State Champ Radio finance
Page: 5
The pace that global music industry revenues have been growing is expected to slow this year, as the industry is “on the cusp of another major structural change” stemming from the changing price of streaming subscriptions, artificial intelligence and new payment models, according to a closely watched report from Goldman Sachs.
In its latest Music in the Air report, published Wednesday, Goldman’s research analysts say they expect global music industry revenues in 2023 to grow by 7.1%, down from an 8% growth projection last year, as live music and publishing growth rates return to more normal ranges of 6% and 8% growth this year respectively. The compound annual growth rate for revenues from 2023 to 2030 ticked up slightly to 7.3%, from 7.1% last year, and streaming revenue is expected to hold steady at an 11%-growth rate, according to the report.
That indicates steady and even more broadbased growth, researchers say, but the industry is about to face a fresh wave of massive changes.
“We believe the music industry is on the cusp of another major structural change given the persistent under-monetisation of music content, outdated streaming royalty payout structures and the deployment of Generative AI,” Goldman researchers wrote in the new report. “In the wake of these developments, we believe a more coordinated and collaborative response from the main stakeholders will be key to ensure that the industry not only continues on its path of sustainable growth but also captures new business opportunities.”
Echoing a frequent refrain of music industry executives, Goldman’s researchers say monetization of music content is way behind the rate of consumption. They estimate that the revenue earned per audio stream has fallen 20% over the past five years, and that the revenue companies earn per hour of music streamed on Spotify is four times lower than for Netflix.
They estimate that up to $4.2 billion in potential revenue could be gained over time by charging different audience segments, such as super fans, more for subscriptions.
Goldman analysts also wrote that the current method of treating all streams lasting less than 30 seconds the same and paying content owners a pro-rata share of streams “needs to evolve…to cope with dilution of market share.” This weakening, they say, is coming from the fast-growing number of songs uploaded to digital service provider (DSP) platforms, fraudulent and artificial streams and “the propensity of algorithms to push lower royalty content.”
Researchers also sounded a positive note on the potential for generative AI to lower barriers for artists, boost music creation capabilities and improve industry productivity overall, with the major music companies best positioned to benefit.
“We believe the quality of the input to large language models is critical and the largest owners of proprietary (intellectual property) are best positioned to leverage the technology,” researchers wrote, noting the industry will need to be aligned in controlling the deployment of that tech.
The report also notes that, despite fears of market dillution from the rush of new content, Universal Music Group and Sony Music Entertainment both maintained their recorded music market share in 2022, with only Warner Music Group losing market share — about half a percentage point — to independents.
“We continue to expect modest dilution of market share over time, mostly driven by the revenue mix shift towards EM, although we believe that the major record labels will continue to expand their presence in EMs through partnerships, investments and bolt-on M&A,” researchers wrote.
Spotify maintains its clear lead among the DSPs with 34.8% of total global market share in 2022, although it edged 60 basis points lower. YouTube Music was the “major gainer,” gaining about 3 percentage points of market share over the past three years to hold market share in 2022.
A third music-focused electronic-traded fund — or ETF — is set to debut on the New York Stock Exchange on Friday (June 30). The aptly named MUSQ Global Music Industry ETF, trading under the ticker MUSQIX, has 48 stocks representative of the modern music business, including Universal Music Group, Spotify and Live Nation.
To MUSQ’s founder, David Schulhof, the fast-growing ETF market is primed for an index that allows investors to easily buy into the global music business’s growth story. “It’s been hard to invest in music for the last 25 years,” he says. “You had to be a [limited partner] at KKR or Blackstone or Apollo. And it was really hard to get liquidity.”
Schulhof, most recently the president of music publishing at LiveOne, invested in music assets as the co-founder and CEO of Evergreen Copyrights, which was acquired by BMG Rights Management in 2010, but everyday investors weren’t able to participate in music’s growing popularity as an asset class. “There were a lot of other private equity-backed companies, but it was hard for investors to get exposure” to music, he says.
