After a three-month auction that attracted 14 bidders, SONGS Music Publishing sold its catalog to Kobalt Capital’s fund, where it will be administered and serviced by Kobalt Music Publishing, the indie publisher tells Billboard.
SONGS founder and CEO Matt Pincus, 45, declined to disclose the sale price, but sources say first round bids included a $160 million offer, while a lower $140 million bid was turned down in the final round of four contenders. The latter price would have been around 12 to 13 times SONGS’ net publishers share, or gross profit. (Other high-priced sales this year have included Concord's acquisition of Imagem in June and Round Hill's purchase of Carlin America in September.) Pincus also turned down an offer from a major record company that would have paid him the majority of the sale price up front but would have required him to stay on as an executive to earn the remainder, sources say. Other sources say that besides Kobalt, bids from other strategic players ranged from less than $100 million to $120 million in the first round; some of those bidders stood pat, some dropped out and others raised their bids in the second round.
Kobalt, meanwhile, was well-positioned to win, recently announcing it had raised commitments of $600 million in equity and debt to buy music assets.
The sale makes free agents of SONGS president Ron Perry and SONGS head of creative licensing Carianne Marshall, both of whom Pincus credits with helping him build the company and both of whom own minority stakes. Perry, who joined SONGS shortly after its launch, is widely considered a leading contender for the top job at Columbia Records, a post that’s been vacant since former Columbia boss Rob Stringer was promoted to chairman/CEO of of Sony Music in April. Pincus, who sits on the boards of ASCAP and the NMPA, is giving employees seven months' salary in severance, and plans to take time exploring his next move. Pincus and Perry will continue to be partners in the record label they started with Barry Weiss, RECORDS, and will JV it with a major label.
A Columbia business school graduate and EMI veteran who once played bass in the hardcore band Judge, Pincus launched his publishing company in 2004. After more than a decade of growth through inking long-term deals with contemporary songwriters and producers such as Lorde, Diplo and DJ Mustard, Pincus says he’d reached a point where doubling the size of his company would mean outspending the three major record companies for new talent and catalog -- an expensive proposition. He says he became determined to sell last year after unsuccessfully attempting to merge with another music asset company, with the deal falling through at the final hour.
“The price of signing songwriters has skyrocketed, and prices of catalog are stratospheric,” Pincus tells Billboard. “We don’t have any outside capital at Songs -- we invest our own money.”
SONGS attracted huge interest thanks to its more than 5 percent share of airplay as of the last quarter of 2016, and also thanks to its lengthy deals with most of its songwriters, which give it publishing or co-publishing rights to their works over the life of the copyrights. (Nowadays, established songwriters usually sign co-publishing deals that allow the publisher to own and exploit the songs for a finite amount of time.) On average globally, the life of copyright extends 70 years past the life of the songwriter, though in the U.S., the songwriter can exercise a termination right after 35 years for songs written after 1978 and 56 years for songs written before 1978. Because the deal with Kobalt is structured as an asset sale, those copyright terms -- generally a 35 percent to 40 percent stake -- will transfer to Kobalt. Diplo and The Weeknd still have several years remaining on their contracts, giving Kobalt rights to their future hits, sources tell Billboard. Also because it was asset sale rather than an entity sale, none of the SONGS executives had to sign non-compete clauses.
LionTree Advisors advised SONGS on the deal, while Michael Selverne, SONGS longtime business advisor, acted as a legal advisor, introducing Pincus to Kobalt Music’s founder and CEO Willard Ahdritz in 2004.
“Since then, first as a client and then as a friend, Matt has built a remarkable company with a combination of great creative vision and a deep business understanding," Ahdritz said in a statement. "The results are an extraordinary music publishing company. I am honored that Matt has trusted Kobalt to take care of his songwriters and songs. We are looking forward to delivering an outstanding service in their new home."
Pincus says he loves music publishing and is still weighing his next move, but has ruled one thing out.
"I'm probably not going to start an independent music publishing company right now - it's a difficult time because the valuations are very, very, very high," he says.