While the pandemic may have thrust fiscal insecurity onto entire global industries, the music business has seen barely a week go by without seven or eight figures being splashed on a prized catalog. Most often, the player has been Merck Mercuriadis’s UK-based Hipgnosis Songs Fund, which recently acquired pieces of RZA, Blondie, No I.D, and Barry Manilow’s catalogs.
But there’s another modern music company eyeing huge buys — and it’s already nailed down two monster deals of over $100 million in 2020.
That would be Nashville-based records and publishing company Concord. In January, Concord acquired the majority of indie pop publisher Pulse Music Group in a nine-figure deal; Pulse has since rewarded Concord’s faith with portions of smash hits from the likes of Drake, Megan Thee Stallion and Travis Scott. In August, in what external sources suggest was another $100-million-plus buyout, Concord acquired the writer’s share and a co-publishing share of Imagine Dragons’ back catalog. (For context, publicly-traded Hipgnosis — which certainly has the financial power to land $100 million deals — had spent an average of $12.6 million per catalog acquisition as of March 31.)
“We’re not looking for volume anymore,” says Concord’s chief business officer and lead deal-maker Steve Salm of his company’s game plan. “We’re looking for transactions that are both large enough and strategic enough to fit into our overall growth strategy — while avoiding full-scale industry auctions.”
Some have described the fevered nature of music’s modern copyright acquisition marketplace as a “feeding frenzy” — a situation that’s been further whipped up by the successful mid-pandemic IPO of Warner Music Group, plus the continually-climbing market cap of Hipgnosis. As a result, Salm says, there are now multiple billions of fresh Wall Street dollars “waiting on the sidelines” to be invested in music rights. With such escalating demand, sale multiples for music publishing rights are soaring to unprecedented levels — some say as high as 20-times-plus a catalog’s gross profit — with the likes of Hipgnosis, Downtown, Reservoir, Primary Wave, Kobalt Capital, Round Hill and Tempo Investments duking it out, depending on the deal in question.
“For those deals below high-eight figures, many smaller players and new entrants with certain funding levels are all bidding against each other, aiming to get bigger through acquisition,” Salm says of today’s music rights deal landscape. “I’ll be the first to say that I respect that strategy, because it was Concord’s for the better part of a decade. But we’re no longer playing in that space and I’m relieved, because it’s time consuming, not to mention very expensive — and getting more so.”
It’s different, says Salm, in the rarified air of those deals approaching — or above — a $100 million price-tag; here, the dreaded “full-scale industry auction” scenario drops away, leaving room for a less fraught, more direct negotiation.
So how is Concord able to calmly sit outside of “feeding frenzy” and wait for whales? For one thing, as Salm notes, Concord built the bulk of its catalog by snapping up a plethora of seven- and eight-figure acquisitions in the wake of the global financial crash — from 2008 through 2016 — when Wall Street’s money was busy being attracted by other, tech-ier suitors. Many of these deals were made in the recordings space, leading to Concord building up an enormous masters catalog for an indie player.
Then in 2017, Concord made a massive bet in publishing with the $500-million buyout of Netherlands-based Imagem. That deal not only included a bunch of evergreen global hits (“Get Lucky,” “Uptown Funk”), but also the storied Rodgers & Hammerstein theatrical IP and catalog (Sound of Music, Oklahoma!, The King and I); this is why Concord subsequently ended up with 90% of the publishing for Ariana Grande’s “7 Rings”.
Today, Concord is believed to generate around $500 million annually, with a fully-functioning theatrical licensing division and one of the largest music rights catalogs outside of the “Big Three” (Warner, Universal, and Sony). The company currently runs seven offices across the US, UK and Europe, supports over 500 employees, and is one of the biggest distribution clients of Universal Music Group. And, by acquiring established music companies like Pulse, Imagem, Bicycle Music, Fania, Fearless and Razor & Tie over the years, Concord has added valuable industry expertise to its workforce — ensuring it can maximize returns from its music rights via a menu of marketing, royalty collection, synch licensing, reissues etc.
Says Salm: “It’s important to understand that there are basically two types of money in this [M&A] market: there are the music companies, and there are the royalty funds.” As evidence of Concord’s status as the former, he points to Pulse, claiming the publisher is “creating some of the most popular new music in the world on a daily basis”.
Another distinguishing factor of Concord is its unusual ownership: It is majority-owned by a pension fund, Michigan Retirement Systems, that has invested more than $1 billion into the music company. Unlike private equity investors who make high-stakes demands, pension funds tend to look for slow and steady returns over multiple decades, reducing the pressure on Concord’s management team to dive into each and every copyright bidding war.
“It makes sense that they love music as an asset class,” says Bob Valentine, Concord’s chief financial officer, noting that music “offers returns to a pension fund that are not particularly volatile, and not particularly correlated to other things they’ve invested in.” He adds that it is a “phenomenal position for us to have an institutional investor who is thinking about this business as a 20-year investment.”
On August 18th, Concord announced that its spending power had received a major boost via a fresh $600 million debt offering, placed by J.P Morgan, providing the company with access to over $1 billion of financing. Valentine says Concord originally set out to raise $400 million, but — in an indication of the frenetic music investment market right now — ended up with over $2.5 billion in commitments on the table. A chunk of the new $600 million debt will be used to pay down a portion of Concord’s previous revolving credit agreement, leaving close to $400 million to spend on future acquisitions, he says.
What will those acquisitions entail? According to Steve Salm, one only need look at the company’s Imagine Dragons deal to detect the crucial ingredients.
“Imagine Dragons are the rock-and-roll band of the streaming age,” he says. “They have tremendous numbers of fans that grew up as streamers, and all of the metrics show a rabid fanbase still growing in every corner of the globe.”
And then, of course, there’s the steep price of the deal — which put Concord in a VIP room with few other suitors. “When you have a deal that big for a single artist/writer catalog, most of our smaller competitors are going to face concentration risk, and simply won’t get approval,” Salm says. “Concord bumped up against that challenge years ago, when we saw a number of tremendous A-level catalogs that, frankly, were just too big for us at the time. That isn’t the case anymore.”
Tim Ingham is the founder and publisher of Music Business Worldwide, which has serviced the global industry with news, analysis, and jobs since 2015. He writes a weekly column for Rolling Stone.