In our Money Moves series we speak to the movers and shakers of the music finance industry. Next up is Sherrese Clarke Soares, former CEO of Tempo Music.
Sherrese Clarke Soares is a long-term believer in the value of Entertainment IP.
A seasoned financial services executive, she spent over 10 years at Morgan Stanley where she founded and led, globally, the Entertainment, Media, and Sports Structured Solutions platform.
Most recently, she served as the CEO of Tempo Music, a music rights acquisition platform formed by Providence Equity Partners in partnership with Warner Music Group, until departing earlier this year to launch her own venture.
We caught up with Sherrese to discuss entertainment IP as an asset class, the value of thinking differently, and putting diversity and inclusion at the forefront of any culture she creates.
You mentioned that for your next move you are looking to build an investment platform that will culminate the learnings and values that you’ve gained over your career. Could you talk through some of those?
Over the last 20 years I have made a career in the financial services industry in and around media and entertainment. For a long time, institutional investors did not broadly accept entertainment IP as an attractive asset class. Part of it was simply a lack of awareness. As an early investor in the space, it’s definitely been an education process over the course of my career and as I move forward, I will continue to bring awareness to the asset class. For investors who might be looking at the space for the first time, part of that educational process will be to find where it fits into their portfolio and how the return meets their objectives. For some, this area might fall into a more opportunistic sleeve. For others, it might be part of a systematic, long-duration yield portfolio.
I believe in the asset class deeply for a few reasons. I really believe that content, whether film or TV, is a vessel for change and communication. It travels to places that you and I can’t get to and it educates us about other cultures, other people, other spaces. I really believe in the long tenured duration of content and the impact it can have on communities and the world. It’s always been a place where I felt there was enduring value, not just as an investor but also just as a human. That will be core to how I build out my investment theses.
“I’ve always seen the value in the unconventional and pushed the envelope to create investment opportunities around things that people have long pushed back on.”
In terms of values – there are several. The first and most important thing, for me, is having a true sense of purpose for myself and my team, with a deep desire to leave a positive imprint on the world. Additionally, I think my superpower is seeing things that others don’t necessarily see. I’ve always seen the value in the unconventional and pushed the envelope to create investment opportunities around things that people have long pushed back on. I think that really lends itself to having a culture and team that is intellectually curious. It makes you a better investor and opens up opportunities one may not have previously considered.
The other thing that’s super important for me in any culture I build is inclusivity. In a similar vein to investing, my strategy for attracting talent is to defy convention – deviating from traditional pipelines for private equity / asset management talent. I seek to find talent where others don’t typically look. As a result, every team I have led throughout my career has been incredibly diverse and authentically so. It is important to me to allow room for everyone to be seen and have a voice. It makes us all better investors.
What does ‘entertainment IP’ cover? Are you looking to invest outside of music as well in your new venture?
I am still formulating my strategy on my new venture. That said, I’m very focused on investing in asset classes that I know well. I know the music business very well, but I also know the film and television space well, and I have a background in sports and sports related investment opportunities. In the future, you will see me involved in things in and around a variety spaces – anywhere where intellectual property is at the core. I view intellectual property in the media space as anything that touches the creation of content.
What has been your experience as a Black female leader in a sector that is so lacking in diversity?
First of all, I feel a huge sense of responsibility to do this not just for myself but also for the community that I represent, whether it’s women or women of color, or Black women specifically. My intention is to be a beacon of light for others who want to come behind me or alongside me, because there aren’t many people like me in C-Suite roles in these spaces. I had the benefit of being on Wall Street for 20-plus years and I’ve been fortunate to have mentor and peer networks to support me through those environments, but the ranks are very thin when it comes women, women of color, and BIPOC professionals.
I think it’s one of the reasons why my strength became having this deep intellectual curiosity. I had to make space where space didn’t exist. When you yourself represent something that is different than the norm, I think it makes it easier for you to see things that are different. Again, I think it makes me a better investor. I’ve always tried to turn it into a strength, but it’s definitely hard. I think the way I’ve sustained and thrived is because of community, peer networks and senior mentors, and this idea of finding not being afraid of the uncharted path.
