finance

Jeremy Tucker of Raven Music Partners is content to operate in areas of the music business that attract relatively little attention. “I am certainly not going to pretend that I’m the coolest person at cocktail parties,” Tucker says, “and I’ve never signed any famous bands as a former A&R rep.”
As co-founder and managing member of the Nashville-based investment firm, Tucker isn’t focused on acquiring what he calls “trophy” catalogs — the Taylor Swifts, Bruce Springsteen and Queens of the world. Nor is he creating biopic films made for the artists in his catalog. Instead, he’s wringing out value from acquired music catalogs and trying to provide his investors a good, risk-adjusted return.

While interest in music rights from financial buyers has exploded in the last five years, Raven Music Partners launched in 2015 and has built a 15,000-song portfolio of assets including recorded music, music publishing and derivative rights such as producers’ royalties. Tucker and his team focus on the small- to medium-sized part of the market with deal sizes typically ranging from $5 million to $35 million but going up to $100 million.

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The world of music catalog investors can be broken into two camps: strategic buyers and financial buyers. Large music companies like Universal Music Group are called strategic buyers because they have a large infrastructure and creative talent to generate additional value from catalogs. These multi-faceted companies will pursue everything from movies to box sets to artist-branded jukeboxes in order to generate licensing income from their catalogs.

Raven Music Partners is a financial buyer, the kind of investor that treats music royalties as financial instruments similar to stocks, exchange-traded funds, mutual funds and debt. Financial buyers seek out catalogs with predictable cash flows and opportunities to generate a better return. Strategic buyers often pay a premium to control 100% of the rights; financial buyers are more willing to have fractional ownership of a recording or composition.

“What we’re focused on is the boring part of the business,” says Tucker, a former managing partner at Merrill Lynch who specialized in alternative asset classes.

Administration fees lack pizazz but are a good example of how a financial buyer can improve the returns on its investments. After an acquisition, Raven Music Partners will consolidate the rights under its rights management partner, Endurance Music Group, to cut out as many of the middleman fees as possible. Tucker says it’s not uncommon to see administration or distribution fees on acquired catalogs around 15% to 25%, and he’s seen catalogs with fees as high as 40%. Reducing fees isn’t the sexiest of accomplishments, but it increases the catalog’s net cash flows. “Saving 10% in collection fees can be pretty meaningful in terms of value-add,” he says.

There are also creative options for finding return on its catalog investments: re-releasing the masters in high-fidelity audio and Dolby Atmos, anniversary editions of albums or songs, and YouTube lyric videos, for example. Sometimes, says Tucker, there’s value in something as simple as a YouTube fan page or making sure all an artist’s tracks are available on the platform. “There are plenty of bands out there that might have several million repeat followers on Spotify or one of these other DSPs, but maybe they’re not that focused on all of the different media.”

Tucker says the Raven catalog has “a good amount” of rock, country, pop and Christian music, with some hip-hop and Latin. “From a genre standpoint, we are agnostic, and we think that all of these genres have value,” he says. “What’s important is that they have a fan base that cares.” The catalog includes well- known tracks by major artists, such as “Whiskey Glasses” by Morgan Wallen, “All About That Bass” by Meghan Trainor, and “Say You Won’t Let Go” by James Arthur.

There’s a lot more music for financial buyers like Raven Music Partners to acquire. Tucker puts a rough estimate of $500 billion on the total addressable market for recorded music and publishing assets. The majors probably own close to half of that number, he says, while financial buyers like Raven Music Partners probably own “less than $20 billion.” That leaves much of the market potentially for sale. And with more artists retaining ownership of their rights, Tucker believes there will continue to be investment opportunities.

“We don’t think that it’s gotten to the point where people can’t compete in this market. Some of the more iconic catalogs are, of course, going to have everyone in the space interested in owning them. But for us, because we focus on a small- to medium-sized part of the market where things are a little more fragmented, we just don’t see that much repeat competition from the same people.”

In March, Raven Music Partners formed a joint venture with Aquarian Holdings, an asset manager with nearly $22 billion of assets under management, to invest in music rights. Raven’s ability to unlock value from catalogs through “active management and creative monetization strategies” aligns with Aquarian’s belief that music can be “both culturally significant and financially compelling,” says Rudy Sahay, founder and managing partner of Aquarian Holdings.

“At Aquarian, we’re focused on backing high-quality, enduring assets — and few assets are as enduring as great music,” says Sahay. “We see real value in partnering with Raven Music Partners, whose investment strategy is rooted in both discipline and deep industry connectivity.”