With MUSQ, Schulhof says he’s giving “the Robinhood investor” a liquid investment to participate in the music business. MUSQ has 48 companies spanning the music content and distribution (including Warner Music Group, Believe), digital music (Spotify, Tencent Music Entertainment), live music and ticketing (Live Nation, Madison Square Garden, Vivid Seats), satellite and broadcast radio (iHeartMedia, SiriusXM, Townsquare Media) and music equipment and technology (Dolby, Sonos). U.S.-based stocks account for 45% of the index’s value; the remaining 55% coming primarily from South Korea, Japan and China.
MUSQ avoids video streaming and other digital entertainment stocks that may rise and fall with music but aren’t dedicated to music. Still, not all of the fund’s companies generate most or all of their value from music. MUSQ’s three largest companies are Apple, Amazon and Alphabet. The next-largest company by weight, Sony Group Corp., owns film, gaming and electronics divisions in addition to Sony Music Entertainment. According to the index’s criteria, a company can be considered for inclusion if it derives at least 50% of its annual revenues from the global music business, is a top five company, or have at least 10% of the global market share in one of the five segments of the music business the index covers.
“I had to include them,” says Schulman, “and I couldn’t ignore them. But I created, I think, a fair, balanced approach, which was to cap their market share on the index at 7%.”
To be eligible for the index, a company must have a minimum market capitalization or assets under management $100 million and a minimum average daily trading volume of $200,000 over the previous six months. Some small companies, such as music streamers Deezer and Anghami, and the newly public Alliance Entertainment, didn’t make the cut. But many other small, unheralded companies are among the index’s 48 stocks, including Stingray, a Canadian streaming company that services cable television networks, and Cliq Digital, a German provider of streaming services that bundle music, movies, audiobooks and other content.
MUSQ is part of a trend of music-focused funds attempting to tap into the booming ETF business. KPOP, which focuses on South Korean companies that create music and video content, launched in 2022. TUNE, another music-focused ETF, launched on June 22. Investors increasingly favor the simplicity of ETFs built around themes such as music, battery technology and sustainability. ETF’s asset under management ballooned from $3.4 trillion in 2016 to $10 trillion in 2021, according to EPFR. PwC believes ETFs will grow to $20 trillion by 2026.
“I have to believe that some amount of that money is going to be interested in music,” says Schulhof.
Shares of Cumulus Media gained 9.7% this week, the leading stock in the Billboard Global Music Index and one of only four stocks in the 21-company index to end in positive territory Friday (June 23).
Overall, the Billboard Global Music Index declined 3.5% to 1,287.41 — more than double the 1.4% declines of the S&P 500 and Nasdaq. Music stocks were more in line with the Nasdaq when the overpowering effects of a small number of tech companies are removed, however. That’s because a few powerhouses — such as Microsoft, Apple, Alphabet and Amazon — often account for a large fraction of the Nasdaq’s gains. To that point, QQQE, an exchange-traded fund that gives equal weight to 100 Nasdaq stocks, declined 2.9% this week.
In the United Kingdom, the FTSE 100 declined 2.4%. South Korea’s KOSPI index fell 2.1%. Central banks in England, Turkey and Norway raised interest rates this week. Investors can reasonably expect more rates hikes in the United States, too. Federal Reserve chairman Jerome Powell said on Wednesday the central bank may continue to raise rates — there have been 10 since March 2022 — but “to do so at a more moderate pace.” When central banks raise interest rates, stocks tend to fall because businesses and consumers are expected to cut back on spending and higher rates make bonds relatively more attractive to stock returns.
Cumulus Media improved to $3.40 a week and a half after the company announced it will sell about 1.75 million Class A common shares — nearly 10% of outstanding shares — at $3.25 per share in a modified Dutch auction that closed on June 9. While the sale will gross about $5.7 million, not including fees and expenses, the final result was well below the company’s goal to sell up to $10 million of shares as part of a previously announced $50 million share repurchase plan.
Shares of French music streaming company Deezer gained 3.6% to 2.32 euros ($2.54), bringing the stock’s year-to-date loss to 20.5%. U.S. streaming company LiveOne gained 3.3% to $1.58. Year-to-date, LiveOne has gained 145.3%. The only other company with a week-over-week improvement was South Korea’s HYBE, which improved 1.2% to 301,000 KRW ($236.91).
The other three Korean music companies declined this week: SM Entertainment and YG Entertainment each fell 5.6% and JYP Entertainment dropped 3.5%. Still, K-pop has been a resounding success for investors in 2023. Led by JYP Entertainment’s 93.7% year-to-date gain, the four Korean companies’ stocks have risen an average of TK% in 2023.
