The current buyers spotting the early opportunities

Last year, a feature in Rolling Stone highlighted how Multimedia Music was one of the key players in this section of the catalog acquisition business, making a swift and huge impact despite only having launched at the end of 2021.

The company stated in the feature that its ambition was to become “the biggest film and TV music company in the world”. As proof of its bold ambitions it had, at the time of the feature, raised $200 million (across two rounds) to shop for catalogs. 

In that brief window of operation, it had already acquired catalogs and rights from a variety of names such as composers James Newton Howard, Tyler Bates, David Buckley and Michael Corcoran, as well as production companies such as Atlantic Screen Music. 

Since that feature ran, Multimedia Music acquired the music publishing and music master rights from STX Entertainment’s film library in February 2023. 

“The composer catalog acquisition market is an unconventional development in a business that already lacks convention compared to other acquisition businesses,” noted Rolling Stone.“Whereas traditional music companies are buying up catalogs hoping to boost earnings on the songs themselves, buying soundtracks, which are more heavily tied to sales and streams of films and shows, has a different business model.”

Cutting Edge Media Music is the big competitor to Multimedia Music in this sector, but it has a 10-year head-start on the new entrant. Early last month, Cutting Edge announced it had secured $100 million in new financing and mere weeks later announced it was forming a new venture with Village Roadshow Entertainment Group which MBW said “covers all of the latter company’s past and future music publishing assets, soundtrack album releases and music supervision services”. 

What is behind this flurry of activity? And what does investment in film scores and music offer that chart-oriented investments do not?

James Gibb, founder and US partner at Multimedia Music, says his company is buying a lot, but is not just hoovering up anything and everything. 

“Our business plan was that we would deploy $100 million over three plus years, and we deployed the first $100 million in the first 10 months.”

– James Gibb, Multimedia Music

“Our business plan was that we would deploy $100 million over three plus years, and we deployed the first $100 million in the first 10 months,” he says. “I think that we could have spent more. There have been so many opportunities out there, [but] we’ve been carefully picking the libraries and catalogs we’ve been acquiring.”

Film catalogs are a “slightly different” kind of investment bet

Phil Hope, founder and CEO of Multimedia Music, suggests that the investment market around film music and scores is based on a bet that is different from the bet around buying a commercial music catalog. The stakes may not be quite as high, but that does not mean they are non-existent. 

“In commercial music, in the very simplest terms, you are betting on the fact that people will continue to listen to those songs and that the general pool of income will increase because more and more people will become subscribers of streaming services,” he says. “Ours is a slightly different thing because what we are betting on is the continued broadcast and streaming of the TV shows and films.”

Streaming platforms, such as Disney+, Apple TV+, Amazon Prime Video, Hulu and Netflix are significantly extending the life cycle of films. Films used to go from theater to rental to TV broadcast to purchase (be that VHS, DVD or download), with the TV part being something that had a limited window (shown on a channel once and maybe never shown again – or shown years later). Now many films are available to stream at any time on a subscription service and so can be played eternally and, ideally, can keep finding new audiences. 

Alaister Moughan of Moghan Music is an expert in royalty auditing, catalog valuation, due diligence and strategic planning. He suggests that there are crucial similarities between film/TV music and pop music, but also crucial differences. 

“The underlying investment thesis is the same as pop music catalogs: a long-term stable recurring income stream which is benefiting from the growth of streaming,” he says. “In the case of film/TV music assets rather than audio streaming, the growth is coming from the growing audience and platforms for video on-demand. The majority of the royalty income is still coming from broadcast and television sources. For high-quality content, in particular scripted drama, this can have similar characteristics to the radio play of evergreen songs.”

“In the case of film/TV music assets rather than audio streaming, the growth is coming from the growing audience and platforms for video on-demand. The majority of the royalty income is still coming from broadcast and television sources.”

– Alaister Moughan, Moghan Music

He adds, however, that the sale price will reflect the (relatively) niche categories for most film/TV music. “The multiples for these catalogs are also much lower, which is attractive from a returns perspective,” he suggests. “This reflects a lower amount of competition but also complexities and unique risk factors relative to pop music catalogs.”

Revenue forecasting for these types of catalogs has to weigh up different factors as the monetization rhythm here is different from that in pop music. 

“Fundamentally you are looking at forecasting income from shows rather than songs and looking at initial broadcast and season dates rather than release dates,” Moughan explains. “The market growth/decline rates have a different reference base as you need to take a view on market trends in cable and broadcast television as well as video on-demand streaming.”

A market with a long way to go?

Hope is confident that the video streaming business still has plenty of global expansion opportunities ahead of it and he adds that the boom in streaming is not necessarily coming completely at the expense of traditional TV. As such, the overall outlets for film (and resulting monetization) are increasing rather than the rise of one outlet cannibalizing or negating the other.

“There’s still a legacy broadcasting business which is still remarkably strong,” he says. “I think a lot of people thought that broadcast TV would disappear in the same way that people thought that radio would disappear, but that hasn’t happened yet. Actually, both sides of the equation are still extremely strong.”

He adds, “There are a huge number of different channels now that the video content can go out on, far more than there were 15 or 20 years ago. But we model how we expect that to go and how we expect the income to come back to us from that exploitation.”

Gibbs says the pandemic added a new longevity to many film titles as people returned to favorite films and shows as a nostalgic comfort blanket, meaning that older titles were “getting a second lease of life”. He says the most solid bet is around the music in evergreen films and TV shows, but streaming is helping to expand that pool. 

