TORONTO, ON – SEPTEMBER 05: (L-R) Musicians Mike Rutherford, Phil Collins and Tony Banks pose … [+]
For several years now, the typically sleepy music publishing industry has been experiencing something of an awakening. Music business trade publications have dedicated plenty of time and ink (digitally, at least) to notable acquisitions by some of the biggest players in the space, who sometimes pay hundreds of millions to buy the rights to catalogs from superstars like Bob Dylan, Bruce Springsteen, David Bowie, and countless others. Each year, billions are spent in this manner, and the value of sought-after discographies has been steadily climbing.
At the same time, a number of financial institutions and new funds have been getting into the game as well, raising both the rate at which catalogs are snatched up and the price they fetch.
In September 2022, Concord, one of the most respected independent names in the music rights industry, made headlines when it broke with precedence and purchased the rights to the band Genesis, as well as three members–Phil Collins, Tony Banks, and Mike Rutherford (as well as his other group Mike + the Mechanics). Between them, they’ve charted dozens of top 10 albums and countless hit singles, and their popularity endures, even decades after most of their wins have faded from the charts.
The deal was reportedly worth $300 million, according to the Wall Street Journal, and it’s a sign that Concord is perhaps changing things up a bit and is not afraid to spend like the biggest buyers out there.
But how does a deal so massive come together? How long does it take and why does a band like Genesis, who could likely field offers from everyone and anyone, pick an independent company? I spoke with Concord CEO Scott Pascucci and President Bob Valentine—who are only just recently opening up to the press—about their big purchase to gain insight into one of the most impressive acquisitions of 2022.
Hugh McIntyre: I associate Concord with many cool indie acts, so when I found out about Genesis and Phil Collins…it was unexpected. Tell me a bit about that. Cause the deal didn’t come out of left field, right?
Bob Valentine: So we had a relationship with the guys from Genesis as part of our publishing business. We administered their rights, so we already had their publishing in our catalog. At some point [their team] contacted us and said, “Hey, the guys are thinking about selling. We’re talking to a few other people, but we’d love to hear your thoughts. A lot of these conversations start this way, which is, they’re not sure they’re going to sell. They’ve heard that valuations are in this range. They’re checking the market. And if they’re right, if what they believe is proven to be accurate from the marketplace, there’s a chance they will sell…and [for] very different reasons, right? Like tax security, estate planning reasons, many different reasons. Usually it’s artists of a particular age that are [in a] particular financial situation where they have their financial advisors telling them, “Hey, if you can diversify or if you can get this stuff out of your estate…”. Frankly, we don’t really know at the end of the day why they choose to do it.
At the end of the day, it just becomes a combination of a point of view on what the rights are worth, and also a focusing/recruitment conversation about why we are the best home for your assets versus Warner Music or Hipgnosis. That conversation is always three dimensional. Typically it will start with, “It’s not just about the money.” Yes, the money’s important, don’t get me wrong. They’re probably not going to sell if the number’s not right. But at some point it’s about relationships and their view of legacy and their view of how their assets are going to be handled and treated.
In some cases we’ve gotten into the conversation and learned that it actually was about the money. I think we have done a good job in those conversations, and I think our success to date with other catalogs has shown we actually mean what we say and we do what we say we’re going to do–and that’s engendered some trust in the marketplace. I think gave us an edge in that conversation versus the other folks that were involved. So that’s really where it came from. That was not an out of the blue, “Hey, it would be great to own Genesis and Phil Collins [‘s rights]. It really was a relationship and then it moved from there.
Scott Pascucci: And their music streams extraordinarily well.
Valentine: Specifically with regard to their catalog, if you look at the streaming performance–both Phil’s solo stuff and the Genesis stuff–it’s remarkably international. These are the kinds of things you think about in the world of streaming. Is it U.S.-centric? Is it global? Where is that streaming growth coming from? What’s the age and demographic of the fans? Are you going to get a longer tail, given where the age of that fan base? All those things come into the equation. Genesis and Phill Collins, they checked a lot. There’s a lot of upside from their streaming that gave us comfort with that deal.
McIntyre: How long did it take from when they reached out to start the conversation until you announced it?
Pascucci: Nine months of real focus.
Valentine: It was probably, I would say, 12 to 18 months. And if I had to hedge, I would say it’s closer to 18 months than 12. I’ve had deals that took two, three years. Because it’s emotional, right. It’s not just like selling a house. There’s an emotional component to it that makes it more complicated.
Pascucci: And then you have the deal stage and then you have the diligence stage. Each of those things has the capacity to go on for a while.
Valentine: And in the case of Genesis and Phil Collins, it was actually three separate deals, because there’s Genesis, there’s Phil Collins’ solo stuff, there’s Mike + the Mechanics. Even with Genesis, there’s early Genesis and late Genesis. It became very complicated because you had this massive collection of rights over many decades that had morphed and blended and weaved itself all together into these guys’ legacy.
McIntyre: What do you think it was about Concord that made them decide you were the right partner for this?
Pascucci: They already knew us, and we’ve known their manager for an even longer time. They knew us as a company and they trusted us. Putting that aside, in the marketplace, we’re known as a company that, when we say we’re interested in a deal, we do everything we say we’re going to do. We don’t try to revisit our price unless there’s a really, really good reason to. We stand up to our proposals and we close, and closing big, complicated deals is not always straightforward. You need to have a team that’s able to do deals that are big and complicated. You need to have the financial capacity. And if you say you’re going to close on X date, if everything else gets done, you need to be able to close on that date.
