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Hey! I recently stumbled on a March 2009 article about Primary Wave’s 50% stake in Nirvana’s catalog only generating $2.3 million in a two-year span.

In 2023 though, Nirvana’s music likely generated $5 million on Spotify alone. It has also had some memorable syncs in Succession and The Batman. A lot has changed in 15 years.

On a similar note, this week’s episode is about the private equity firm, KKR, and its investments in music rights.

In the past few years, KKR’s has made its presence known in the music rights space. KKR has bought, sold, and securitized its fair share of assets. From BMG to Kobalt Capital, to Chord Music and HarbourView Equity Partners.

To break it all down, I’m joined by Anna Nicolaou from the Financial Times, who has covered this for the past six years. You can listen to us here or read a few highlights below.

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inside KKR's music investments

Here’s a brief recent history of KKR’s moves in the music royalty space:

• January 2021: acquired music rights from OneRepublic’s Ryan Tedder
• March 2021: KKR and BMG announce a deal to buy catalogs
• October 2021: acquires Kobalt Capital’s Fund II, creates Chord Music
• February 2022: creates $1.1 billion music rights bond
• December 2023: hires Raine Group to explore catalog sale
• February 2024: sells majority stake in Chord Music
• March 2024: leads $500 million debt deal in HarbourView Equity Partners

It’s easy to see this as entering and exiting (and entering again) in the music business, but it’s more nuanced. This is more about buying high and timing the market.

When KKR acquired Kobalt Capital’s Fund II in October 2021, interest rates were still quite low and music rights valuations were quite high. It was a very different environment than today when interest rates have skyrocketed and a lot of the prices have come back down to earth. It’s a different environment, and Chord’s assets were relatively less attractive than they were two and a half years ago.

Plus, Chord’s new owners, Dundee Partners and Universal Music Group, have other incentives that KKR doesn’t. Dundee now owns around 75% of the assets, but UMG, which owns the remaining 25%, will become the administrator for Chord Music’s assets. That means UMG can use the performance of those assets toward its market share and overall revenue.

Two of the most valuable assets in Chord Music are publishing rights for The Weeknd, and Shellback, who wrote some of Taylor Swift’s most popular songs including “Shake It Off.” The Weeknd and Taylor are the #1 and #2 most followed artists on Spotify. This is the music rights version of LeBron James and Dwyane Wade playing together on the Miami Heat.

UMG’s position as the music administrator (but not its majority owner) follows a pattern in the current deal structure with its superstar artists. Taylor Swift is not “signed” to Universal, but she has a licensing deal that allows Universal Music Group to use the massive sales numbers from The Tortured Poets Department toward its market share. The Weeknd likely has a similar type of licensing deal with the major label.

The music rights space follows a lot of the same ownership trends seen in the broader industry, but it also reflects how the broader industry promotes itself as well.

You can listen to me and Anna discusses this in more depth here or read below for more highlights.

say it loud, say it proud

The Hipgnosis saga has been a roller coaster of enduring headlines and questionable decisions, but as Anna said in our episode, the rest of the music rights acquirers may owe the firm and its former CEO, Merck Mercuriadis, some credit.

Music rights deals have happened for decades, but they weren’t yet subject to the PR machine. At Hipgnosis, every. single. deal. was a press release. They were back-to-back-to-back. Merck did plenty of interviews and spoke often about his strategy, the opportunity for legacy songwriters, and these deals. And the artists that he deals with did several interviews too.

This investment fund was on a nonstop press junket like it was getting ready to drop a new album. We hadn’t seen anything quite like that.

But love the firm or hate it, Hipgnosis boosted awareness for music as an asset class. This industry was looked down upon for years by the broader business world. Parts of the industry were seen as seedy and borderline criminal for much of the 20th century. In the 2000s, the business was seen as archaic and dogmatic. But as streaming came into the picture, the industry attracted the attention of several firms, KKR included, that saw their own timely lane to enter the game.

The nonstop press release approach has now become table stakes for most acquirers in the business. It gets the word out to potential buyers, backers, and the rest of the business.

Some of Hipgnosis’ struggles may cast a negative light on the casual audience, but based on people I’ve spoken to in the business, it hasn’t slowed down deal flow one bit. If anything, there’s more competition than ever.

Chartmetric stat of the week

The prize jewel of the Chord Music catalog is The Weeknd's publishing, and that's for good reason. He and Taylor Swift are currently the only two artists on Spotify with over 100 million monthly listeners. The Weeknd has the only song with 4 billion streams "Blinding Lights," and has three others in the top 50: "Starboy at #5, "The Hills" at #41, and "Die For You" at #47.

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money moves

• what’s next for Hipgnosis?
• inside the Taylor Swift, UMG, and TikTok drama
• how Glen Taylor sabotaged the Timberwolves sale​
• how athletes and entertainers get scammed by inner circle​
• ​Bump raises $3M seed round (I’m an investor in the company)

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