Moughan is not so convinced that this is a completely stable and growing investment category. 

“If a show is dropped from a channel the royalties could in theory drop to zero rather than just decay,” he says. “Shows being in long-term syndication or having close ties with the broadcast helps mitigate this; but it’s a unique and key risk in the class.”

“If a show is dropped from a channel the royalties could in theory drop to zero rather than just decay …. it’s a unique and key risk in the class.”

– Alaister Moughan, Moghan Music

Hope also proposes there are new sync opportunities and ways of repacking the music to create whole new licensing possibilities. 

“We create alternative masters and pitch those for ads, for trailers, for reuse in other TV shows and films – all the usual stuff. We have a team in the UK that runs sync for us. That’s an important part of the model as well.”

The old still trumps the new – for now

Like established hits in the pop world, buying into the music of an evergreen soundtrack means you already have proof of its durability and a good grasp of its enduring appeal for future generations.

As such, Multimedia Music is not at the stage where it will buy in early to new films and shows. 

“We’re not buying future shows – that’s not part of our business,” explains Hope. “Our model is to buy rights that have a solid earnings history and where we can see strong continuing distribution paths for the shows.”

The (relatively) straightforward nature of soundtrack rights

Where film music rights ownership has a clear advantage over pop music rights ownership is in the comparatively straightforward nature of those rights – typically written by one or two composers, meaning they are not as restrictive as rights where teams of writers are involved.

“It’s not like a hip-hop track which has 17 writers and three samples” explains Hope. “It’s much more straightforward. Either we’re buying the actual underlying copyrights from the film and TV companies or we’re buying the income stream from the composers where the copyrights may well be owned by Disney, Sony or one of the other big studios.”

The role of a company like Multimedia Music or Cutting Edge goes beyond acquiring these rights and going into an educational push for the wider industry, stressing the fact that they are often easier to clear for sync use, for example, than many presume or have been accustomed to in the pop music space. 

“This is something that a lot of the time in the past people were afraid of because they just didn’t understand the rights or were frightened by the potential pitfalls,” says Hope. He notes that – apart from material owned by the biggest studios such as Disney, who will typically hold onto their IP in the sound recording – a company like his is keen to acquire both masters and publishing in the same deal. As such, this means they can become “that one-stop shop for synchronization”. 

“When a film is a huge blockbuster film, you are basically getting access to income from the success of that film.”

– Phil Hope, Multimedia Music

Even when the master recording or publishing is not available to buy from a huge studio, that does not mean there is not an investable opportunity here. “You can’t buy Disney’s copyrights, but we can buy the writer’s share from composers who worked on those films,” says Hope. “When a film is a huge blockbuster film, you are basically getting access to income from the success of that film.” 

As in the pop sphere, there is a growing willingness for writers and composers to consider selling their rights – or at least part of their rights. That boom in pop catalog sales has had repercussions that are being felt in the film music world. 

“Maybe three or four years ago, this was sort of taboo,” notes Gibb. “Few composers would sell their writer’s share; they were always advised by the agents and managers to hang onto those rights. They’ve then seen the likes of Springsteen and other big music acts starting to sell their rights. That has opened the door for composers for film and TV now thinking, ‘Well, maybe we should look at what our catalogs are worth. I think the landscape has changed in the last four years.”

The importance of deep audits specifically in film music

Hope says a company like Multimedia Music can do deep audits of catalogs and work out not only where revenues are coming from but also where they are missing.

“We do all the work that composers and film companies don’t have the time or expertise to do themselves in their catalog,” he says. “That brings us additional value in terms of both revenue and future catalog value.”

It is not, however, all plain sailing here as metadata issues are still causing problems for those selling and those buying rights. 

Gibb notes that when Multimedia Music bought the James Newton Howard library, there were significant metadata issues that needed to be cleaned up. He estimates Howard’s name was being spelt in 17 different ways in Europe, meaning aggregating all the due revenues was a Sisyphean task. 

“Phil and I were involved in a film once where they were paying completely the wrong film and all this money from this big film in Spain was going to a small producer in Ireland whose film had the same name” Gibb reveals. “And he was collecting all the revenue. He was probably getting more revenue from that music than he was from the film itself.”

Cleaning up data and fixing payment holes in something acquirers have to take responsibility for and factor in as a possible complication in the purchase. 

The cusp of an acquisition frenzy

The sector could see its biggest acquisition frenzy ever with the news in January that Warner Bros. Discovery (the company formed last year when WarnerMedia and Discovery merged) may be looking to sell its vast catalog. The asking price could be over $1 billion. 

On the Warner Bros. Discovery deal, Moughan suggests the frontrunners looking to acquire it would include “anyone with experience or existing ownership in the space and who have an interest in wider media assets”.

Being more specific, he says, “Shamrock Capital would be a good example of someone with wider expertise and interest in both. I think the size would be compelling, but the buyer would need to have confidence and a firm view of the future of television and video on-demand industries. It’s a big bet!”

Hope and Gibb also feel that the deal, if it happens, will almost certainly see one of the other giants in the space acquire the catalog. This could, they believe, be the deal that really raises the stakes for film music catalogs – for better or for worse. If it happens, things will never be the same again. 

“It may have some impact in the market in general in terms of the film and TV music suddenly getting a lot more attention,” says Hope. “That might be a good thing or it might be a bad thing for us; but it’s certainly a very interesting thing to be happening in this space.”