One company, Anghami, was unchanged and the index’s other 16 stocks were in negative territory this week. MSG Entertainment had the Billboard Global Music Index’s largest decline after dropping 17.1%. Sphere Entertainment Co., which spun off MSG Entertainment in April, intends to sell part of its 33% stake in MSG Entertainment. The news dropped the live entertainment company’s share price 12.1% on Wednesday. At Friday’s closing price, Sphere Entertainment’s sale of 5.25 million shares would gross about $170 million that could help fund the state-of-the-art Sphere at The Venetian Resort in Las Vegas that’s set to open in September.
Sphere Entertainment Co., the company behind an expensive, state-of-the-art venue opening this fall in Las Vegas, is selling about a quarter of its stake in MSG Entertainment — 5.25 million shares of Class A common stock — in a secondary offering, the company announced Wednesday. That amount could grow by 787,500 shares if the offering’s […]
German television personality Jan Böhmermann appears to have single-handedly knocked more than 1 billion euros ($1.15 billion) from the market value of CTS Eventim after he criticized the concert promoter and ticketing company on his late-night talk show ZDF Magazin Royale on German public television on Friday.
According to various media reports, Böhmermann, in a 23-minute news-styled feature, bemoaned the company’s dominant market position in promotion and ticketing and a lack of transparency about the fees added to tickets. “Eventim is practically the German event industry,” the satirist said (as translated to English) He singled out the company’s re-sale platform, fanSale, which allows ticket holders to sell tickets at a premium to their face values. “Why fight the black market when you can earn money yourself?” he asked.
Böhmermann also said that CTS Eventim received 15 million euros ($16 million) of COVID-19 economic aid from the Federal Government Commissioner for Culture and the Media. In total, the company received 272 million euros ($295 million) in economic aid from Germany and elsewhere from 2020 to 2022, according to the company’s financial statements. He noted that a director, Juliane Schulenberg, is the daughter of CTS Eventim founder and chairman Klaus-Peter Schulenberg. She has been a member of the CTS Eventim’s supervisory board since May 2016, according to the company’s website.
“Unfortunately, many facts are twisted and not the truth,” a CTS Eventim spokesperson told Billboard in an email. While Böhmermann suggested Juliane Schulenberg influenced COVID-19 aid received by CTS Eventim, the company’s spokesperson says she “had no professional position in this regard and therefore no influence.”
ZDF Magazin Royale made a significant impact when the market opened after the weekend. Shares of CTS Eventim fell 8.9% on Monday and another 7.5% on Tuesday, bringing the two-day decline to 15.7% — a 1.07 billion euros ($1.15 billion) decline in market capitalization. After a 0.8% gain on Wednesday, shares of CTS Eventim were up 1.3% year to date.
CTS Eventim is the largest concert promotion and ticketing company in Europe and had revenues of 1.9 billion euros ($2 billion) and sold 69 million tickets online in 2022. Its portfolio includes EDM promoter ALDA Germany; the Rock am Ring and Rock im Park festivals; numerous ticketing brands; EMC Presents, a partnership with U.S. tour promoter and producer Michael Cohl; and Eventim Live Asia, a partnership with former Live Nation executive Jason Miller based in Singapore.
U.S. audiences will recall a similar segment about the country’s dominant ticketing company, Ticketmaster, by comedian John Oliver on his HBO show Last Week Tonight in 2022. Oliver touched on the same themes brought up by Böhmermann: market dominance, rising ticket fees and ownership of a secondary market that profits from in-demand tickets’ re-sale values. Oliver had a negligible effect, however, as the share price of Ticketmaster’s parent company, Live Nation, dropped just 0.5% the day after the episode aired. A chance of government intervention has given Live Nation investors pause on numerous occasions, however, such as politicians’ criticism of Ticketmaster’s Taylor Swift pre-sale in November and a 2018 New York Times article about Live Nation’s alleged anticompetitive business practices.
