Bertelsmann-owned label and publisher BMG and investment firm KKR announced a partnership on Wednesday to fund acquisitions of major recorded music and publishing catalogs, establishing yet another player in the gold rush for music’s biggest song collections.
BMG and KKR aren’t buying a stake in one another — and how they determine investment in a given catalog will be determined on a case by case basis. The two companies have already marked potential catalogs they’ll consider purchasing, and BMG CEO Hartwig Masuch says the two companies want prolific, culture-defining catalogs. KKR partner Nat Zilkha, who also serves as chair of guitar maker Gibson Brands, tells Rolling Stone the companies are prepared to spend into the billions.
“We are looking at what shaped our music culture,” Masuch says. “We’re not chasing hits from January 2021. We’re looking at repertoire that’s proved itself about being part of our lives, we’re interested in artists who are an undeniable part of our cultural DNA. This is definitely more a question of what is realistic pricing and how can we add value to it. Whatever fits that profile, we’re definitely prepared to get involved, and there is a significant pipeline already building over the last couple of months, so it’s a very exciting environment.”
Song catalogs have seen major increases in value thanks to companies like Merck Mercuriadis’s Hipgnosis Songs Fund, which has spent billions since 2018 acquiring publishing rights from songwriters and producers including Mark Ronson, Neil Young and Richie Sambora. Primary Wave bought a majority stake in Stevie Nicks’ catalog late last year, valuing it at a reported $100 million.
Songwriters who’ve sold their catalogs have elected to take a large immediate payout rather than gamble on their future royalties. The buyer companies look to leverage their investments by getting songs placed in movies, TV shows and video games for sync placements while also drawing more streams to songs. Smaller companies like Hipgnosis and Primary Wave believe that with their smaller collections than the biggest publishers, they can more acutely focus on bolstering their catalogs.
BMG and KKR have a notable history together: KKR held a 51% stake in the company until 2013, and KKR partner Richard Sarnoff, the firm’s chairman of Media, Entertainment, and Education for the Americas, previously served as an executive at Bertelsmann. On their own, both BMG and KKR have secured two notable catalog deals in the last year — with BMG buying Mick Fleetwood’s recorded music rights and KKR purchasing a majority stake in Ryan Tedder’s publishing rights, valuing the catalog at a reported $200 million.
The companies remain agnostic on which music rights they want and will pursue both recording and publishing rights going forward, leaders say.
The companies’ partnership brings clear financial scale needed to keep competitive for the biggest music sales on the market. (Bob Dylan’s legendary catalog fetched around $400 million, sources have told Rolling Stone.) But Zilkha believes the appeal for artists is BMG’s and KKR’s combined resources as a global music company and well-sourced investment firm. BMG has an established publishing and label business while KKR holds significant investments in Fortnite developer Epic Games and TikTok parent company Bytedance, both of which have given artists major marketing opportunities in recent years.
“We see a lot of capability as a collective to add value to what we buy. We understand these are not just financial assets to buy, but these are expressions of art that will have more and more outlets than even exist today,” Zilkha says. “It’s not just about getting traditional sync licensing and getting someone to use a song in the movie or on a commercial. The range of where these songs are ultimately going to touch consumers and listeners is expanding so rapidly, and We see a lot of capability as a collective to add that value to what we buy.”
Still, buying on the highest scale requires major cash as catalogs’ values continue to grow amid the streaming era and as more players show interest in taking a stake. In light of the high returns artists like Bob Dylan got on his publishing rights, could similarly prolific artists get as much or higher?
Zilkha and Masuch haven’t ruled it out. “For the right catalogs, yes, you absolutely hit half a billion dollars, and there are far fewer players who can write the $500 million dollar check than there are who could write a $5 million dollar check or $10 million dollar check,” Zilkha says.
Whether or not any artists of such a size will end up selling their life’s work isn’t clear, but, as Dylan’s deal told the rest of the industry last year, at this point no artist is too big to sell.
“There are catalogs that in the right partnership and with the right perspective, could be worth half a billion dollars and will come to market,” Masuch says. “We’re definitely prepared to look at those as well.”