Primary wave

Primary Wave has had a busy year: not only did it rustle up some new funding, it has signed a bunch of partnerships, spent money on full or part catalogues from artists like KT Tunstall, the Prince estate, Luther Vandross, and Wilson Phillips, and snapped up the Sun Records label.

Now, it’s bought more catalogue: Jim Peterik, formerly of US group Survivor, has signed a “multi-million-dollar deal” which sees Primary Wave Music acquiring a majority stake in the royalties from his entire music publishing catalogue, and rights to many of its songs, including the mega-hit “Eye of the Tiger”. MBW claims the deal was worth “approximately $20 million.”

The rapid movement of huge financial companies into the music business – bringing vast swathes of money with them – are one of 2021’s most curious developments. This is no coy flirting with the music biz: it’s a significant injection of two very powerful things that the music industry may not be used to.

Firstly, it’s new money being brought into the system, and it’s being spent with various levels of caution or abandon, depending on how you look at it. And secondly, it’s the momentous financial heft that comes with these firms.

So what’s the big-picture intent of these alternative investment management firms like Oaktree, KKR (jointly-buying Kobalt’s Fund II Music Rights publishing catalogue with Dundee Partners) or Blackstone (who in 2017, bought US collecting society SESAC, and this year launched a $1 billion partnership with Hipgnosis Song Management)?

One perspective is that these financial giants are establishing a new market value for music, and also using influence that comes with owning other parts of the industry structure, like a collecting society, to create a new framework and value chain. In this scenario, their payoff will come slowly with time. A slightly more complex perspective, as described by Anna Nicolaou of the Financial Times, is that in a time of low interest rates, song catalogues are being viewed as something akin to low-yield corporate bonds, and all that money has to be invested in something.

It’s important to get perspective on the sheer size and power of just one of these firms: Blackstone, for instance, has $649 billion of assets under management, total assets of $26.3 billion, and reported a net income of $2.3 billion in 2020. In comparison, the global recorded music sector, for instance, saw revenues of $21.6bn in 2020 – by no means puny, but not invulnerable to disruption.

It’s not impossible, as we reported earlier this year – and discussed with analyst Dan Fowler in this popular episode of the Music Ally podcast – that an investment fund could become a major publisher. These big firms, paying 18-20x multiples of historic annual royalties, are lifting the wider value of catalogue, which means they are either over-paying for it in some sort of land-grab; or that they have calculated that music is significantly undervalued in 2021, and want in.

Considering that these financial giants think in decades, not months, it’s entirely possible that both of these scenarios are true.

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