Just as Live Nation and Ticketmaster are under constant scrutiny in the U.S., CTS Eventim routinely falls into the crosshairs of consumer advocates and government regulators. In February, more than 1,500 consumers in Germany had joined a model declaratory judgment against CTS Eventim filed by the Federation of German Consumer Organizations. The consumer advocacy group alleges the company did not refund ticketing fees for cancelled events. In 2018, CTS Eventim’s share price fell as much as 10% after Germany’s Federal Supreme Court ruled the fees charged for printing out tickets ordered online were illegal. Also in 2018, the German Federal Cartel Office banned CTS Eventim from having exclusive ticketing agreements with promoters and box offices. In 2017, the Cartel Office blocked CTS Eventim from acquiring promoter and booking agency Four Artists, which a German court upheld the following year.
Would you rather own the rights to Bruce Springsteen’s song catalog or the musical scores to hit Nickelodeon TV shows such as iCarly, Victorious and Henry Danger?
While those tween comedies may not be household names, fans stream them worldwide, and unlike Springsteen’s masters and publishing rights — which Sony bought for $500 million in 2021 — the rights to their scores sold for tens of millions, presenting, for some, an appealing and approachable investment.The Nickelodeon shows’ music is an example of the kinds of deals being done by a new crop of music investment funds that are focused on acquiring the one type of music they know best, often for a much lower price than the deals making headlines.
Funds like Armada Music’s BEAT (focused on dance), Jamar Chess’ Wahoo Music Fund One (Latin), Singapore’s blackx (the Asian music market) and Multimedia Music (film and TV music) have all launched in roughly the last 18 months with similar aims: to exploit their specialized genre knowledge and industry connections to buy rights to songs in one category and earn a return.
The principals of these funds, which have raised between $100 million (BEAT, blackx) and $200 million (Multimedia) from banks and investment firms, say the primary difference between them and funds like Primary Wave and Hipgnosis, which have institutional and private equity backing, is that their success hinges on a lower cost of entry and therefore present less risk.
“It’s a niche within a niche,” says Phil Hope, founder/CEO of Multimedia Music, which recently bought the music income and copyrights to scores from the Nickelodeon shows. “People see that there’s a well-priced opportunity in what we’re doing. Is it as obvious or as sexy as buying a big artist’s catalog? It needs a bit of explaining.”
Each fund faces its own challenges, but in an investment class, where the slowing of streaming growth and high interest rates are prompting greater investor scrutiny, these funds present the next natural step, says Bob Valentine, president of Concord. “We are now at the evolution stage of the investment thesis,” says Valentine, who will become Concord’s CEO in July. “There is still supersize growth in some of these genres — like Latin, dance, EDM. Investment managers are thinking, ‘The cost of capital is going up. Let’s find the genres that are going to outpace that index trend. Then, if the cost of capital goes up, we still outpace it.’ ”
Founded in late 2021 by Hope and James Gibb, Multimedia Music has acquired the rights to dozens of film and TV scores, including James Newton Howard’s catalog (Pretty Woman, Fantastic Beasts and the Hunger Games films), the STX music library catalog (Bad Moms, The Foreigner) and in-demand composers like Tyler Bates (the Guardians of the Galaxy and John Wick franchises, Deadpool 2).Multimedia has raised $200 million in debt and investment from Metropolitan Partners, Pinnacle Financial Partners and others to buy the rights to film and TV music that is reliably played — whether streamed, broadcast or licensed by filmmakers.
“Initially, investors were excited but didn’t understand it. They kept saying, ‘I don’t know who’s going to be streaming film and TV music on Spotify,’ ” Gibb says. “What we’re looking at are the TV shows and films that have longevity so that every time they get played anywhere in the world, we get streaming royalties paid back to us.”
Chess, whose Latin music-focused Wahoo Music Fund One launched in 2022, says he also spends time educating prospective investors. “You’re buying into cultural artifacts and less into a net publisher’s share of now. That’s why it’s a good deal,” says Chess, whose grandfather, Leonard Chess, co-founded Chicago’s legendary Chess Records.
Last year, Wahoo acquired a 50% stake in the publishing and recording catalog of Oro Solido, a classic merengue group, for an undisclosed amount. Chess says he is in talks to acquire two more catalogs that are also considered classics in the Latin genre — a status that makes them marketable for new recordings and sampling by current Latin artists.
