up for sustained growth in the dynamic music industry.
Shamrock Capital
Shamrock Capital, the former family office of Roy Disney had a big 2023 with a new fundraise and two key acquisitions.
2023 high-profile catalog acquisitions and partnerships include:
Dr Dre sells music assets to Shamrock Capital and Universal Music Group
Metro Boomin’ sells publishing catalog for nearly $70M
The Takeaway:
In 2023, Shamrock Capital significantly advanced its position in the investment arena, with a notable focus on the media and entertainment sectors. The firm successfully closed its Shamrock Capital Content Fund III, L.P. (SCCF III), attracting overwhelming investor interest and surpassing its target by raising over $600 million. This fund is strategically designed to purchase a diverse, global collection of content and media rights, furthering Shamrock's ambitious plan to own and finance high-quality content across a variety of areas such as movies, TV, music, video games, and sports rights.
Shamrock Capital, led by partners Patrick Russo, Jason Sklar, Stephen Royer, and their team, stands out for its strategy of investing in a wide variety of content categories, extending beyond just music. The firm emphasizes the importance of quality over quantity, especially within the music industry. Notably, even after Taylor Swift re-released her albums, Shamrock Capital's ownership of her original masters has continued to generate significant consumption in 2023, demonstrating the lasting value of premium music assets.
According to data from Luminate, Shamrock Capital's acquisition of six Taylor Swift albums resulted in sales of 3.9 million albums w/TEA w/SEA in 2023. The breakdown is as follows:
"Taylor Swift" sold 325,000 albums.
"Fearless" sold 284,000 albums.
"Speak Now" sold 530,000 albums.
"Red" sold 260,000 albums.
"1989" sold 1.3 million albums.
"Reputation" sold 1.2 million albums.
In contrast, the four albums that Taylor Swift re-recorded and released saw sales in 2023 totaling 6.7 million:
"Fearless (Taylor’s Version)” sold 835,000 albums.
"Speak Now (Taylor’s Version)" sold 1.8 million albums.
"Red (Taylor’s Version)" sold 1.2 million albums.
"1989 (Taylor’s Version)" sold 2.9 million albums.
Since Shamrock Capital announced its acquisition of Swift's albums in November 2020, there has been a notable increase in album consumption over the next three years, totaling 8 million albums:
2021 saw sales of 2,041,000 albums.
2022 saw sales of 2,124,000 albums.
2023 saw sales of 3,799,000 albums.
With the resurgence of The Eras Tour in May, both the original albums and their re-recorded versions are expected to continue generating significant listening numbers.
Music Funds’ Partnerships + Acquisitions
A detailed examination of the portfolios held by the most active funds in the music industry reveals clear distinctions among their investment strategies.
Primary Wave and Iconic Artists Group are known for their investment in the catalogs of music legends, where they act as stewards of these artists' legacies, seeking opportunities for synchronization and creating genuine moments of connection.
Iconoclast, while also engaging with iconic artists' catalogs, occasionally diverges to include catalogs from younger, emerging talent.
Hipgnosis, credited with popularizing the music intellectual property (IP) acquisition market, boasts a roster of superstars but has been embroiled in controversy.
Kilometre Music Group focuses its efforts on partnering with Canadian artists, covering a spectrum from emerging talent to established talent.
Litmus, Opus Music Group, and Shamrock Capital take a highly selective approach to acquisitions, prioritizing quality over quantity. Their investments are daring, often involving catalogs valued at or above nine figures.
HarbourView and Influence Media Group have built versatile portfolios that include both current hitmakers and mature, superstar artists.
However, as mentioned previously, the success of each fund hinges on the nuances of their acquisitions: the purchase price, the rights secured, and their strategy for managing the catalogs post-acquisition amongst other things.
Music IP Ecosystem
What does the future hold?
With top-performing funds acquiring more capital, we can expect continued intense activity on the buying side of the market. This dynamic is likely to prompt market consolidation, necessitating some funds to offload their portfolios. Additionally, we foresee a pivot towards investments in content, with an increasing number of funds engaging with and supporting storytellers. The potential for utilizing Name, Image, and Likeness (NIL) rights and crafting innovative products around talent presents particularly exciting opportunities. As the growth of streaming services begins to slow, funds will be faced with the challenge of finding creative ways to sustain their returns. Funds that have relationships with strategic platforms that can reduce distribution and administrative costs will also be at an advantage. Echoing Gerry Cardinale's perspective, the arms race will continue, with capitalism finding its way into the cracks but as long as songwriters, artists, and producers get fair value for their lives work, it shouldn’t matter.
For more on this subject matter, there are a ton of great resources out there including reporting and analysis from: