"You follow drugs, you get drug addicts and drug dealers. But you start to follow the money, and you don't know where the f*** it's gonna take you." ~ Lester Freamon

A look at the music IP ecosystem: Private Equity + Funds + Majors + Publishers + Entertainment Companies

This is one of my favorite scenes from The Wire.  Lester Freamon breaking it down. 

Deciding that the case he was working on was about a lot more than drugs.

Follow the money. Let’s see where it goes.

The spirit of what Lester was doing is aligned with something that I’ve been working on.

With the influx of cash that’s led to a catalog buying spree over the past few years, where does all of this money come from?

Who is behind these funds that are in the press for acquiring catalogs all of the time?

Well, let’s take a look…

Blackrock, the world’s largest asset manager with $8.6 Trillion in AUM has invested hundreds of millions of dollars into the ecosystem via Influence Media Partners. 

Apollo Global backed HarbourView with a large credit line to acquire assets. 

Brookfield Corp which generated $5.2 Billion in net income in 2022 dumped $2 Billion into Primary Wave. 

Litmus Music launched with $500 Million in funding from Carlyle Global Credit. 

Opus Music Group recently acquired 90% of Juice WRLD’s catalog by use of funds from Paul Singer’s Elliott Management. 

And the ringleader of it all, Merck Mercuriadis’s Hipgnosis Song Management raised $1 Billion from Blackstone who generated $3 Billion in net income in 2022.

Mind you, this is just a small glance at the big picture and it’s not new information.  

Wall Street is making sure they get their piece of music.

It’s viewed as a great alternative asset with sizable growth earning potential.

It’s not just Wall Street though, there is plenty of consolidation in the space as the majors and publishers look for ways to increase revenues and market share.

Let’s take a look at some of the entities that have been active in acquiring assets.

This isn’t a completely comprehensive list but it does highlight who has been participating in the catalog boom.

Each company has their own strategy and while there are some similarities there are also some stark differences.

Let’s take a closer look to see what those trends are.  

Here is a look at some of the more aggressive funds in the space and what’s in their portfolio.

Hipgnosis, who kicked off this catalog boom when it launched in 2018, has been by far the most assertive player in the space.

Their portfolio has some of the most iconic songs of all-time.  A Financial Times article from September of 2022, highlights that Hipgnosis has the rights to 23 out of the top 100 most streamed songs in the Spotify 'billions club' that surpassed 1bn streams by June 2022.

True to their name, Iconic Artists Group, the entertainment company founded by Irving Azoff focuses on acquiring IP from some of the most iconic artists ever heard.

Influence Media Partners, led by Founder + CEO, Lylette Pizarro have invested in talent that have been providing the soundtrack to many people’s lives since the beginning of the 21st century, ranging from Future, to frequent Harry Styles collaborator, Tyler Johnson, to super producer, Tainy, to Blake Shelton.

HarbourView, headed up by former managing director of Entertainment, Media, and Sports Structured Solutions at Morgan Stanley, Sherrese Clarke Soares has acquired in excess of 17,000 copyrights and is reported to be raising their first commingled fund.

Kilometre Music Group, the Canadian based music company is focused on acquiring IP from Canada’s top music talent which has included Murda Beatz, Nineteen85 and Belly.

KKR, the global investment company, acquired Ryan Tedder’s catalog for approximately $200 Million back in early 2021.  They also have partnered with BMG to acquire music rights from select talent.

Litmus Music, who just announced their foray into the space in December, started off with a bang by acquiring Keith Urban’s master recordings.

Rosie Lopez heads up Opus Music Group who touts Juice WRLD, Maluma and Rauw Alejandro as their roster.

Shamrock Capital, the fund whose history started as Roy E Disney’s family office, caught quite a bit of attention when Scooter Braun’s Ithaca Holdings sold Taylor Swift’s master recordings to them for a rumored $300M in 2020.  Their fund holds a diverse portfolio outside of music (but also includes Ingrooves) however, they recently partnered with Universal Music Group to acquire assets in the Dr. Dre sale.

Now for some trivia…

What does Le Pain Quotidien, House of Cards, The Killers and the Beverly Hilton all have in common?