But despite the surging popularity of Latin American music — recorded-music revenue grew by nearly 26% in Latin America last year, according to IFPI — Chess says investor interest is still lagging.“We are not competing against a Sony buying [Bad Bunny’s label] Rimas,” says Chess, who is also president of Spirit Music Latino. “There is a wealth of opportunity across the [Latin American] territories, and sometimes lining up investors can be a challenge.”
BEAT Music Fund was launched in April by independent dance music label Armada Music. Its first acquisitions were rights belonging to artists it has ties to, like Detroit techno forefather Kevin Saunderson’s KMS Records and Russian DJ ARTY. BEAT enters the investment space at a time when the global dance music industry grew by 34% to $11.3 billion in revenue in 2022. Its fan base is also growing 10 times faster than hip-hop on TikTok, according to a new report from MIDiA Research.
“Our plan is to invest $100 million in its first two years and increase the investment to at least $500 million in coming years,” says Nadine van Bodegraven, COO for the fund. “Our goal is to announce at least one new deal every month this year.”
The Billboard Global Music Index improved 1.8% to 1,270.57 in the week ending June 9, marking gains in successive weeks and four out of the last six weeks. iHeartMedia was the index leader for the second straight week. Shares of the radio company were up 13.5% to $3.54 a week after rising 30.5%. Thirteen of […]
Universal Music Group plans to raise 750 million euros ($801 million) from the sale of 4.000% senior unsecured notes due 2031, the company announced on Tuesday (June 6). The notes will be issued from UMG’s Euro Medium Term Note program and listed on Euronext Amsterdam. The proceeds will be used to refinance existing debt and […]
Institutional investors are increasingly using a new playbook when it comes to sinking money into the music industry. Instead of buying individual artist and songwriter rights, some firms have shifted to acquiring stakes in or outright ownership of operational music companies.
One of the newest players approaching the market in this way is Firebird Music Holdings, a 17-month-old enterprise backed by institutional money that is building out a multi-sector music company that includes labels and publishing with an emphasis on management and label services.
Michigan Retirement Systems first invested in Concord back in 2010, and more recently, Brookfield Asset Management and Oaktree Capital Management have placed bets on Primary Wave, to name just two, but Firebird co-founder and executive chairman Nat Zilkha is taking a different approach to the companies it’s rolling up.
“We are maintaining separate brands of the companies that we invest in,” Zilkha says. “We allow their creative process to remain very independent from us; but we’re giving those companies an ecosystem that helps them create opportunities for themselves and the artists that they work with. They can now access really sophisticated resources, both in terms of capital and expertise.”
Zilkha, a former partner at KKR and the chairman of Gibson Brands (after leading the guitar manufacturer out of bankruptcy) formed Firebird with Nathan Hubbard, the former CEO of Ticketmaster and e-commerce company MusicToday.
So far Firebird has acquired stakes in Coran Capshaw’s Red Light Management, which represents approximately 400 artists, including Dave Matthews Band, Phish, Brandi Carlile, Chris Stapleton, and, according to sources, recently signed Mumford & Sons in a co-management deal with Split Second Management; Mick Management, which specializes in independent singer-songwriters such as Maggie Rogers and Hamilton Leithauser; Transgressive Records, the home of Arlo Parks and Alvvays; Defected Records, a U.K.-based electronic music label; Ashley Gorely’s Tape Room and U.K.-based One Two Many Music publishing outfits and the Latin entertainment company Ntertain, which was co-founded by former Sony Music Entertainment chairman/CEO Tommy Mottola. Firebird has also backed two start-ups, dance label EasierSaid, and country label Leo33, the latter of which is in partnership with Capshaw’s Red Light Ventures.
Zilkha says that Firebird tends to acquire a majority stake in the companies it brings under its umbrella, using a combination of cash and Firebird stock, thus requiring its new partners to have a stake in Firebird’s overall business approach. Industry sources say that Firebird has a minority stake in Red Light.
While Zilkha has a lot to say about Firebird’s operating strategy, he is tightlipped when asked about the financial underpinnings of the company. He will say only that Firebird has so far invested “several hundred million dollars acquiring stakes in companies; and that the company has access to over $1 billion in equity. Sources tell Billboard that the Raine Group is lead investor in Firebird, which is also backed by KKR Partners, Goldman Sachs Asset Management, and other institutional investors and high net-worth individuals.
