State Champ Radio investments
“I’m a musician. The risk I take is in my chosen career path. I don’t want to take risk in my investments.” This was the most common remark we heard from entertainer clients for years.
And the most common advice those musicians would receive to address their concerns was, “Invest in municipal bonds. Your principal is protected, default risk is low, and you get tax-free income.” For the most part, that was true… until interest rates stayed close to 0% from 2020-2022 and then rose at their fastest pace in US history since then. During that time, municipal bonds were not what they were promised to be — down almost 10% in 2022 — especially for those who thought they couldn’t lose money owning them.
To be fair, barring defaults, and even with the recent price declines, municipal bonds bought prior to the rise in interest rates will give investors the return they signed up for when they bought them. But now we have artists coming to us excited that they are getting paid 5% pre-tax on cash in money market funds. However, those heady money market rates can be cut in half by taxes and they won’t last forever — we suspect they won’t even last much longer from here.
So, what can you do for an attractive risk-adjusted return these days while avoiding the volatility of the stock market? Let’s look at some particularly interesting options.
Intermediate Duration Municipal Bonds
While past performance doesn’t always translate into the future, over rolling two-year periods, high-quality intermediate municipal bonds have never lost money. Now, with interest rates at their highest levels in almost 20 years and municipalities’ finances healthy, these bonds look more attractive than they have in a long time.
However, balancing exposure to different sources of return in fixed income is important. We do not recommend just buying Treasuries or Treasury/municipality ladders. Consider an actively managed bond portfolio (as opposed to laddering) with the flexibility to move between municipal bonds and taxable bonds based on their relative attractiveness. This allows you to maximize after-tax returns while also managing interest rate exposure.
Hedged Exposure to Stocks
The S&P 500 is up over 18% year-to-date (as of Dec. 4), but it’s done so in a fairly volatile manner and more than half of the stocks in it are actually down for the year.
For investors concerned about volatility, they can consider reducing exposure to the market in the near-to-medium term by using a defined outcome exchange-traded fund (DOETF). Like other ETFs, these types of securities have daily liquidity and relatively low cost. But what makes DOETFs different from the index ETFs that many investors are familiar with is that they utilize options to create a specially designed payoff. For instance, recently created versions of DOETFs allow an investor to capture around 15% of any upside in stocks while not experiencing the first 15% of any market decline.
So, if the market is up 20% over the next year, investors will be up around 15%. If the market rises 8%, investors’ returns will be the same. If the market is down 10%, the investors won’t have any gains but also won’t take any loss. And if the market has an awful year and ends down 20%, investors would only be down 5%.
Private Credit
Every week brings new headlines about banks cutting back lending in different areas. It raises the question, “Who is lending money to businesses these days?” Private debt funds.
This area has grown substantially since the financial crisis as government regulations have made it harder and costlier for banks to lend. The private markets have stepped into that void. One notable aspect of these loans is that they’re made at floating rates, with financing usually made similarly. That’s protected them from the run-up in interest rates, as fixed interest investments have declined in value. That’s also allowed them to keep up better with inflation. Investors contemplating private credit should consider the fact that some of these strategies are only available to accredited investors or qualified purchasers and they’re often illiquid, with money locked up for several years at a time.
Real Estate
In addition to private credit, we’re seeing attractive opportunities to lend into the commercial real estate (CRE) market, partly for the same reasons as private credit (with banks stepping back) and partly for real estate-specific reasons, such as the pressure on office prices since the pandemic. However, with office being only one small piece of the overall market and with lenders having attractive bargaining power as assets are revalued and refinanced, that’s an area we’ve been highlighting in 2023.
Finally, and further up the risk spectrum, is real estate equity. Even inside that asset class, the risks can vary. With the turbulence in the market, we’re starting to see more attractive opportunities emerge in the “core plus” space, which are typically well-leased, income-producing properties in good locations. They’re often found in commuter suburbs in secondary or tertiary markets.
