Some of pop’s most iconic songs and assets are back on the block but may be attracting lower-than-expected bids.
Two separate auctions, one for the Elvis Presley estate and another for S1 Songs, are in their second and final round of bidding, sources say.
The Presley estate, which includes such assets as royalties from recordings and music publishing; name and likeness rights; and Graceland and Heartbreak Hotel, is supposedly being packaged with the Muhammed Ali estate, and those assets are said to have about $15 million in earnings before interest, taxes, depreciation and amortization.
According to sources, G2 is making a joint bid with Sony/ATV for the assets in which the latter would get the publishing assets, while G2 would get the bulk of the estate including record royalties paid for post-1973 recordings and reissues that the Presley estate was involved in preparing with Sony Legacy. Other bidders are believed to be branding companies that work in name and likeness properties.
While first-round bids for the Presley and Ali estates were in the $200 million range, sources say second-round offers have dropped to between $100 million and $150 million. The lower bids in the auction — run by the Raine Group, which recently ran the successful auction to sell Concord Music Group — are due to the recognition that both Graceland and Heartbreak Hotel will require a capital infusion in order to upgrade and maintain them.
Meanwhile, the S1 Songs publishing catalog, which sources say generates about $4.5 million annually in net publisher’s share, also will fetch a lower-than-expected price. That’s because the assets are under contract in what’s termed as a “massive administration deal” until the end of either 2015 or 2016, which carries about a $2 million annual fee.
The S1 catalog — built by Steve McMellon’s First State Media with the backing of Colonial First State Advisory, the private-equity arm of Commonwealth Bank of Australia — holds about 30,000 songs spanning from the ’60s to 2008, including Sheryl Crow’s catalog, the Wind-up catalog (including songs by Evanescence) and the DreamWorks Music Publishing catalog (including titles by the Byrds and Stevie Ray Vaughan). Other songs believed to be in S1’s catalog include Chubby Checker’s “The Twist.”
First State Media laid out more than $150 million in assembling the publishing assets, according to sources. But these sources claim that it overpaid for the catalogs, leaving its only lucrative asset the administration deal to manage the song catalogs. McMellon sold the company containing the administration contract to Chrysalis in a deal valued at about $10 million, and that contract was subsequently taken over by BMG Rights Management when it acquired Chrysalis.
Since BMG is serving as administrator through 2016, most other suitors consider it the lead bidder. But people familiar with the situation say BMG and all of the other likely suspects are already out of the running.
Sources say six bidders are left in the S1 auction, including ole, Nettwerk and Kobalt Music Group, with bids due by Aug. 19.
Jason Somerville, managing director of Los Angeles-based boutique investment banking firm EIG, is running the auction. He was unavailable for comment.