Remember when Kobalt Music Group went quiet? Hope you didn’t get too used to it.
The company – which has been a disruptive presence in the music business ever since being founded by Willard Ahdritz in 2001 – was notably muted in its announcements throughout 2020 and most of 2021.
In addition, Kobalt’s investment management arm, Kobalt Capital, facilitated the sale of two music-owning funds over the past couple of years for a total of $1.4 billion: Fund One was sold to Hipgnosis Songs Fund for $323 million in late 2020; Fund Two was sold to KKR / the Hendel family for $1.1 billion in October last year.
Important to note: These funds were not owned by Kobalt, but by third-party investors whose money Kobalt managed (and got chunky fees/commissions for doing so).
Now, as MBW reported earlier this week, Kobalt is a profitable company, with a projected FY revenue of over $600 million in its current fiscal year. It’s also very excited about the growth prospects of its in-house digital collection society, AMRA.
But that’s not where the story ends.
Kobalt is going to continue to buy heritage copyrights amid the current music catalog gold-rush, it’s been revealed. Only this time, it’s not using outside-investor money… it’s using its own, including a hunk of debt.
According to Bloomberg, Kobalt Music Group has successfully raised $550 million in debt financing from JPMorgan Chase & Co. and HPS Investment Partners.
Kobalt intends to use the funds, says Bloomberg, to build out its owned catalog of music rights.
Hubert explained that Kobalt had effectively shuttered its Kobalt Capital investment advisory arm, but that it would continue to make acquisitions under its core Kobalt Music Publishing division.
(Kobalt these days effectively has two divisions: Kobalt Music Publishing – including investment advisory services – plus AMRA.)
Confirmed Hubert in that interview: “Obviously the [two now-sold] funds have been good for Kobalt. They enabled us to expand our reach in the market and grow as a company. The flip side of that is the funds, rather than Kobalt, were capturing the majority of theeconomics.
“Going forward, by deploying our own capital on our own balance sheet, we will be the sole owner of those economics – whether it’s a [songwriter] signing or an acquisition. It’s a fundamental shift in the way we’re able to grow our gross margin, and grow a business.”
Now, Kobalt has an additional $550 million on that balance sheet… in addition to a stack of cash left over from Sony‘s $430 million acquisition of AWAL and Kobalt Neighbouring Rights.
According to its recently-published financial results, Kobalt ended its FY2021 – the year to end of June 2021 – with $314.98 million cash in the bank.
If the now-profitable company has managed to grow that cash pile from then to now – and when it’s mixed in with the new $550 million in debt – we could be looking at yet another firm in the music business with catalog-acquisition spending power at close to a billion dollars.
Kobalt’s catalog acquisition business is distinct from its frontline publishing business, which administers copyrights that are owned by songwriters themselves.
Those songwriters include the likes of Andrew Watt, Finneas O’Connell, Ozuna, Karol G, Lorde, Phoebe Bridgers, Stevie Nicks, The Foo Fighters, Roddy Ricch, Gunna, Kali Uchis, and many more.
Kobalt told MBW this week that it expects to generate somewhere close to USD $625 million in gross collections in its current financial year, to the end of June 2022. (Gross collections being overall revenues, plus fees received by Kobalt for its role as an advisor / asset manager to music-buying funds.)
Kobalt is also anticipating that it will end the current FY with around a tenth of that figure, $65 million, in EBITDA profit.Music Business Worldwide