March 25, 2021

“The fact is, with more and more artists in control of their rights these days, the old music industry ways are no longer an option.”

BMG boss Hartwig Masuch would like to make it clear that his company’s new industry-shaking pact with investment giant KKR – under which both sides will co-own acquired assets – has much more going for it than its spending power.

Even so, after a sustained hiatus from buying music assets, BMG has its check-book out once again… and it’s ready to write down some colossal numbers.

Sources close to the BMG/KKR alliance tell MBW that both sides (BMG via Bertelsmann; KKR via, well, KKR) have initially committed circa $500 million each to their new deal-hunting partnership, with more cash to come when that’s been spent up.

When MBW catches up with Nat Zilkha, a partner at KKR, he confirms that BMG/KKR’s initial joint spending capacity “is measured in the $1 billion-plus category”, and that beyond this, “there’s no upper limit on the capital”.

“YOU CAN RAISE $1BN, $2BN, $3BN – AS MUCH AS YOU LIKE – BUT IF ARTISTS AND, INCREASINGLY FINANCIAL INVESTORS, CANNOT TRUST YOU TO PLAY IT STRAIGHT AND TREAT THEM AND THEIR WORK WITH RESPECT, THEN ALL THE MONEY IN THE WORLD WILL NOT BE SUFFICIENT TO PERSUADE THEM TO DO BUSINESS WITH YOU.”

HARTWIG MASUCH, BMG

On the other side of the new alliance sits KKR, which has already dabbled with buying music rights, having snapped up a Ryan Tedder song catalog for around $200 million in January.

Meanwhile, KKR is an investor in multiple companies that have a connection to the music rights business – whether that be TikTok owner Bytedance, Fortnite maker Epic Games, or Gibson Guitars.

“FROM OUR PERSPECTIVE, IT WAS CRITICAL THIS [DEAL] WAS DONE IN A WAY THAT PUTS THE ARTISTS FIRST.”

Zilkha adds that with BMG by KKR’s side, the latter company has rekindled a relationship with a music partner that it considers “family”. Yet in 2013, five years after ‘new’ BMG was founded, KKR sold its 51% holding in the music company – turning its back on a business that has since boomed as streaming has exploded worldwide.

Has KKR not found itself sitting on the sidelines of the music industry ever since, wondering what might have been?

Zilkha says: “There were many considerations as to why we sold [in 2013]; it was a great partnership for us and BMG, so we look back at it with absolutely no regrets.

“Now we’re looking forward, not backward – and we’re looking at a landscape [in music] where we think there’s an abundance of opportunity.”