Answer: Todd Boehly.

While not quite as active as some of the other funds in the music space, Boehly’s holdings outside of music through his company Eldridge and his own partnerships are diverse and insanely impressive.

Boehly’s company bought The Killers publishing catalog and assisted Sony with financing on the Bruce Springsteen acquisition.  

One of Todd’s latest high profile acquisitions is Chelsea F.C., which his consortium acquired for £2.5bn with a pledge to invest an additional £1.75bn into the club.

Speaking of soccer, big money, and music, there is another player in the space worth noting.

Enter Jason Traub’s 23 Capital.  23 Capital is primarily known for helping soccer clubs with financing for player transfers.  But a little research yields some other results as well.  

At the 2019 Billboard Women in Music event, during Taylor Swift’s speech where she voiced her distaste with Ithaca Holdings for buying her catalog, she also called out George Soros, 23 Capital and The Carlyle Group, accusing them of helping Braun fund the acquisition.

It looks like in addition to financing soccer player transfers 23 Capital’s interests also extend into music.

Utilizing The Library of Congress’s public database for copyrights shows that Drake’s Live Write, LLC entered into an agreement with XXIII Capital for 332 copyrights back in 2020.

Digging a little deeper, research shows that XXIII Capital was also transferred copyrights from Metallica and T.I. amongst others.

Since the finance company’s background is predominantly in loans, these copyright transfers could very well be collateral for loans that will be paid back in time.

Moving along…

Funds aren’t the only ones who’ve been getting busy during the boom.

The majors appear to have a slightly different strategy. 

For the most part they’ve been focused on buying frontline labels to bolster market share and acquiring masters and publishing catalogs that have a strong vintage.

Some example acquisitions:

Sony: Human Re Sources + AWAL + Alamo

WMG: APG + 300

UMG: mTheory’s label division

Now, let’s take a look at the publishers + entertainment companies.

HYBE, Scooter + Ithaca Holdings deserve their own dedicated write up which I’ll get to in due time. With Braun at the helm of HYBE, I would expect more acquisitions as they become a bigger global entity.

Primary Wave continues to work with iconic artists and their estates. With that $2Bn from Brookfield filling their coffers, I don’t anticipate them slowing down.

BMG + KKR work in partnership and independent of each other. They announced a joint partnership with $1Bn and put that towards acquiring catalogs from ZZ Top and John Legend thus far.

The Swedish based Pophouse has a variety of interests but stays true to their local roots by acquiring assets from Swedish House Mafia and the late, great Avicci.

Concord has been busy on both the records side and publishing. On the records side they acquired LA Reid’s Hitco. On the publishing side they’ve done big deals with Imagine Dragons and Phil Collins.

Roundhill has interests in 90’s rock ‘n’ roll bands Alice in Chains and Collective Soul while also acquiring the O’Jay’s masters.

Reservoir Media went public in 2021 and has acquired publishing catalogs from the likes of Dallas Austin and also recordings from Tommy Boy.

And now a look at some of the biggest disclosed deals during this spending spree.

Midia Research reported that there was just under $2Bn spent on catalog acquisitions in 2020 and over $5bn in 2021.  These figures are based just off of publicly announced spending.

A glance at the graphic above shows where a lot of that money was allocated.

A forthcoming Michael Jackson acquisition could very well end up being the biggest artist acquisition to date.  Ed Christman does an excellent job at highlighting what the potential sum might be.  Also, still on the block is Pink Floyd.

As mentioned previously, private equity and music is nothing new. Many have run this play before.

Fred Goodman’s book, Fortune’s Fool includes several somewhat recent examples including Bain Capital, Thomas H. Lee Partners and Providence Equity Partners teaming up with Edgar Bronfman to buy WMG and flip it for a profit several years later.

Anyways, music is emotional and while some creatives are weary of entrusting their life’s work with fund managers who come from the finance world, there is still plenty of activity in the ecosystem.  

Higher interest rates and over spending on deals might cause some of these funds to exit the space but I would expect a continued steady flow of new transactions.

As Lestor Freeman would have wanted, I’ll continue to follow the money.