In our new Money Moves series, music consultant Alaister Moughan speaks to the movers and shakers of the music finance industry. First up, he interviews David Weitzman, partner at Synchtank client Primary Wave…
Primary Wave brings a “label” mindset to the music publishing world.
With significantly more competition in the acquisitions space and an ever widening variety of deal structures, it is the trailblazing business’s focus on marketing and branding for iconic artists that sets it apart.
In the following interview, David Weitzman discusses the factors driving a “bullish” catalog acquisition market, and the deals and expertise which shape Primary Wave’s strategy.
How do you pitch the music catalog asset space to investors?
That’s a good question. I actually don’t deal directly with our investors but, as a company, when we pitch to investors we let them know that we focus on iconic legendary catalogs.
We work with iconic catalogs because we have a competitive strength in that we do a lot of marketing, branding and digital strategy. It is much easier to market and brand an artist than a songwriter or producer because the public knows the artist. Because those strengths are often directed from the PW business to consumer, we can actually provide a lift on the earnings which are investors expect.
“We work with iconic catalogs because we have a competitive strength in that we do a lot of marketing, branding and digital strategy.”
So, if we buy a catalog at 15 times NPS, we can market, brand and promote it to a place where the return is more like 12 times pricing because we have unique ways to take advantage of it.
You have worked on a number of high-profile deals such as the estates of Whitney Houston and Allee Willis. Is offering legacy management a large part of Primary Wave’s role?
That is a big part of what we do. We have the Bob Marley music publishing catalog, and we work with closely with the Marley estate, as well as being part owners in the Prince and Whitney Houston estates. More recently we completed deals with the Allee Willis and Ray Charles estates for music publishing assets.
Those are all legendary artists that really dovetail nicely with what I just said about working WITH catalogs and doing the marketing, branding and promoting to provide value to the artist brands and catalog.
For instance, with the Whitney Houston estate we did a Kygo remix of the Steve Winwood song “Higher Love” that was nominated for a Grammy. We then had the gentleman who wrote Bohemian Rhapsody write a screenplay. We took that to the film studios and had a bidding war.
We chose Sony Pictures to be our production partner with the Houston estate and we are going to make a Whitney Houston biopic. If that film does half of what Bohemian Rhapsody did it will be a giant windfall and hopefully a great film.
In addition to music royalty income streams, Primary Wave also buys wider rights such as merchandise or name and likeness which are then implemented in innovative ways (for example Alice Cooper’s recently released range of hot sauces). Can you discuss a few examples and explain how this works?
Yeah, absolutely. We represent most of our clients on a name and likeness basis. That is usually non-exclusive. It provides an opportunity to really grow their brand in an authentic way.
The Alice Cooper hot sauce is a good example. We also used to own 50% of the Kurt Cobain catalog. With that catalog, we went to the shoe company Converse and said, “In every photo you have ever seen of Kurt, he is wearing Converse All Stars. Let’s do a limited-edition Kurt Cobain lyric All Star.”
Thank God we did that before Twitter because I’m sure the Twitter world would have crucified us. But at the time, the fans loved it and Courtney signed off on it. If you could buy a pair of those shoes now I bet it would go for thousands of dollars. And this was way before Kanye and a lot of other pop stars had their own lines. It was definitely forward-leaning.
Another example is Smokey Robinson. We recently went to Shinola watches and pitched them to make a My Girl and My Guy watch. Shinola is a Detroit brand and Smokey is Detroit Motown.
In both cases, Primary Wave came up with ideas to create new revenue streams for our artists, and in each case, the ideas were totally authentic to who the artists are.
I guess that speaks to the sort of catalogs you work with. That type of exploitation only works if you are dealing with legendary artists rather than an unknown songwriter…
You are correct. We choose artist catalogs mostly because we can utilize our marketing strengths. There are a lot of other types of deals such as songwriter producer deals which are very, very expensive. We often let other companies overpay for those types of deals as they don’t dovetail with our strengths. Often they’ll have great copyrights and sometimes we will wade in and do those deals, but we do focus mostly on artist deals.
We will get more aggressive in pricing for the artist deals because we know we can work on those marketing initiatives with musicians that we can hit home runs with.
How do you value non-music catalog rights where there are not historical incomes to analyse?
We don’t really place a value on those per se. I suppose if we think we can do a lot with a catalog we might add some growth into our model, but we really only place a monetary value on the actual revenue streams.
Usually when I talk to an artist or an estate, I’ll sit down with them and say, “Let’s talk about publishing, writer’s share, and master royalty income. Or master ownership. Also, are you a producer and are there producer royalties to buy, especially if that’s coupled with publishing?” We tend to look at rights with a 360 degree view.
We place a value on those rights that earn. With the name and likeness rights we get, we eat what we kill. Basically, we get a cut on ideas that we turn into marketing campaigns for the client. The client gets the majority of the income on the name on those campaigns.
They get to take advantage of our services and if we present them with an idea that works, they see the majority of the upside.
You made a number of key hires in the marketing and branding area recently. Is this an extension beyond having a sync team?
It is funny you say that because I feel like you have been talking to our chairman Larry Mestel. He very often says that other publishers consider sync as marketing. We have a great sync staff. We have tons of sync right now. There’s Bob Marley syncs everywhere.
But we don’t consider sync licensing as marketing. Marketing is creating marketing campaigns, branding, digital strategy, all those things. Those are real marketing. Sync is licensing. We have full departments for branding, marketing, digital strategy and sync.
“We don’t consider sync licensing as marketing. Marketing is creating marketing campaigns, branding, digital strategy, all those things.”
