MBW Reacts is a series of analytical commentaries from Music Business Worldwide written in response to major recent entertainment events or news stories. Only MBW+ subscribers have unlimited access to these articles.
“[This deal] means there isn’t any good acquisition that we couldn’t do in the music business. We’re not limited by size or opportunity.”
His comments arrived alongside the news that New York-headquartered Primary Wave had struck a $2 billion deal with financial giant Brookfield to acquire music copyrights.
That deal included the acquisition of a minority stake in Primary Wave and Brookfield investing $1.7 billion into a new “permanent capital vehicle”.
Primary Wave has been acquisitive in the months since, striking several deals with legendary artists, songwriters and their estates. Amongst those deals included the music rights of Robby Krieger and Ray Manzarek of the Doors in Janaury 2023 and a ‘multimillion-dollar deal’ with singer, songwriter, and producer Stevie Van Zandt in February.
Primary Wave also made a strategic investment in India’s Times Music in April last year in a deal worth $100 million.
Last week, the company revealed the type of deal it could be targeting next.
In a press release announcing that Agnes Kacicki has been hired to lead Primary Wave’s Investments team as Head Of Corporate Development, the company said that the exec will work closely with Mestel to lead efforts “around largeracquisitions”.
Those acquisitions won’t “only include legendary and iconic music publishing catalogs” said Primary Wave, but also “music platforms as well”.
Naturally, and no doubt deliberately on the part of PW, “music platform” is a broad description – it covers everything from a large-scale streaming service (think: SoundCloud) through to niche B2B SaaS software.
Still, MBW is in the mood for a guessing game – so we’ve considered a few types of “platform” that might be potentially additive to Primary Wave’s business model.
Here are just four ideas…
1) A claims-free music licensing service for video/podcast creators
Primary Wave’s Film & TV Division produces original content and serves as the studio on multiple productions.
PW founder Larry Mestel was even one of the producers behind Kurt Cobain: Montage of Heck and he was part of the team that produced the Whitney Houston biopic, I Wanna Dance With Somebody distributed by Sony Pictures.
But beyond superstar biopics, there’s another opportunity in the audiovisual space that Primary Wave could tap into: video and audio creators.
In October last year, Universal Production Music launched a subscription service called Universal Music For Creators. It offers claims-free music and FX for video and podcast creators with a library of 50,000 pre-cleared music and 200,000 sound effects.
We can be sure that UMG wouldn’t have invested in such a platform had it not seen a significant opportunity in the space. Primary Wave could see a similar opportunity.
PW already controls over 50,000 songs from the catalogs of legendary artists from Bob Marley to Stevie Nicks the Four Seasons, Smokey Robinson, Whitney Houston, James Brown, Bing Crosby and many more.
Although it has a thriving sync business, and a film division working on superstar artist-related projects, there’s a massive opportunity to monetize much of this tranche of content in the growing audio-visual production landscape within the creator economy.
The company doesn’t even have to offer access to its 1,000 Top 10 singles and over 400 No.1 hits. A subscription service featuring deep cuts and outtakes from the various legendary songwriters and recording artists that it owns the rights to could be a great way to monetize that content.
Primary Wave could make its entrance into this market via an acquisition, and take on Universal’s service and other players in the space, i.e. Epidemic Sound, in the process.
The question is, who could it buy? One name that springs to mind is UK-born Lickd, a service that lets creators license popular and stock music for their videos. The company raised around $7 million in 2021 led by the Nick Mason Group, a round which included strategic investment from Warner Music Group (WMG) and Epic Games, creator of Fortnite. Lickd also has partnerships in place with BMG, Universal Music Group, EMPIRE and Sony Music Entertainment.
Lickd offers two subscription tiers: Creator and Professional. The former gives creators unlimited access to 100,000 royalty-free tracks and discounted license fees for its 1.3 million mainstream songs starting at $8 per track. The Pro tier, meanwhile, is for creators with over 2 million subscribers and the pricing is discussed on an individual subscriber basis.
Adopting a similar model could be significantly additive to Primary Wave’s business. By retaining the stock music option for subscribers and opening up the rest of its catalog to be licensed by video creators, it could generate substantial revenues.