Like private credit, these real estate strategies are often illiquid, and even some of the strategies which are advertised as more liquid have gated investor redemptions recently. But for investors with enough cash flowing in to meet their outflows (even in a distressed situation) and a longer time horizon, the rewards for accepting that illiquidity can be meaningful.
What to Do
As always, investors should consult with a licensed investment advisor before making investment decisions. While each of the asset classes discussed here may be of interest, they are not suitable for all investors. At the same time, we recognize that having excess cash earning 5% in money market funds may feel nice for now, but it may not feel so nice looking back on things in a year’s time. Investors don’t need to feel tied to cash or forced to swing for the fences — there are many options worth considering in the middle ground.
Finally, while we’ve mostly focused on safer options here, which are meant to guard against the risk of market volatility, there’s another risk that investors must weigh — the risk of running out of money during retirement. Taking too little volatility risk can potentially generate excessive depletion risk. We recommend discussing this, and other considerations, with your financial advisor.
Adam Sansiveri is a senior managing director and head of the Nashville Private Client Group at Bernstein. Stacie Jacobsen is a director in Bernstein’s Wealth Strategies Group. Sansiveri and Jacobsen are co-heads of the Sports, Media and Entertainment Group at Bernstein Private Wealth Management, a division of AllianceBernstein. AllianceBernstein is a leading global research and investment management firm headquartered in Nashville with over $700 billion under management and offices in 53 cities in 26 countries.
Word Collections, the publishing administration firm launched in July 2020 by serial music industry entrepreneur Jeff Price, has closed on a $5 million investment round to boost the company’s global licensing and collection efforts. Metallica‘s Black Squirrel Partners was the lead investor in the round in Word, which specializes in musical and comedic recordings.
Word Collections handles global licensing for — and collections from — digital music services, thus bypassing traditional mechanical and digital performance collection societies around the world. This reduces administrative fees and helps ensure the data of its songwriters and comedians’ works are properly registered at each DSP.
As for other publishing income streams and licensing — including synchronization and performance for television, radio, and general licensing to stores, bars, hotels and, etc. — Word has a joint venture with Blue Water Publishing International that promotes Word’s catalog and handles collections from those sectors, which includes being a member of over 40 collection societies around the globe.
Current Word clients include the publishing catalogs for Metallica and the band’s guitarist Kirk Hammett, Greta Van Fleet, Thomas Dolby, Songwriters Guild Of America, Gerencia360, St. Nicholas, Baroness, The Offspring’s Bryan “Dexter” Holland, Shriekback, DLG., Bazanji, Gomba Music, John Oates, Switchfoot and Grace Potter, among other musical songwriters. It also represents the comedy catalogs of Robin Williams, George Carlin, Margaret Cho, Jerry Seinfeld, David Cross, Ron White, Bill Hicks, Bill Engvall, Billy Crystal and numerous other authors and comedians.
Jeff Price
Courtesy of Jeff Price
Prior to starting Word Collections, Price co-founded TuneCore and also launched Audiam, now owned and/or controlled by other entities, respectively Believe Music and the SESAC. According to Word Collections’ announcement of the new financing, the funds will be employed to accelerate global direct licensing and for the enhancement of Word Collections’ proprietary technology and systems.
Black Squirrel was founded in 2020 by former Morgan Stanley executive Paul Donahue, Metallica and its in-house leadership team (Tony DiCioccio, Marc Reiter and Vickie Strate), WG&S founder Eric Wasserman and Artist Management firm Q Prime, with music industry executive Rick Krim also a partner of Black Squirrel.
KOMI, a creator commerce tool used by Lizzo and Elton John, said on Tuesday (July 18) that it raised $12 million from a group of investors including venture capital firms RTP and Third Prime, as well as Sony Music and Live Nation. In addition to the $5 million in seed funding KOMI says it raised […]
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.
When it comes to the red-hot market for music rights, the only people who may be more important than the buyers and sellers are number crunchers like Nari Matsuura.