Larry and other senior members of the team such as Justin Shukat and Adam Lowenberg had a past working at several record companies such as Arista, Island and Virgin. Larry was a marketing guy. So when he started Primary Wave, he said: “I didn’t know what a publisher did so I ran it like a record company.”
A lot of people have told me Primary Wave is kind of like a record company without masters. We really like that idea and we hang our hat on that. We actually do marketing like a record label and most of our competitors don’t.
I saw that you hired a director of streaming and playlists marketing. That is obviously something you are more used to seeing at a record label. In the publishing world what does such a role provide in a practical sense?
Well, it means really similar to what a label does. We’ve got a Digital Strategy Team, and they talk to the Spotify, Apple and YouTube platforms of the world.
We get our artists on the right playlists. We also have been very savvy about creating channels on Sirius XM as well. We had a Bob Marley channel for over a month on the Sirius reggae station The Joint. We have deep relationships at Sirius and have created custom shows for other artists.
That kind of marketing is really a record company function but it also works for publishing. In many of our deals we own the publishing and we may collect master royalty income or we may own a master so we get paid on both sides from DSPs. Sirius pays master royalty income as well as publishing royalties.
When I initially started working in the valuation space, people were looking to buy the publishing copyright. Writer’s share was occasionally bought and sold but it wasn’t a particularly lucrative space. Buyers now seem to have much more interest in acquiring “passive” shares. Have you seen writer’s share, neighbouring rights and producer royalties becoming more common in the acquisition market?
Absolutely, I see those kind of deals the time. Matter of fact, I’ve been pitched a lot of pure producer royalty deals lately. We don’t usually wade into those as we would want to have publishing connected to it. It’s hard to raise the value of the producer royalty revenue stream without active participation on the publishing side.
When we own publishing and producer royalties together, we can utilise all those upstream departments like I talked about and then increase the producer royalties.
We have done some pure writer share deals, especially for super iconic stuff.
Multiples are getting higher and higher. Barry Massarsky recently said during the Music Finance Forum that they went from an average of 15.2 last year to 17.3 this year. Do you broadly see this as justified? What do you think is driving them to these levels?
I think that multiples have gone up for a few different reasons.
One is the low interest rate environment.
Secondly, music publishing has been a very solid growth business. As an example, Last year, I attended the annual NMPA meeting and David Israelite said on stage said that music publishing revenues in the USA had grown 10% year over year for five years straight. So, a lot of institutional investors say, “If I can park my money somewhere that’s making 10% a year, we should do this.”
This growth is being fuelled by two main drivers.
Legislative – I think most people consider the future to be very robust with legislative decisions like the MMA, the Copyright Board Decision in the US, and the rulings in Europe regarding copyright. On the legislative side, the rates are getting better.
International growth – The streaming pie is getting bigger. India came on board with Spotify this year. There’s hope that China will eventually pay and there are many other territories that are coming online.
So you’ve got international growth and a legislative agenda that has gone well for the business. I think people expect growth to continue.
Third is competition. There are new aggressive players in the space.
Fourth, this asset has proven itself to be non-correlated to the economy and stable.
Are there any particular genres that you think have uniquely strong growth prospects or is it more about the individual catalogs?
It is more about the artists themselves and their songs. For instance, our Burt Bacharach song “What the World Needs Now” has done great this year during the pandemic.
Our Bob Marley catalog has exploded this year. People have been drawn to his melodies and to his lyrics. People need happy songs in this challenging era to take their minds off COVID like “Three Little Birds” and “Could You Be Loved”, but they also need social justice songs in this era of social change with songs such as “Get Up, Stand Up” and “Burning and Looting.”
Throughout your time in the space how have you seen the capital raising part of the game change?
There is more institutional interest in the music asset class than there has ever been.
However, I don’t think it is ever easy to raise money. If you are going to raise money you have to have a compelling reason that makes you different from everybody else.
“There is more institutional interest in the music asset class than there has ever been. However, I don’t think it is ever easy to raise money.”
I have heard of lots of people out there looking for funding in the last couple years but that does not mean everybody gets funded.
One of the hardest things in business, whether you’re Coca Cola or Primary Wave or Honda, is what differentiates you from the competition. What is your name? What is your logo? Those really simple things can be hard to pin down. Primary Wave has a clear vision of working with legendary artists and marketing and branding those artists to add value to their careers and brands. And, we have been serving our investors really well and we have gained access to a lot of capital because of our vision and execution of this vision.
One of the most recent high-profile acquisitions that Primary Wave made was the Ray Charles catalog. How did you work with the estate? And what are you still hoping to achieve from the deal?
That was a great acquisition. Our chairman Larry said that he got more phone calls on that catalog purchase than any other, except Bob Marley.
I haven’t been involved in the marketing ideation meetings for clients such as Ray, but we take great pride and know it is a huge responsibility to have a catalog like Ray’s. He is an American treasure, a global treasure.
We are working closely with the estate too. We didn’t buy 100% of the IP, and that’s actually another thing that differentiates us. Our preferred deal structure is to buy a majority interest in the IP from the clients, and have them retain an interest and truly partner with us. That way our goals are aligned.
“Our preferred deal structure is to buy a majority interest in the IP from the clients, and have them retain an interest and truly partner with us. That way our goals are aligned.”
A lot of our competition want to buy 100% of the music IP off the seller, and then don’t want to to talk to them again or institute artist friendly terms like artist sync approvals.
We want to have deep relationships with our clients and we do. That also leads to clients spreading the good word about Primary Wave. Our clients are our best advocates.