Zilkha says he and his partners are building Firebird to respond to a changing industry in which artists are moving away from label structures to partner with companies that can provide label services and artist development, as well as help them tap into additional income streams, such as publishing, merchandising, branding, and live events.
He uses the word “holistic” to describe the company’s approach and says its first investment was Capshaw’s Red Light because that company was already pursuing a strategy that aligned with Firebird’s strategy. Capshaw founded the direct-to-consumer e-commerce company MusicToday, which sells vinyl, CDs and merch direct-to-consumer, sold it to Live Nation in 2006, then reacquired it in 2017. Hubbard was CEO of the company from 2002 and moved to Live Nation and then Ticketmaster with the sale.
“Firebird has built an artist friendly platform,” Capshaw says of his decision to throw in with the company. “We’re like-minded in focusing on the success of artists over the long run of their careers, including enhancing the value of their IP from music to licensing, and providing additional resources like audience insights, community building and marketing. There was a need for more artist-friendly options out there, and our partnership with Firebird is helping to fill that need. I’m impressed by the team that they’re building.”
Zilkha spoke with Billboard about Firebird’s launch and where it’s headed.
How did you and your partners come together to form Firebird, and what is your investment approach?
It started in the fall of 1994 when I was in college and heard guitar coming from a dorm room. I poked my head and there’s Nathan Hubbard playing guitar. We bonded over a shared passion for music. Both of us initially tried to start our careers by pursuing music from a creative perspective. Ultimately, we came back together 25 or so years later, initially around Gibson. And that’s really how we began looking at the music industry which we believe is in transition. It led us to believe there was a real opportunity to build a better kind of partner for music artists.
Considering your background, I would refer to you as an institutional investor, even if Firebird is not using the traditional institutional investor approach of buying stakes in songs. You are acquiring stakes in companies.
There are a few things that differentiate what we’re doing versus what most institutional capital flooding into music is doing. First, we’re not a fund. We’re building an operating company that acts in a holistic, integrated, coordinated way; and where the individual components mean more together than they would apart. We are trying to build a company that solves specific problems in the marketplace.
What problems are you trying to solve and how else are you different from other institutional money?
The world of music, technology and direct to consumer commerce have evolved very substantially over the last five to 10 years; and the rate of change continues to accelerate. But many of the incumbent partners for artists have not caught up. We think there’s an opportunity to create a new kind of partner for artists, one that is fully aligned across everything they do. One that has sophisticated capabilities to create content and provide access to capital. What we are doing is long-term and isn’t oriented toward worrying about a near term return on investment. The question we are answering for the entrepreneurs is: How do you build value for your artists and ultimately for the company?
But you seem to have started in an institutional investment kind of way. There’s a form D filed with the SEC in November 2021 that says Firebird raised $120 million to make an acquisition by selling equity.
Those numbers in the filing are probably stale. We’ve got access to over $1 billion of capital right now. We are not raising capital for funding. We’re raising capital for an operating vehicle. Some of that capital is being used to invest in companies, but some of that capital is being used to build out organic capabilities like our own distribution structure, where we’ve got over 30 people at Firebird. They’re not investment people; they are digital marketing, data analytics, and brand partnerships. We also helped start two other businesses from scratch. There’s nothing about it that’s like a fund.
Nat Zilkha
Courtesy of Firebird
There are other efforts in the marketplace that have built out label services and distribution companies, like The Orchard, BMG, Believe and DistroKid. How are you going to differentiate yourself from them?
A lot of the distribution businesses that exist currently are focused on the long tail to make distribution accessible to every artist irrespective of their scale. We’re really focused on premium artists. That’s one area of differentiation. The second is we view label services not as a stand-alone but as something you use in conjunction with how you activate artist across all different forms of media.
What do you mean by that?
With our label partners and their artists, we want to participate across a much broader range of all the activities artists participate in by having a horizontal relationship with them so that we can be more forward leaning in terms of how we invest in artists’ careers. Most of the music industry is stuck in silos where you’re an artist’s label, or you’re their manager, or you’re their publisher, or you’re their agent or you’re their merch partner. That under optimizes the investment behind an artist’s career. There isn’t a single best-in-class consumer brand that operates with separate economic sleeves in the way it interacts with its fans and customers.
