Even so, after a sustained hiatus from buying music assets, BMG has its check-book out once again… and it’s ready to write down some colossal numbers.<\/p>\n
Sources close to the BMG\/KKR alliance tell MBW that both sides (BMG via Bertelsmann; KKR via, well, KKR) have initially committed circa $500 million each to their new deal-hunting partnership, with more cash to come when that’s been spent up.<\/p>\n
When MBW catches up with Nat Zilkha, a partner at KKR, he confirms that BMG\/KKR’s initial joint spending capacity “is measured in the $1 billion-plus category”, and that beyond this, “there’s no upper limit on the capital”.<\/p>\n
You caught that, right? “No upper limit.”<\/p>\n
We quietly note that KKR currently has over $230 billion<\/a> in assets under management.<\/p>\n To infinity, and beyond.<\/p>\n BMG’s Masuch is keen to explore what to him is a more meaningful discussion than mere dollar signs and zeroes.<\/p>\n He argues that both financialized parties like KKR and the songwriters\/artists BMG has been serving for the past 13 years are actually looking for the exact same thing in a music industry partner.<\/p>\n “BMG is unique in this conversation because it is in our DNA to say to songwriters, artists, and other partners, ‘Here, we found this money you are owed,'” he suggests.<\/p>\n “You can raise $1bn, $2bn, $3bn \u2013 as much as you like \u2013 but if artists and, increasingly financial investors, cannot trust you to play it straight and treat them and their work with respect, then all the money in the world will not be sufficient to persuade them to do business with you.”<\/p>\n Hartwig Masuch, BMG<\/span><\/p><\/blockquote>\n “If you’re a music company and it’s not in your DNA to hand money to partners if you can avoid it, if the money gets stuck in your pipes on the way out, that could kill returns for well-capitalized partners.”<\/p>\n Adds Masuch: “BMG’s fairness agenda isn\u2019t some kind of hobby, separate from our business strategy \u2013 it\u2019s integral to it.<\/p>\n “You can raise $1bn, $2bn, $3bn \u2013 as much as you like \u2013 but if artists and, increasingly financial investors, cannot trust you to play it straight and treat them and their work with respect, then all the money in the world will not be sufficient to persuade them to do business with you.”<\/p>\n A new market entrant with over a billion dollars to spend in music is obviously a big story. But there’s an even bigger headline sizzling away here: the overall size of the music rights marketplace now stretching out in front of KKR and BMG, not to mention their competitors.<\/p>\n This could be seen with the recent \u2248$400 million sale of Bob Dylan’s song catalog (a long time Sony Publishing client) to Universal; and it could also be seen last week with the sale of Paul Simon’s song catalog (a long time Universal client) to Sony. Clearly, things are hotting up.<\/p>\n “In terms of quantum, BMG and KKR would clearly have the firepower to buy all of [the $1bn in rights on the market today] if we chose.\u201d<\/p>\n Hartwig Masuch, BMG<\/span><\/p><\/blockquote>\n Masuch tells MBW: \u201cIn terms of live deals now being marketed by lawyers and managers, our deal monitor suggests there are [music] rights with an aggregate value of around $1bn in play today. These are mainly in the sub-$50m range but include one catalog targeting more than $100m.”<\/p>\n He adds: “We are certainly not going to buy all of them \u2013 some of them don\u2019t fit our investment profile and we are prepared to sit this out to find the best match. But in terms of quantum, BMG and KKR would clearly have the firepower to buy all of them if we chose.\u201d<\/p>\n A few weeks ago, Merck Mercuriadis, CEO of the ever-acquisitive Hipgnosis Songs Fund, told MBW<\/a> that he believes there are two more years left to run in music rights acquisitions before the current “window of opportunity” closes. After that point, he suggests, it will be slim pickings at sky-high prices.<\/p>\n Masuch takes a less time-sensitive view of things. He forecasts there will be “no shortage of repertoire coming to the market over the next five years”, including a “huge amount of rights with pretty iconic characteristics”.