The appetite for publishing catalogues remains voracious out in investorland, so at this point all but the largest companies in that space can be seen as potential acquisition targets. Kobalt included. Bloomberg reported today that the company is “working with advisers to explore strategic options including a potential sale”, according to anonymous (of course!) sources claiming the company “could be valued at more than $1 billion”.
In its official comment, Kobalt didn’t exactly dampen down the speculation. “We’ve always had great interest in the company. We’re always evaluating the best capital structure for the business to make sure we have the right capital partners to continue to build and grow the world’s best independent company for artists and songwriters.”
Is Kobalt worth a billion dollars? The company was valued at $775m in its May 2017 funding round, so it’s not an unreasonable-sounding figure to aim for, given the current market climate. Kobalt’s revenues for the financial year ending 30 June 2019 were $543.4m, or $616m of ‘gross collections’ with gross neighbouring rights revenues factored in. In March, the company said it expected the gross collections nearer $700m for the financial year ending 30 June 2020.
Variety has posted a few warning signs from its own sources though, suggesting that “various entities have circled Kobalt but shied away, due to the price, the nature of its deals — many of which are said to be short-term — or the fact that not all of the company’s current roster necessarily would be included in a deal”. Perhaps more likely to put off the three major publishers than, say, private investment firms or even big technology companies.
Whatever happens next, it will add more fuel to one of 2020’s more perplexing fires in the music industry. Publishing catalogues may the new gold / oil (choose your favourite metaphor) fuelled by streaming, yet songwriters are more vocal than ever about their income from streaming. To be clear, some songwriters – Kobalt’s included: the company has always been keen to stress that – are doing very well from streaming, while others are cashing in on their catalogues with paydays from companies like Hipgnosis.
Even so, publishing catalogues and companies going for hundreds of millions or even billions, when a new generation of songwriters who could create the catalogues of the future are fretting about paying the bills, is a situation that needs wrestling with, even as we celebrate the acquisitions (or potential acquisitions) that show the continued value of music.
Music Ally’s next Learn Live webinar will help you understand what’s required for artists to thrive in new international markets!