Instead of silos we are looking at how intentional, coordinated, thoughtful marketing and brand building behind an artist can be optimized, which allows us to invest heavily in any one area that might benefit the whole ecosystem. So, you may invest in recording music to help activate the tour activity, which helps to sell the merch; and getting the right kind of synch can activate your streaming and make publishing much more valuable. So it might be that we lose money on the distribution or recorded music, but that’s okay, because we’re partnering with the artist in a lot of other places where she or he may be reaching their fans.
What kind of deals are you doing with companies?
It depends on the company and the situation. There are examples where we’ve done minority deals, but most of what we’ve done is buy majority stakes. That comes back to this objective to not have standalone, separate investments, but to have an ecosystem where people are benefiting from other companies that are part of a Firebird family. We very passionately believe that in periods of significant change, like you’re seeing in the music industry today, you want to harness entrepreneurship. You don’t want to be a big, slow, bureaucratic corporate entity. We’re trying to bring the best of what a big company can offer, which is expertise, resources, and capital, but marry that with the best of what entrepreneurs can do—make quick decisions, with lot of creativity and have different approaches for different genres, different regions, and different types of companies—to get the best of both worlds.
What was the rationale for your investment in Transgressive Records.
The hallmark of Transgressive is music that moves culture. Arlo Parks is a great example of that, and so is Mykki Blanco. What we love about Transgressive is they have exceptional A&R and artist development people. They have signed artists who they have nurtured over multi-year periods, with very fair and transparent deals. They are true advocates for their artists.
What does Firebird bring to the table for Transgressive?
We can help them supercharge what they’re doing by bringing all the resources that exist at an internationally focused company as opposed to the resources they have in the United Kingdom. It means having access to more capital to help grow the interests of their artist, and to invest in advances to sign bigger artists who appreciate the aesthetic and the integrity of Transgressive. That’s a perfect example of where one plus one equals three.
Where do the acquisitions of publishing companies Tape Room and One Two Many fit into the equation?
Tape Room is an example of where we will buy catalog. We purchased some of their existing catalogs; and then we created a go-forward joint venture with Ashley Gorley. Coran is also involved in that deal so it’s a three-way partnership to create songs and sign writers. What you won’t see is for us to go and compete with KKR or Primary Wave or anybody else and buy straight catalog without a frontline component, which means that we don’t have something we can build on.
Can you give me an example of the entrepreneurial cross-pollination you’re talking about?
Transgressive, Defected, and One Two Many each do different things and have different genre focuses, but their teams are talking to each other all the time. One Two Many is extremely good at synch, so they’ve been working with Transgressive and Defected on synch strategies. These are separate entities within Firebird that maintain their separate brands, but they’re finding ways to work together where one company’s areas of expertise can be helpful laterally.
With Ntertain, you have a Latin component.
Ntertain is [Neon16 label co-founder] Lex Borrero. When we think about what Firebird is trying to accomplish in how you tell stories around talent, move culture, and create brands around artists, Ntertain is already doing a great job of that within the Latin space. They’re doing it for music, film, and television. They just wrapped up a [Latin music competition] show La Firma, which was very successful on Netflx. They’ve got a management company; they’ve got recorded music; they have publishing, and they’re doing really interesting things around film and TV. In many ways, it’s already the Firebird model focused on Latin music and Latin culture. We think Lex is a superstar and that’s a partnership that we’re really excited about.
What do you mean by moving culture?
We’re focused on any genre where people identify with it beyond just a single song or a single artist. One of the things we love about Red Light is its strength within country music. As you’re seeing from things like Yellowstone, it’s not just a genre, it’s a lifestyle. There’s a lot we can do around that partnership with Red Light and you’re already seeing us start to do that with Leo 33, with Tape Room. And there’s more to come on that front. The same thing is true with Latin culture and Ntertain, which is moving music, film, entertainment. The same is true with dance music. There’s a word we use: tribes. Tribes identify strongly with these genres. In dance music you have a fan base that identifies with Defected, you will see that it’s not only a label, but we have live events in Ibiza, and in Croatia. We’re going to be doing more in New York, Chicago and Vegas — bringing fans together, giving them something special and giving the Defected artists an opportunity to access those fans.