You were recently named as one of Billboard’s Change Agents. What are the changes that you want to see?
That’s a big question. There are so many places where one could look to find opportunities for progress and change. I’m under no illusion that I can change the world myself, but I’m happy to be part of it. I care deeply about giving back and anything I do will have an element of being present in our communities. As it relates to what could change specifically in private equity or in music, we need to find ways to have more differentiated voices at the leadership table. I’d love to see more founders and CEOs that are women and women of color, or people of color in general.
“We need to find ways to have more differentiated voices at the leadership table. I’d love to see more founders and CEOs that are women and women of color, or people of color in general.”
The headline deals of the music catalog space tend to be around ‘legacy’ rock or pop acts such as Bob Dylan and Neil Young. Where do you see the value in the market and is there a type of catalog or genre that you think is under-appreciated?
I’d say non-US music can be somewhat under-appreciated, particularly music in any of the emerging markets, whether it’s Latin America, Sub-Saharan Africa, or Asia. I definitely think there is value there. In terms of genres, I think R&B and hip hop are underserved from a value perspective and they actually permeate so much of the music that we use everywhere else. That said, when I invest, I’m pretty genre agnostic. I think in and around music there’s a lot of value and value creation still to be had, particularly as use cases continue to proliferate and come online.
We’re seeing those use cases across socials, gaming, and at-home exercise start to take off, and that will only continue to proliferate the value of music and music content. You’re not going to ride your Peloton in silence. Everybody I talk to is super excited about the Lizzo ride or the Beyoncé ride. You need music to be integrated into all of those other experiences, and those experiences will just continue to shift and grow over time as we become a more interconnected world. So, from that perspective, I think there’s a lot of value in all these genres collectively.
There’s also the potential to take music content and reinterpret it for foreign markets.
I think there’s definitely that potential. But I also think there’s a lot of value in local markets with local language, or local music becoming more global. It goes back to why I love content as a vessel. Five years ago, Afrobeats or K-Pop was not as ubiquitous as it is today. Now it’s everywhere. There’s a huge opportunity to bring local perspectives to global markets as well. So, platforms that have global extensions are really ones that are interesting to me because you can find opportunities that way.
“There’s a huge opportunity to bring local perspectives to global markets.”
That really ties into having access to data that shows how assets are performing on an increasingly global scale. How important is data to you?
I love data. I love leaning on data and learning from data. Data is a core part of what I do, no matter what angle you’re looking at it from. Whether it’s penetration rates around streaming globally, or it’s usage or it’s sub source of income in different regions. I’m a huge consumer of data. All of that data is really important, and it helps to shape perspective on where to go and how to think about what’s next. Continuing to track that and getting better granularity on some of that data is going to be hugely important as to how people can think about value, particularly coming out of overseas markets.
You mentioned during the Music Finance Forum that you have a lot of confidence in the long-term value of ‘premium’ IP, which is resilient even in times of crisis. What are the attributes of a ‘premium’ IP asset?
I think about premium in terms of best-in-category and something where you’ve developed a core audience around your catalog and artistry that stays with you for a long time. It’s premium to that group of people. I think there’s value up and down the artistry chain and it’s really about consistency of effort. That’s how I define premium. Others may define it as only the people at the top of the Billboard chart. That clearly is premium, but I think about it from the context of knowing your audience and serving them in a way that’s consistent over a long period of time.
You’ve previously been involved in acquisitions of both contemporary hits and older releases. How do you get comfortable taking a view on long term cash flow?
I think about portfolio construction, so I’ll never have only old music or only young music. I will have things that are balanced across the spectrum. As I mentioned I’m a little bit more genre agnostic than some. I’m very focused on balance. You will always see in the work that I do a differentiated view of things, but behind the scenes what we have going on is a fairly prescriptive point of view on how we’re thinking about portfolio allocation – it is all about balance.