The Ottawa, Ontario, native is the partner of Barry Massarsky and founder of the valuation division of their music economics and valuation services practice at Citrin Cooperman, one of just a handful of firms that calculate the future growth rates and discounts essential to determining a music catalog’s market value.
From 2021 to 2022, Matsuura estimates she oversaw 750 catalog valuations totaling $15.5 billion for such clients as Hipgnosis Songs Fund, Primary Wave and Reservoir Media.
But as billions have flooded the music intellectual property market, the practice of valuing catalogs has encountered unexpected controversy, with Massarsky and Matsuura’s team occasionally in the middle. Banks put considerable weight on catalog valuations when determining how much to lend to a buyer, and some question whether Citrin Cooperman’s discount rate — which has not budged since spring 2022 — ignores macroeconomic pressures, such as the rising cost to borrow, that could affect valuations. Lower valuations could lead banks to decrease the amounts they lend overall, which could have a cooling effect on the market. “The reason we did not increase our discount rate along with the rising interest rate environment is because we had originally started at a higher discount rate so that we could accommodate for that rise,” Matsuura says. “We knew that this low interest rate environment was not sustainable in the long term.”
JKBX, a start-up offering retail investors fractional shares in thousands of hit songs, is partnering with electronic market-making firm GTS Securities for U.S. equity trading, the companies said in a joint statement Friday (Feb. 3).
The partnership is a sign that investing in songs and catalogs rights — a burgeoning asset class so far open to only the biggest, most monied music fans — is taking another step toward the mainstream. By teaming up with the electronic market maker GTS, JKBX is positioning itself to have one of the most prominent platforms when it launches its public offerings in late 2023.
Pronounced “jukebox,” chief executive Scott Cohen says JKBX has acquired $1.7 billion in music rights and is aiming to acquire $4 billion in rights before their LLC offerings go live. Once those regulation a+ initial filings are registered with the U.S. Securities and Exchange Commission, everyday investors will be able to buy bite-sized investment stakes in songs by current artists and back catalogs belonging to rock legends for a price starting at around $10.
“A handful of private equity firms, multinational corporations and major labels control the most valuable music rights in the world,” Cohen said in the statement. “JKBX’s platform will allow these entities and other significant rights holders to unlock the true value of these assets by offering them to retail investors to buy and sell in a regulated marketplace.”
Cohen, who co-founded The Orchard and was previously Warner Music Group’s chief innovation officer, last year named Matt Brown, formerly of Citadel and Ripple, as JKBX’s chief technology officer tasked with building out the tech powering the platform. With a high-frequency quantitative trading firm, GTS is responsible for nearly $13 trillion of market capitalization — or 3-5% of the daily cash equities volume in U.S. stock markets — making it a designated market maker. Through the partnership, JKBX will gain access to GTS’s technology, a competitive digital advantage in accessing U.S. public markets.
“GTS excels in making markets for every major financial asset class and providing enhanced liquidity through sophisticated, real-time pricing,” said GTS Securities co-founder/CEO Ari Rubenstein in a statement. “This same expertise can be applied to music royalties, which represent the next exciting tradeable asset class.”
Los Angeles-based private equity firm Shamrock Capital raised $600 million in a new fund aimed at acquiring film, television, music, video games and sports rights, the company announced Thursday (Feb. 2).
Founded in 1978 as Roy E. Disney‘s family office, Shamrock now says it has $4.4 billion of total assets under management, including $2 billion in its content strategy, thanks to the close of this new fund, the Shamrock Capital Content Fund III.
Shamrock has become a powerful force in music catalog investment space, which continues to draw in deep-pocketed Wall Street investors, like Brookfield Asset Management.
Shamrock made headlines in 2020 when it bought Taylor Swift’s Big Machine catalog from Scooter Braun’s Ithaca Holdings. (Braun’s firm acquired the master recordings as part of its acquisition of Big Machine in 2019.) Last month, Shamrock bought a portion of Dr. Dre’s music income streams and some owned music assets alongside Universal Music Group. Its other investments include Stargate’s publishing catalog, the trade publication AdWeek and the fantasy sports platform FanDuel.