Another player in the space to watch out for is Epidemic Sound rival Artlist, a royalty-free music and sound effects company that licenses content to creators on YouTube and other platforms. It raised $48 million in 2020 led by KKR.
2) A Sample marketplace
Another booming sector of the creator economy that Primary Wave could have its eye on is music-making apps and beat/sample marketplaces.
Private equity is pouring substantial sums of investment into this space, and prominent figures from this world are confident about its growth.
BandLab Technologies CEO Meng Ru Kuok for example, whose company acquired beat marketplace Airbit last year, recently told MBW of his prediction there “will be over 1 billion music creators by 2030, potentially even sooner”.
Sample libraries have even caught the attention of the majors in recent years. MBW broke the news last year that Universal Music Group had launched its own ‘secret’ sample service for major label artists in 2022.
Could Primary Wave make an entrance into the space via an acquisition? If so, who could it target?
If Primary Wave isn’t “limited by size or opportunity” as per Larry Mestel’s comments, armed with Brookfield’s heavyweight backing, one company it could swoop for is Splice.
Splice is a prominent sample platform that reached an approximate $500 million valuation after closing a $55 million round of Series D funding in 2021, led by Goldman Sachs’ GS Growth.
Splice’s Series D attracted additional investment from Matt Pincus’ MUSIC joint venture with Liontree. Splice’s total raised now stands at over $155 million, including a $57.5 million Series C funding round in March 2019.
Established in 2013 by co-founders Steve Martocci and Matt Aimonetti, Splice claims to be used by over 4 million people, and its catalog of royalty-free Splice Sounds samples have become popular with both bedroom producers and producers for superstar artists. Could Splice’s investors exit for the right price?
There are a few interesting companies operating in this space, of course. Take for example Stockholm-headquartered Tracklib, which last raised $12.2 million in 2021 and has raised over $21 million in funding to date.
It already appears to have a healthy partnership with Primary Wave – clearing samples for musicians within the PW catalog such as Ray Charles, as well as The Sun Records label, which Primary Wave acquired in 2021.
3) A music-for-business licensing platform
Last but not least is the background music for businesses, including retail spaces, bars, restaurants.
One of the companies that stand out most as a potential acquisition target is B2B music streaming service Soundtrack Your Brand.
Founded in 2013 by Ola Sars as a joint venture with Spotify, Soundtrack Your Brand — formerlySpotify For Business — is a global music streaming service that caters specifically to businesses.
It works with global brands like Joe & The Juice and Tag Heuer.
In 2020, it renewed its global licensing agreement with Warner Music Group and signed a global licensing deal with Universal Music Group, excluding China.
The company announced a $15 million pre-growth round last summer led by MUSIC, the holding company spearheaded by Matt Pincus in collaboration with Liontree, JS Capital Management, and Schusterman Family Investments.
At the time, Soundtrack Your Brand said that it boasts an average revenue per user of $33, significantly higher than the B2C average of approximately $5.
Of course, on the topic of “music for business”, Primary Wave may be hunting for a B2B platform in one of its core disciplines: Sync.
Licensing iconic music for new film, TV, ad and video game opportunities has been one way in which PW has proven its mettle when it comes to adding value to already-iconic copyrights.
Is there a software solution that could further accelerate this golden slice of business for the company?
4) A consumer-facing digital service – in a fast-growing market?
Primary Wave’s core business principle is furthering the value of rights (whether copyrights or name & likeness) established by icons. Thus: “The Home of Legends”.
This highly-focused model makes PW’s acquisition of a broad music streaming platform perhaps unlikely.
However, PW’s recent investments in music local to India – see: that nine-figure deal with Times Music last year – suggest that Larry Mestel and his team are strong believers in the growth potential of the region.
To bolster that Times Music investment, could PW now make a play for one of India’s leading streaming platforms?
Gaana comes to mind, as a platform with financial challenges to deal with (in September 2022, it chopped its ad tier to go ‘premium only’).
No one can deny Gaana’s reach, though: at last count, the Tencent-backed platform had over 100 million users.
