HarbourView Equity Partners, the firm founded by Sherrese Soares Clarke and backed by financial giant Apollo Global Management, has acquired an income stream from the record label that’s home to Justin Bieber‘s catalog, sources tell Billboard.
The label, RBMG Records, was co-founded by Scooter Braun‘s Schoolboy Records and Usher in 2008 “with the signing of 15-year-old pop wunderkind Justin Bieber,” according to information on Braun’s now archived website. HarbourView bought out Usher’s interest in RBMG, these sources say, for a sum that Billboard estimates at shy of $40 million. The price would have been much higher had Bieber not taken an advance against the catalog in recent years, sources say.
Representatives for Braun, Usher and Harbourview declined to comment.
According to the archived site, the label venture was “formed through a profit-sharing deal” with Universal Music Group’s Def Jam, and that typically means that after expenses, the profits are split 50-50 between the major music company and the partner. Sources say that the profit-sharing arrangement is still in place. So if UMG and RMBG have a 50/50 split on profit, and if Braun and Usher had a 50/50 split on their end, that would mean that HarbourView could have bought as much as 25% of the label’s profit income stream.
Billboard estimates that the Bieber catalog averaged $47.3 million annually in master recording revenue over the last three years through 2021. Billboard has no insight into the details of the label’s deal with Bieber, but in order to ballpark the size of the deal, if distribution and production costs amount to an estimated 14% of revenue; if radio and marketing expenses cost another estimated 10% of revenue; and if Bieber’s royalties are a blended estimated 25% of revenue — figure the early albums at a 16% royalty rate and the royalty rate escalating during his six-album stay at the label, with the royalty rate winding up above 30% at the end of the deal — that would leave earnings before interest, taxes, depreciation and amortization (EBITDA) of 51%, or $24.05 million. At a 15-times multiple, that would value the label at about $360 million.
The Bieber catalog has generated 27.4 million in album consumption units in the U.S. alone, according to Luminate. Over the last three years, it has averaged 1.2 million units a year in album consumption units in the U.S. During his career, he has been nominated for 64 Grammys and has picked up two Grammy song awards, for “10,000 Hours” with Dan + Shay for best country duo/group performance; and “Where Are You Now” for best dance recording. Ten of Bieber’s albums have hit the top 10 of the Billboard 200; while 104 of his songs have hit the Hot 100, of which 26 have reached the top 10; and eight of them have hit No. 1.
At a $360 million valuation, a 25% share of equity or the income stream would be worth about $90 million. But sources say the label’s valuation — and thus Usher’s interest in the label — was impaired by significant advance money paid out in recent years against the catalog. Thus, Harborview’s new interest is likely about half that.