New players are coming into the acquisition market all the time. Is it getting overcrowded?
I get asked this question a lot. I think about two things. One is, who are all of these platforms and where do they sit in the ecosystem, and then how does one compete with them and how does these various platforms stack up from a competition perspective. Everybody’s got a slightly different strategy. I definitely think there continues to be market appreciation in terms of value. I believe that these assets are long tenured and that you can be a long-term investor in this space and play when you think the value is right for you. I don’t think it’s necessarily overcrowded. I think there’s still a lot of room for potential investors.
What concerns do you have about the market?
Investors are new to this space and they can be fickle, so I’m always concerned about foot faults by any of these platforms in the industry. It’s no different than other niche investment strategies that have grown from novelty to mainstream over the last few decades. From my experience with entertainment and media investing in particular, hiccups by aggressive investors can put a chill on investor appetite. That’s why I’m always rooting for these platforms to be successful.
I also pay attention to the relative value of investments that are similar in risk profile and where various metrics such as interest rates are. And then particularly around music, I am continuing to monitor growth around streaming but also monitoring all these new use cases and how they become monetized. Social media usage is not showing up significantly yet in historical income on catalogs, but it will soon.
“Investors are new to this space and they can be fickle, so I’m always concerned about foot faults by any of these platforms in the industry.”
Are you confident investing in both recorded music and publishing catalogs?
I’m pretty agnostic here again. As an investor, I will seek to build portfolios of attractive rights across publishing and recorded music and across other opportunity sets as well. It’s all about value and it’s all about where it is in its life cycle and can I value it in a way that makes sense. So, to me portfolio construction is what it comes down to.
Until recently, the number of publicly listed ‘pure’ music copyright companies has been small, and it has been difficult for investors to get direct exposure to the catalog business. Along with Warner, Hipgnosis, Round Hill, and Universal coming this year, this is changing. Why do you think this is?
We can dissect those one at a time. Warner’s had public bonds for a while now but also saw real growth in value in the underlying asset class with the business model for music consumption in general really settling down over the last five years. With all that growth underpinning the business and really providing a true non-correlated asset, my guess is going public was an opportunity to take advantage of that market sentiment. I’d also say that the public markets for a while now have been starved of public companies, and so investors don’t have a ton of places to find both growth and non-correlation. So, if I’m sitting in the seats of enterprises organized around the music business, those are some of the things that start to drive decisions around thinking about accessing the public markets as a way to create shareholder liquidity.
I’d say the same thing is therefore true for Universal. It’s no different necessarily from looking at the cost benefit of keeping it within the overall Vivendi structure or spinning a portion of it out to take advantage of the fact that, again, investors are hungry to find places with real yield and real growth potential. As it relates to specialist funds, I think Merck, at Hipgnosis, has done an excellent job of bringing that market to bear and it’s a technology that obviously Round Hill has also used. Again, it’s just another opportunity to give certain investors access to the asset class. The public markets have never been hotter in terms of new companies coming to market. I think from that perspective, across various industries, you’ll see more and more engagement with private companies finally looking at going public.
“The public markets have never been hotter in terms of new companies coming to market.”
Historically, there have been a few examples of securitization such as Bowie Bonds and the SESAC listing – is securitization still a viable structure and something we might see more of?
I think, again, anything that can give investors opportunities to get access to a risk asset class that they find attractive, whether it be bonds or public equity – I think, yes, you will see more of that.
Enjoyed this interview? Why not check out:
- Money Moves – Merck Mercuriadis on Changing Industry Paradigms and the Future of Music as an Asset Class
- Money Moves – Primary Wave’s David Weitzman Talks Acquiring Iconic Catalogs & Unique Marketing-Driven Approach
- Money Moves – Barry Massarsky on Data-Driven Catalog Valuations and Drivers of Growth in the Music Investment Market