You looked at some specific deals that didn’t happen, such as Glassnote and Mom + Pop. What happened there?
We’ve looked at literally hundreds of transactions. There are lots of reasons deals don’t happen — you just can’t come to an agreement on price; or an agreement structure. Does the team involved in a potential deal really buy into our strategy? Every deal we’ve made, the company we have invested in has taken Firebird stock as part of the deal. We want people who believe in what we’re doing; to be a part of a family; to be a part of this broader strategy. If you want all that, than let’s talk. But if it’s just about dollars, then that’s the wrong partner. If you just want capital, that’s fine but go talk to a private equity firm. Glassnote and Mom + Pop are companies we have enormous respect for; they are leaders in the industry. I’ve nothing but great things to say about those organizations.
Is there any way that you can achieve economies of scale without interrupting the formulas each individual brand has?
That’s where Nathan and I spend a lot of our time strategically: how to balance all the resources to make them successful at whatever scale they can reach without interrupting the very thing that makes them special.
For any of these individual companies to spend the kind of money that we’re spending on our data analytics team would be cost prohibitive. But we can spread that cost across all of the different companies. That’s really where we’re trying to help.
What we do say is, what resources do you need to do five shows instead of one show? Or what would your label do if you had access to $25 million more in capital next year to grow your business? How do we take some of what we’ve learned with Red Light, which is the largest and most successful management company in the world, to help you scale your management business at Ntertain? We’re not going to tell Lex who we think the next great Latin artist is going to be. We’re going to let the creatives we’ve invested in be creative and entrepreneurial. We’ll provide the infrastructure to turn all of that into a world class business.
Reservoir Media on Wednesday reported that revenues grew by 13% during its most recent fiscal year, as investments in record labels and artists rights in the Middle East added to its growth from acquiring works by North American artists like Louis Prima and Dion.
Reservoir reported $122.3 million in revenue for their fiscal year 2023 ending March 31, driven by a 9% increase in music publishing revenue and an 18% increase in recorded music revenue, both helped by the digital release of De La Soul‘s first six studio albums in early March. The legendary rap trio’s catalog netted 12.5 million U.S. song streams and sold 28,000 albums in its first week streaming, according to Luminate.
Founded in 2007, Reservoir said it grew by 8% organically and finished at the top-end of its financial targets in fiscal 2023 despite a 1%-decline in fourth quarter revenue driven by lower performance, sync and other revenues in its music publishing division, which suffered from a tough comparison to a strong year-ago quarter.
Fourth quarter music publishing revenue of $23.2 million was off 8% from the year-ago quarter when Reservoir benefitted from a one-off event in Dubai. Recorded music revenue in the quarter rose 10% to $10.8 million, in part due to the outsized performance of De la Soul’s catalog.
Reservoir has made investing in emerging markets a key prong of its growth and diversification strategy, and on a call with analysts, Reservoir CEO Golnar Khosrowshahi referred to it as “highly important to our overall strategy … as we work to become the largest holder of Arabic music copyrights.”
With its partner PopArabia, an independent music company headquartered in the United Arab Emirates, Reservoir has acquired stakes in the Egyptian label 100COPIES, the Lebanese label and music publisher Voice of Beirut and signed publishing deals with Egypt’s Mohamed Ramadan, Lebanon’s Zeid Hamdan and Moroccan hip-hop star 7liwa. In January, Reservoir announced signed publishing deals for the catalogs and future works of Indian rappers MC Altaf and D’Evil and the producer Stunnah Beatz.
Funds like Reservoir also grow inorganically through acquisitions of song catalogs, and over its past fiscal year it acquired rights by “the Saxophone Colossus” Sonny Rollins and Dion, best known for “Runaround Sue” and “The Wanderer.”
Reservoir’s chief financial officer Jim Heindlmeyer told analysts that the company expects 6% revenue growth f 9% growth for adjusted earnings before interest, tax, depreciation and amortization for this fiscal year, compared to midpoint of its 2023 guidance ranges.
“Our outlook includes strong top-line growth expectations and margin expansion across our business segments as we continue to see a positive impact on profitability from our strategic acquisitions and benefit from secular tailwinds across the music industry,” Heindlemeyer said.