“We are truly grateful to our existing and new investors for their commitment to this fund and our strategy overall,” said Patrick Russo, partner at Shamrock. “The closing of SCCF III continues to build on our multi-product platform and long-term strategy of owning and financing premium content and media rights. Our track record of successfully investing in these sectors stands out and uniquely positions Shamrock to capitalize on the trends, changes, and opportunities across the global media and entertainment landscape.”
In 2021, Shamrock expanded into the lending space with a $196-million debt fund intended to loan money to intellectual property owners across music, film, TV, games and sports. Shamrock’s Capital Debt Opportunities Fund raised the money from both existing and new limited partners and is managed by Shamrock partners and other investment professionals, including pension funds, foundations and financial institutions.
South Korea-based media company Kakao Entertainment, which owns Monsta X‘s K-pop record label Starship Entertainment, said on Thursday (Jan. 12) it raised 1.2 trillion won ($966 million USD) from a group of investors led by sovereign wealth funds.
The move signals strong investor interest in Korean music and media. Kakao Entertainment owns three other record labels in addition to Starship: Antenna, Edam Entertainment and IST Entertainment, the latter of which lists The Boyz on its roster. Kakao Entertainment also owns the leading South Korean music streaming app Melon, the North America-based webtoon company Tapas Entertainment and several media production companies and is a subsidiary of the tech conglomerate Kakao Corp.
The company plans to use the investment to “spearhead growth in K-culture worldwide,” including expanding its record labels’ reach through distribution partners and its artists’ fanbases through touring, according to a company statement.
“It’s significant that we were able to secure funds of this scale at a time when both the Korean and global markets face a lot of uncertainty and investment sentiment is weaker,” said Kakao Corp.’s chief investment officer and executive vp Bae Jae-hyun in the statement. “This is [a] testament to the global competitiveness and future growth potential of Kakao Entertainment’s unique IP value chain, which spans multiple categories in the entertainment industry.”
Singapore’s GIC and Saudi Arabia’s Public Investment Fund (PIF) each invested 600 billion won ($484 million USD) as part of the deal, the Korea Economic Daily reported earlier on Thursday. GIC and PIF did not immediately respond to requests for comment.
Kakao Entertainment will issue new shares through a third-party allotment, it said.
JKBX, a start-up offering retail investors fractional shares in thousands of hit songs, said Friday (Dec. 16) it has hired executives from Spotify, NTWRK, Comcast and others as it builds out its executive team and aims for a mid-2023 launch.
Pronounced “jukebox,” the new investment platform founded and led by former Warner Music Group chief innovation officer Scott Cohen hired Whitney-Gayle Benta to be its chief music officer from Spotify, where she was global head of artist & talent relations, and Jason Brown as chief marketing officer from the livestream commerce platform NTWRK. Brown previously held top marketing roles at Foot Locker and PepsiCo.
JKBX is part Robinhood, the popular online brokerage, and part Spotify. Cohen says it will offer bite-sized investment stakes in hundreds of thousands of No. 1 songs by current artists and back catalogs belonging to rock legends for a price starting at around $10.
While several start-ups offering fractional share investing in music copyrights have launched in recent years, JKBX aims to differentiate itself with its scale, as well as by packaging the investments in SEC-registered entities and creating a platform welcoming of investors confused by blockchain and NFT jargon, says Cohen.
“This is about the interest in owning a real asset that is something you love, a piece of music,” he says. “This is a wide-open market now because retail investors have never had an opportunity to get involved. We’re creating a new asset class, building something at scale and … I think it’s going to explode.”