Not every competitor in the business can say those things. And people know that about some of the competitors. People know that if they get to a place where we’re agreed on a price, they know that the deal is going to happen on the right timeline and that we have smart people that can get the really tough issues resolved. And there could be very complicated issues, particularly when you’re buying assets overseas [between] multiple parties. We have a pretty good-sized team that have done a lot of these deals, and they know how to work through complications. Our reputation is good.
McIntyre: You said that this didn’t come out of left field and you’ve worked with them for a long time, but ahead of this deal, were you thinking Concord should be making this, this sort of headline-grabbing acquisition that we see frequently these days in this space? Were you sort of already in that mindset?
Valentine: I would say that this was atypical for us. We have not been in the world of big, splashy artist catalog purchases. We certainly looked at a lot of them. We’ve been in the conversation with a lot of them. It helped us that we were in the dialogue and we [had] a relationship with the artists already. Those other big deals that have been in the headlines over the last two years, there is a relationship already with someone. Many of those deals have been done by the majors, because those artists had relationships. I think a lot of conversations go along those lines.
So I think in those situations, that’s an important consideration for those artists. Not all of them have done that. Obviously Neil Young sold to Hipgnosis and I don’t think that that that was the same situation. From our perspective, all things being equal, we would prefer to have Phil Collins be one of the representative, A-list titles in our catalog forever. We didn’t want to wake up one day and think we could’ve kept this relationship going and been able to market this music over the next 20, 30, 40 years. This is seminal music. We have a relationship. We should, in this particular situation, take advantage of the relationship we already have and move into this deal that we otherwise, from just a neutral perspective, probably wouldn’t have.
Pascucci: There are also a lot of gating factors in deals. One of them is whether if you buy assets, you’re going to have control over the assets or if you’re going to be receiving passive income from somebody else who has control for a long time, or forever. If you’re looking at a large deal with a superstar artist, but his or her recordings or publishing is tied up for a very long time, it affects how you look at the deal because your capacity to maximize the value and control things properly is much more limited.
Valentine: That absolutely plays a part in every acquisition that we look at. The ability to actually control our own destiny with regard to what we do with the music as a company.
McIntyre: You just said that this is atypical and you’re not necessarily looking for more acquisitions at this level, but now that you’re in this space, now that you’ve made this big splash, what would you like to do next acquisition-wise?
Valentine: The world we’ve typically lived in, growing the business over the last 10 years, has been smaller deals. For a while, we bought a few independent record labels, because we believed that over time, recorded music would look more like publishing as we moved into a streaming world. We thought that there was more upside in bringing in recorded music rights because there was a disconnect between how the industry was valuing records versus how they were valuing publishing. There’s always been this historical view that publishing, because it’s more of a licensing, B2B kind of business, that the royalties are more stable and that there’s more optionality to them. But as we’ve moved into a world with TikTok and Spotify, the master side of things looks more like publishing from a revenue perspective.
We still believe all things being equal, there’s probably more opportunity on the record side over the next five years than the publishing side, both from evaluation perspective and also just there are many, many, many other independent operators out there that are, for whatever reason, thinking about selling. Those smaller deals will get us into different genres that we’re not in now on the record side and would broaden the scope of our frontline business. So I think over the next five years, we’ll probably look at masters a little bit more than publishing. But I hate to put myself in a box, because then something could come up.
There’s a different growth profile, there’s a different distribution profile. Decisions to spend money on marketing, whether it’s reissuing something 20 years after its release or hiring more people to do social media posting about the artist, there’s many, many different things that can move the needle on masters that are interesting. Whereas with publishing, you are a little bit reliant on what the record label is doing. You’re sitting behind someone else in those situations. So it does lend itself to thinking about records versus publishing. In the case of Phil Collins and Genesis, we got both. In a perfect world, you get everything in which case you can move the needle for both. That doesn’t happen very often. That’s pretty unlikely in a lot of situations because the artists, for whatever reason, didn’t get everything back or don’t have everything under their control.
Pascucci: We’re pretty agnostic about looking at deals, and we’re always looking at a lot of them. We’re not obsessed with headline-grabbing deals. In our average weekly call, we will look at deals as small as one million dollars and we’ll talk about deals that are [in the] hundreds of millions of dollars. Any of those are capable of checking enough boxes and fitting our business and making sense. It’s not the size of Phil Collins that makes us say it was a little bit unusual for us. It was more that it was a headline-grabbing deal.
McIntyre: In an age when it seems to be an arms race of who can get the biggest deal and who can have everyone talking about them for the day in the trades, I like hearing that’s not the goal necessarily.
Pascucci: In an average year, we’ll do 30 to 50 deals, and most of them are small and you won’t hear about them.
Valentine: We have such a big catalog now that a lot of the deals we do, we have a relationship with an artist. They have a royalty share in some master and they want to sell their participation in those. They’ll call us and say, “Hey, you know, would you be interested in buying out my royalty participation?” That’s not a headline at all. That’s just a transaction we can get done in 30 days. That’s the liquid market for royalties. That didn’t exist 20 years ago. The fact that people are now aware that they can call us and say, “Hey, I understand you will buy this stuff from me,” that’s a phenomenon that was created by Bruce Springsteen and Bob Dylan and everyone selling their work.
Source: https://www.forbes.com/sites/hughmcintyre/2022/12/14/concord-opens-up-about-acquiring-genesis–phil-collins-music-rights-our-reputation-is-good/