Willard Ahdritz is very clear that Kobalt Music Copyrights (KMC) has spent $200m acquiring music rights and paying advances over the past half-decade.
He’s also very clear that this isn’t Kobalt’s money.
Kobalt Music Group, the company that’s relentlessly disrupted the music industry since launching at the turn of the Millennium, is still very much based on the principle that its clients – across publishing, label services and neighbouring rights – get to retain their own copyrights.
“Kobalt’s mission has always been to take the music industry into the digital age as a service provider to rights-owners,” Kobalt CEO Ahdritz (pictured) tells MBW. “That’s what we are and what we always have been.”
KMC, on the other hand, is funded by confidential investors who want to snap up available copyrights. It is managed and advised by Kobalt Capital Ltd – part of Kobalt Music Group.
“Publishers used to say: ‘We’ve love to be a kobalt partner, but we want to sell some of our catalogue.”
Willard Ahdritz, Kobalt
So why would Kobalt, which prides itself on not owning any rights, be specifically chosen to advise those looking to acquire songs and recordings?
“Publishers used to come to Kobalt and say: ‘We’d love to be here, but we want a bigger advance, or to sell some of our catalogue,'” explains Ahdritz.
“We all know that companies like BMG have come in and bought a number of [publishing] companies over the years.
“I ended up sitting there thinking: ‘If these people want to be [administered by] Kobalt, they will not get the chance after being acquired.
“I knew the answer would be to manage and advise our own fund, and – as Kobalt – offer exclusive administration to the assets that were purchased.”
You only have to look at the story of Evergreen Copyright Acquisitions (ECA) for a prime example of what Ahdritz is talking about.
The clue’s in the name: this acquisitive, well-funded operation was administered by Kobalt outside the US and China from 2006.
Yet in 2010, ECA was itself acquired by BMG, bringing 65,000 copyrights into the Bertelsmann-owned company – and away from Kobalt’s admin roster.
In short, Kobalt needed an acquisition fund that it didn’t own… but which would help it fend off those trying to steal its clients.
Kobalt Capital Ltd – a company regulated by the Financial Conduct Authority – was born to manage the KMC fund in 2011.
“These are separate, blue chip investors. It means when people come to kobalt and say: ‘I want to sell my copyrights,’ we can have that conversation.”
Willard Ahdritz, Kobalt
“Today we have been up and running for five years, and have invested over $200m across more than 60 deals in the market – in acquisitions and advances,” reveals Ahdritz.
“It’s best to think of this fund as just another client of Kobalt, a group of rights we are servicing.”
He adds: “This is now actually one of the biggest funds out there in the music royalties world.
“Once again, this is not Kobalt: these are separate, blue chip investors, which we exclusively manage and advise.
“It means when people come to us and say: ‘I want to sell half my copyrights but work with Kobalt,’ we can have that conversation.”
Funnily enough, that’s exactly what happened with Fleetwood Mac’s Lindsey Buckingham, who sold 50% of his copyrights to KMC in late 2012.
The year after, the fund acquired the publishing and songwriting rights to Steve Winwood’s back catalogue of 177 songs – including tracks from his early career with Spencer Davis Group, Traffic and Blind Faith.
It also snapped up publishing rights to The B-52s song catalogue, including Love Shack and Rock Lobster.
And now, another big deal: MBW revealed yesterday that KMC has acquired Nettwerk’s historical publishing catalogue for an undisclosed fee.
New signings at Terry McBride’s company will also be administered by Kobalt in future.
“This is the first regulated music royalty fund in existence.”
Willard Ahdritz, Kobalt
Ahdritz is keen to drill home that Kobalt Capital Ltd is FCA regulated and, therefore, an authorized investment advisor.
“It is the first regulated music royalty fund in existence, which is an innovation in itself,” he says.
“We wanted to be ahead of our time as a financial and creative point of view – with the highest standard of investor.”
Ahdritz won’t reveal who those investors in KMC are, but he does call them “family offices… institutional investors”.
We know for a fact that the CEO of Kobalt Capital Ltd (and KMC) is one Johan Ahlström, who built a $2.5bn hedge fund business for Allianz from 2001-2006.
“This is proper stuff,” says Ahdritz. “It is of the standard I expect when running Kobalt: the best.”
So if Kobalt Music Copyrights has invested $200m+ into music rights so far, what about Kobalt (Kobalt Music Group) itself?
Ahdritz drops another big number.
“On our own balance sheet, Kobalt [Music Group] has paid out significantly more than $50m in creative advances,” he says.
This additional money has been invested by Kobalt’s A&R/creative team run by Sas Metcalfe (pictured inset).
On our own balance sheet, kobalt has paid out significantly more than $50m in creative advances.”
Willard Ahdritz, Kobalt
“These are higher-risk advances – the fund has a different investment criteria to that,” explains Ahdritz. “It’s looking for predictable cashflows.”
What he’s driving at is that the fund behind Kobalt Capital Ltd is more about solid catalogue acquisition… while Kobalt’s creative team takes A&R risk on new and competitive signings.
Those creative risks, of course, will now include future songwriting clients at Terry McBride’s Nettwerk publishing operation.
“Since I started Kobalt, I’ve often met and admired Terry [McBride] as a manager, a thinker and a visionary,” adds Ahdritz.
“The fact he’s chosen Kobalt, and we’ll work together going forward, makes me very proud.”Music Business Worldwide
