When KKR and BMG were last involved with each other, the music company acquired the Sanctuary catalog, including recordings by Black Sabbath (pictured). What will it buy now? (credit: Shutterstock / Ga Fullner)
The jungle of music rights acquisitions has become a crowded and expensive place. But the game just changed again – as an 800-pound gorilla enters the fray.
BMG and investment giant KKR have announced an alliance that will see them team up to acquire and manage music copyrights.
MBW understands that the result of the combination will see KKR and BMG co-invest in rights across both recorded music and music publishing. This will enable BMG to increase its spending power in the highly competitive catalog acquisition market, while giving KKR a global administrative/operational partner for music rights with a financial interest in maximizing returns.
The new relationship does not involve any transfer or sale of equity in BMG or the formation of a formal joint venture between KKR and BMG. It sees the two companies working together for the first time since 2013, when KKR sold its 51% holding in BMG to the latter firm’s parent, Bertelsmann.
BMG teased its new-found spending power in a media release today (March 24) by noting that its KKR alliance will ensure both parties’ “ability to invest in transactions of all sizes”. This is not empty rhetoric: KKR currently manages global assets with a combined worth over $230 billion.
KKR has started flexing its muscles in music over the past year: In June 2020 it led a $48m investment round in royalty-free music and content platform Artlist. And in January, the company acquired a majority stake in a Ryan Tedder catalog, which media reports valued at around $200m.
BMG has form hunting out its own valuable acquisitions in music, of course. The company concluded more than 100 significant deals between 2009 and 2017, many of them during the time of KKR’s shareholding in BMG from 2009 to 2013.
Those transactions included music publishing investments in the Chrysalis, Crosstown, Cherry Lane, Bug and R2M catalogs; in recordings the Sanctuary, Mute, Skint/Loaded and Strictly Rhythm catalogs; and the Infectious, Vagrant, S-Curve, Rise and BBR Music Group labels.
“This new relationship with KKR will offer artists and songwriters a well-funded, financially stable home for their music assets with the confidence that their songs and recordings will be managed both professionally and respectfully.”
Bertelsmann Chairman & CEO Thomas Rabe said of the new alliance: “BMG and KKR can jointly pursue opportunities for acquisitions of major catalogs of music rights from now on. Together with KKR, we are ideally positioned to make attractive offers to rights owners.”
He added: “KKR was already the ideal partner and catalyst once before, following the reestablishment of our music subsidiary in 2008. We subsequently bought back all of the BMG shares held by KKR in 2013 and since then, BMG has developed into one of the most successful music companies of the streaming age, and one of Bertelsmann’s three global content businesses. Now we will ignite the next stage with KKR.”
Richard Sarnoff, Partner at KKR and previously a longstanding executive at Bertelsmann, said, “BMG has become an innovative leader in the music industry by embracing digital trends early on, while always placing artists at the center of everything they do. We are delighted to reunite with BMG’s talented team to pursue future opportunities together, leveraging our complementary platforms.”
“We are delighted to reunite with BMG’s talented team to pursue future opportunities together, leveraging our complementary platforms.”
Richard Sarnoff, KKR
BMG CEO Hartwig Masuch said, “Our early partnership with KKR helped us rapidly become the first new international music company of the streaming age winning the trust of artists and songwriters with great service and 21st century levels of fairness and transparency.
“This new relationship with KKR will offer artists and songwriters a well-funded, financially stable home for their music assets with the confidence that their songs and recordings will be managed both professionally and respectfully.”
KKR’s other investments in music businesses include its financial backing of companies like Gibson Brands and Alpha Theta (f.k.a. Pioneer DJ). The firm has also invested in ByteDance (TikTok), Jio Platforms (JioSaavn), Epic Games, AppLovin, OverDrive, RBmedia, WebMD, UFC, Leonine, Next Issue Media and Nielsen.
In January this year, following a notable hiatus from the music M&A market (and its ever-escalating multiples), BMG announced it had acquired Fleetwood Mac co-founder Mick Fleetwood’s interests in the band’s recordings.Music Business Worldwide
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