Once upon a time, it had a material stake in the music business, until it sold its 51% holding in BMG to Bertelsmann in 2013 for approximately $1bn.
Today, however, KKR has jumped back in the music biz in a much bigger way – announcing that it has bought a majority stake in a music catalog created by three-time Grammy winner Ryan Tedder.
How big a deal are we talking? Transaction details weren’t disclosed… but KKR is keen to remind us that, to date, songs written by Tedder have sold over 420 million copies, or the equivalent of 63 billion streams.
KKR says the Tedder catalog spans nearly 500 songs, covering both “music publishing and recorded music rights”.
As so often in the music business, though, the rights to Tedder’s back-catalog are something of a patchwork, and KKR doesn’t get its hands on it all.
MBW has confirmed that the deal sees KKR acquire a majority stake in Tedder’s publishing rights for all songs written for other artists released after January 1, 2016. In addition, KKR has acquired a majority stake in all songs (before and after that date) Tedder has written for, and performed as, OneRepublic.
That carefully-worded clarification is needed because the publishing rights that Tedder sold to Downtown in 2016 for 170 of his songs are not included in the KKR transaction. Those copyrights didn’t include OneRepublic songs, but did include music written by Tedder for other artists released before January 1, 2016. Those 170 songs continue to be owned and administered by Downtown.
In addition, MBW has confirmed that Interscope Records continues to own the masters to OneRepublic’s recorded music. However, KKR will participate in Tedder and OneRepublic’s royalty income from that music, as well as Tedder’s producer royalties from other recorded assets.
Two other parties – Tedder’s management, Patriot Management, and artist development company mtheory, through its MTC Music Royalties fund – are co-investors in the catalog alongside KKR, and will hold stakes following the transaction.
KKR says that the catalog covers songs and/or tracks Tedder has written with Beyoncé, U2, Paul McCartney, Adele, Stevie Wonder, Ed Sheeran, Lady Gaga, Cardi B, Jonas Brothers, Thomas Rhett and all OneRepublic songs including hits like Apologize, Secrets and Counting Stars.
The news of a huge investment fund manager moving into the ownership of individual artist/songwriter copyrights might raise eyebrows in the music business, where some at traditional major companies have registered skepticism about “check-book publishing” in recent months.
Rather batting back at that suggestion, a KKR press release issued today (January 11) said: “Centered around an ‘artist-first’ approach and in collaboration with Tedder, KKR plans to leverage the firm’s vast network, resources and global scale as well as its deep experience successfully investing in market-leading music, digital, media and content businesses to expand upon the success and reach of Tedder and OneRepublic’s music.”
Tedder said: “The music industry is undergoing an incredible period of transformation. Streaming and all forms of digital content are not only providing new avenues for how we consume music, but also for how artists can reach new audiences in a much more immersive way. KKR really stood out to us from every metric that mattered and it truly impressed upon me and my team their commitment to music as a true focus and passion moving forward.”
“KKR really stood out to us from every metric that mattered and it truly impressed upon me and my team their commitment to music as a true focus and passion moving forward.”
Nat Zilkha, Partner at KKR and Chairman of Gibson Brands, a portfolio company of KKR, said: “We are excited to partner with Ryan on both his extraordinary body of creative work and on pursuing future opportunities together. At KKR, we are focused on a number of investment initiatives across the music and entertainment industries and we believe Ryan’s unique combination of artistic brilliance and business acumen will help us amplify these efforts.”
Jenny Box, Partner at KKR, added: “KKR’s collaborative approach across investment strategies allows us to provide highly flexible and creative capital solutions to artists and companies across the music and entertainment industry. We are looking forward to partnering with Ryan and other leading artists to support their art and innovation.”
And Ron Laffitte, President of Patriot Management, said: “Ryan is one of the most creative artists of our time. We were looking for a strategic partner to help us build on Ryan’s incredible success and find new ways to empower his artistic genius. KKR stood out immediately because they understand that the artist should be at the center of everything that involves the creator’s creation.”
“We believe that KKR, with its ability to leverage its vast investment platform to bring innovation to our industry, will be the ideal partner to support Ryan in his future endeavors,” said Nick Geller, COO of Patriot Management. “We are excited to work with Nat, Jenny and the rest of the KKR team on this opportunity, and to be a part of their various initiatives in the music industry going forward.”
KKR is investing in the catalog through its Dislocation Opportunities Fund and private credit vehicles.
Jordan Keller and Sarah Smith of Keller, Turner, Andrews & Ghanem represented the sellers, and Latham & Watkins and FTI Consulting served as advisors to KKR on the transaction.Music Business Worldwide