As Round Hill’s market share of US hits climbs, company tells music biz: Don’t call us a check-book publisher

Round Hill Music CEO and founder, Josh Gruss

Round Hill Music equalled its best-ever market share performance for radio hits in the US in Q4 2020. According to Billboard data, Round Hill ranked at No.6 with a 3% share of the Top 100 most popular radio hits across all genres in the quarter – behind BMG (No.5), Warner Chappell (No.4), Kobalt (No.3), UMPG (No.2), and Sony Music Publishing (No.1).

Round Hill has been a regular in Billboard‘s Top 10 market share list for over three years, and ranked at No.7 in the first three quarters of 2020. This level of frontline radio success is obviously unusual for a company like Round Hill, which is best known as an aggressive acquirer of catalog music rights. So what’s going on?

According to Round Hill CEO Josh Gruss, the driving force behind Round Hill’s ability to snaffle market share for contemporary US radio hits lies in three key factors: (i) Round Hill spends somewhere around 5% of its private fund investment on frontline A&R – with the remaining 95% spent on acquiring catalogs; (ii) Its early and successful investment in country music; and (iii) The way in which it structures many of its deals across genres.

1) The ≈5% investment

Gruss is proud of the 5% stat. He points to Round Hill’s ‘Fund One’, which was launched in 2012 and raised $202 million. This money was then spent on copyrights to classic songs made famous by the likes of The Beatles, Louis Armstrong and Otis Redding. (The collection of copyrights initially acquired by Fund One were recently acquired by Round Hill’s new UK-listed London fund.)

Crucially, Gruss says that Round Hill directed $15 million of Fund One’s $202 million to signing works and ‘futures’ from contemporary songwriters, as well a new recorded music. Round Hill has subsequently earmarked around 5% of its capital for frontline A&R investment from two further private funds: ‘Fund Two’ ($263m raised in 2017) and ‘Fund Three’ ($291m, announced last year).

“There’s a lot of chat out there about check-book publishers – the supposed difference between a ‘real’ publisher versus a check-book publisher,” says Gruss. “Round Hill was No.6 in terms of [Billboard] market share this past quarter but we’ve been anywhere between six and 10 almost every quarter since 2016.

“We’re grabbing a lot of market share on radio, really punching above our weight. That’s what a real publisher does; if you’re just a check-book publisher, you’re just buying catalogs – you’re not relevant in the current radio charts.”

Gruss acknowledges there’s an additional capitalistic perk to Round Hill’s performance on the Billboard chart: some lump-sum settlements in the US music publishing industry are divided on the basis of radio market share.

“We’re grabbing a lot of market share on radio, and really punching above our weight. That’s what a real publisher does; if you’re just a check-book publisher, you’re just buying catalogs, you’re not relevant in the current radio charts.”

Josh Gruss, Round hill

He adds: “Round Hill has been able to maintain about 5% of our capital being put into new signings and the results for us have been just off the charts. We’ve had about 60 No.1 songs on [various] Billboard charts over the last five years. A lot of that came from the $15 million we spend from ‘Fund One’ [on new music]. Compare that to the next highest [publishers] on Billboard’s list – they’ve all spent a lot more than that to get their market share [of the Top 100 radio hits].”

But how does a predominantly catalog-driven company like Round Hill justify spending 5% of its investors’ money on frontline A&R? Especially to those investors themselves?

“It’s all about diversification,” says Gruss. “It’s important for any publisher not to get stuck being pigeon-holed as being just a catalog company. If you have newer music it makes you a little bit more relevant and attractive to songwriters who are still active.

“[Frontline A&R] is more risky – it’s more like venture capital, say, versus private equity, which is more [akin] to investing in proven catalog. But if you do [contemporary A&R investment] right the returns can be really good.”

Gruss notes that “brands sometimes really want to attach themselves to the hottest new thing”. With this in mind, he says that Round Hill’s in-house sync department, Zync Music, has its own A&R budget to invest in sync-friendly new artists/writers and has enjoyed material success via this strategy.

2) Success in Country

Round Hill’s early investment in frontline A&R saw the company take ownership of contemporary hits by big acts such as American Authors, whose Best Day Of My Life (2013) went to No.1 on the US Adult Chart and No.2 on the US Rock chart. Other more recent Round Hill successes in the Rock genre include Black Pistol Fire and Tash Neal, both of whom release their masters via Round Hill’s Black Hill Records.

But it’s in the Country genre, says Gruss, that Round Hill has found most consistent success with its frontline strategy.

“One of the great things about Country is that you have the optionality to get a pop crossover hit too,” says Gruss. “We had The Bones by Maren Morris last year written by our writer Jimmy Robbins. It was a No.1 Country song for 17 weeks and it also reached the Top 10 pop charts.

“We’ve had several other of these ‘crossover’ hits. It doesn’t work the other way around. A pop song never crosses over into the country charts.”

Gruss cites research by Massarsky Consulting concerning the division of US performance royalty radio revenues in 2019, which showed that Country music took a bigger chunk of this money (19.9%) than any other genre, with Standards (19.6%) at No.2.

He further notes that Round Hill’s investment in Country (and other genres) extends to its own recording studios – Sienna Studios – in Nashville.

3) Round Hill’s deal structure

Part of the reason Round Hill is active in the contemporary A&R space, notes Gruss, is because its involvement can directly stem from its core focus of catalog acquisition.

For example, in 2018 Round Hill acquired the song catalog of multi-ASCAP winning Country writer, Ashley Gorley. As part of that deal, Gruss says that Round Hill “wanted to attach ourselves to Ashley’s future and bet on it”, so struck a mixed catalog and ‘futures’ deal.

Although mixed deals like this aren’t the only way Round Hill increases its frontline market share, Gruss accepts it’s a “primary way” that the company increases its presence in the hits business.

“I know that in reality [frontline A&R] is a risky business, and it’s time-consuming.”

Josh Gruss, Round Hill

He adds: “I recently joked to our Fund One investors that in hindsight we should have increased our investment in [contemporary hits] to above 5% because it did so well for that fund – but I know that in reality [frontline A&R] is a risky business, and it’s time-consuming.”

He adds: “We have some things in place to mitigate that risk, like our sync team who really have their ear to the ground in terms of which [potential new signings] are sync-able, which is a key way we recoup our investment following a deal.

“We’re also aware there’s some luck to A&R: there have been one or two things along the way that we wanted to sign that completely bombed. But I’m pleased to say someone outbid us for them!”Music Business Worldwide