<\/p>\n Does Masuch think we’re not far away from the storied $500m-plus price-tag for a single songwriter\/artist’s catalog?<\/p>\n “I recently learned of one huge band who got back their masters after updating what was a life-of-copyright deal with a major record company.”<\/p>\n Hartwig Masuch, BMG<\/span><\/p><\/blockquote>\n “Definitely, and it’s not hard to name the suspects,” he replies, adding: “I recently learned of one huge band who got back their masters after updating what was a life-of-copyright deal with a major record company.<\/p>\n “The [updated deal] ensured that every time they released a new album, they gained back a [reversion] on a classic album. And in January this year, they gained full control of their catalog.”<\/p>\n Whoever this mystery band is \u2013 Masuch gives us no other clues than saying they began releasing music in the 1980s \u2013 it sounds like a similar situation to that we saw with R.E.M in 2015, when the band recaptured its classic ‘Warner Bros’ catalog, then moved it away from Warner<\/a> via a licensing deal with Concord.<\/p>\n Masuch’s wider point: publishing catalogs revert\/are terminated with relative frequency, and so are regularly bought and sold, but that doesn’t mean there won’t be hugely valuable master rights deals also coming to the market in the years ahead.<\/p>\n On the other side of the new alliance sits KKR, which has already dabbled with buying music rights, having snapped up a Ryan Tedder song catalog for around $200 million in January.<\/p>\n Meanwhile, KKR is an investor in multiple companies that have a connection to the music rights business \u2013 whether that be TikTok owner Bytedance, Fortnite maker Epic Games, or Gibson Guitars.<\/p>\n Nat Zilkha \u2013 who is Chair of Gibson \u2013 points out that KKR’s various investments in these ancillary spaces formed part of the reason the firm chose BMG, a company he says is “perfectly placed to take advantage of all these [media] trends, and music’s place within them”.<\/p>\n “There is also a philosophical argument as to why BMG is the perfect partner for KKR,” adds Zilkha. “From our perspective, it was critical this [deal] was done in a way that puts the artists first; a friendly solution, with a partner who advocates for artists.”<\/p>\n “From our perspective, it was critical this [deal] was done in a way that puts the artists first.”<\/p>\n Nat Zilkha, KKR<\/span><\/p><\/blockquote>\n Zilkha adds that with BMG by KKR’s side, the latter company has rekindled a relationship with a music partner that it considers “family”. Yet in 2013, five years after ‘new’ BMG was founded, KKR sold its 51% holding in the music company \u2013 turning its back on a business that has since boomed as streaming has exploded worldwide.<\/p>\n Has KKR not found itself sitting on the sidelines of the music industry ever since, wondering what might have been?<\/p>\n Zilkha says: “There were many considerations as to why we sold [in 2013]; it was a great partnership for us and BMG, so we look back at it with absolutely no regrets.<\/p>\n “Now we’re looking forward, not backward \u2013 and we’re looking at a landscape [in music] where we think there’s an abundance of opportunity.”<\/p>\n
\n![](\"https:\/\/www.musicbusinessworldwide.com\/files\/2017\/07\/BMG_Rectange-Logo_Red_RGB-80x39.jpg\"){kind=logo}
<\/i><\/a><\/figure>‘The big check is not enough’<\/h6>\n![\"Hartwig](\"https:\/\/www.musicbusinessworldwide.com\/files\/2021\/03\/Hartwig-Masuch_photo-by-Barbara-Dietl1-80x53.jpg\" "\\"Hartwig")
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\n‘We have the firepower…’<\/h6>\n
\n‘There is no shortage of repertoire’<\/h6>\n
\n![](\"https:\/\/www.musicbusinessworldwide.com\/files\/2021\/01\/KKR-80x49.jpg\")
<\/i><\/a><\/figure>KKR: ‘We’re looking at an abundance of opportunity’<\/h6>\n![](\"https:\/\/www.musicbusinessworldwide.com\/files\/2021\/04\/Nat-Zilkha-80x80.jpeg\")
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\nBMG: Bullish on music rights<\/h6>\n