Oaktree Bets Big On Music Rights

Oaktree Capital Management LP is investing up to $375 million in Primary Wave Music, an independent company that manages songs from Bob Marley and Whitney Houston, joining a parade of financial powerhouses diving into the recording industry, reports Bloomberg.

A portion of the money will go toward a minority stake in closely held Primary Wave, which creates and manages funds that own songs, founder and Chief Executive Officer Larry Mestel said in an interview. The business is valued at $300 million to $400 million. The balance will be earmarked for the acquisition of additional music catalogs via funds that are raised and run by Primary Wave.

Oaktree is the latest high-profile financial firm to make a substantial bet on the music industry. The value of song copyrights has soared over the past few years as streaming services from Spotify Technology SA and Apple Inc. lift industry revenue. Primary Wave, which has offices in New York and Los Angeles, represents Oaktree’s biggest investment investment in the recording business, according to Brian Laibow, a managing director at Oaktree.

“We believe strongly that Primary Wave is of the highest-caliber ability to manage and grow the values of the music,” Laibow said.

Copyrights generate a consistent flow of revenue that some investors liken to interest on bonds.

The high prices enticed major legacy acts, including Nicks, Neil Young and Bob Dylan, to cash in on their catalogs. The more music becomes come available, the more investors show up to buy them.

Mestel has lived through the boom-bust cycles of music copyrights. He founded Primary Wave in 2006 and went about acquiring songs catalogs from Nirvana, John Lennon and Def Leppard. The value of copyrights crashed not long after, triggered by shrinking spending on music by consumers.

While some industry figures still say the copyrights are overvalued, the growing number of investors suggests confidence that industry revenue will rise for years to come. Not only are streaming services growing, but the industry has found new ways to make money, including charging for the use of music in fitness services, video games and social media.

Vivendi SE is selling a stake in Universal Music Group, the world’s largest recording company, that values the business at more than $40 billion — up 33% from just a couple years ago. Shares of Warner Music Group Corp. have climbed about 38% from their initial offering price a little over a year ago.”