Cohen declined to name any of the artists or songs to which JKBX has acquired rights. But Benta, who was featured on Billboard’s R&B/Hip-Hop Power Players list this year, brings numerous artist relationships with her. In her previous role, Benta curated events including Spotify’s presence at the Cannes Lions Festival of Creativity, which featured Kendrick Lamar, Dua Lipa and Post Malone.
Building out the technology supporting the platform will be Matt Brown, JKBX’s new chief technology officer, who previously co-founded the web3 startup Arthur, and worked at the hedge fund Citadel and the Blockchain company Ripple; and Madhav Gopal, who worked in cybersecurity operations at Comcast Cable and now serves as JKBX’s chief information security officer. Jacqueline Ortiz Ramsay joins JKBX as its chief communications and public affairs officer, having previously helmed public policy communications at Robinhood.
JKBX is structuring its offerings by putting the rights it buys into special purpose vehicles — such as an LLC — and registering them with the U.S. Securities and Exchange Commission, a step that adds an extra layer of protection for rights holders, investors and the company.
Investors can then buy and trade stakes in those entities, with the share price being determined by the song’s valuation. The entities will gain value as they are streamed, synched and played, with that revenue being paid out intermittently to investors and other JKBX partners.
JKBX is still hammering out the technology and mechanisms that will be used for its public offerings, but the company is following all existing securities laws, Cohen says.
“We believe that everything should have this regulatory wrapper because this isn’t the first time for me,” says Cohen, who founded The Orchard with Richard Gottehrer in 1997, just a few years before the dotcom bubble burst in early 2000. “There were a lot of companies that IPO’d with these silly business models and they all disappeared. But what remained was people doing business by the fundamentals leveraging the technology of the day.”
“We will use blockchain technology, but as far as the consumer knows you want to buy royalty streams, click buy, enter how much and it goes into your account,” Cohen adds.
The company has not yet picked a date for its 2023 launch, but it is “fully capitalized,” says Cohen, who is bullish about the promise of the fractional shares market.
“This is the only area where I see explosive growth. I don’t see explosive growth from VR, AR, blockchain and NFTs, gaming,” Cohen says. “We’re not substituting anything the way albums replaced singles, or cassettes replaced albums. We’re not replacing anything. We are building an entire asset on top of it. We [fractional shares investing platforms] can add billions and billions of dollars to the ecosystem.”
Former Warner Music Group executive and the Orchard co-founder Scott Cohen said on Tuesday (Nov. 1) he is taking a new job as chief executive officer of a fintech platform aimed at selling fractional shares in song catalogs.
Cohen, who stepped down from his role as chief innovation officer at WMG in September, said the aim of the new venture is to “fractionalize ownership of music royalties.”
Fractional shares are a familiar concept in finance, and brokerages like Robinhood and Fidelity Investments sell them as a way to buy a slice of a share for less than the price of the whole stock. The market for buying and investing in music publishing rights has traditionally been open to only the world’s largest music companies and, more recently, money managers.
Introducing fractional shares could change that by making it possible for more smaller investors to participate alongside the deep-pocketed private equity funds and major labels.
In an email to Billboard, Cohen said has already secured rights from major artists and catalogs, and his team is now working to build the platform’s technology.
“We have a very aggressive timeline,” said Cohen, declining to provide a specific date when the venture would launch to outside investors.
Prior to joining WMG in 2019, Cohen founded the Orchard with Richard Gottehrer in 1997 and built it into the largest independent distributor on iTunes when the download platform launched in 2003. Cohen and Gottehrer sold the Orchard to Dimensional Associates, the private equity arm of JDS Capital Management, the same year, and subsequently expanded into video, music licensing, marketing & analytics, royalty collections, sports media, neighboring rights and more.
In 2015, Sony Music Entertainment bought out Dimensional Associates for $200 million, and in 2017 merged it with RED into a single global distribution entity operating under the Orchard brand.
While Cohen’s new venture has not yet settled on a name, he described its aspirations and potential as “transformational” for the music industry.
“I am only interested in doing things at scale,” Cohen wrote.
-
Pages
