On the most recent Music Enterprise Worldwide podcast, MBW founder Tim Ingham is joined by Sherrese Clarke Soares, founder and CEO of HarbourView Fairness Companions.
HarbourView has earned loads of headlines because it was based in 2021. Underneath Soares, the corporate has acquired premium recorded music and publishing property carried out by stars reminiscent of Wiz Khalifa, Nelly, Girl A, Florida Georgia Line and the late, nice Christine McVie.
One in all HarbourView’s greatest offers to this point is its reported $325 million buy of SoundHouse Acquisitions LLC in 2022, a catalog that features royalty streams for songs by artists reminiscent of Tech N9ne, George Jones and Trey Songz.
HarbourView has made all of those acquisitions with the monetary backing of Apollo International Administration, who partnered with Soares to launch the agency. (Apollo lately partnered with Sony Music Group through a $700 million funding which is believed to have partly funded Sony‘s buyout of Queen‘s catalog.)
Over the previous yr, HarbourView has expanded its remit past music into different leisure verticals, instance being its funding in content material firm Mucho Mas Media, which produced the Netflix hit The Lengthy Sport.
(It’s additionally continued to purchase in music: subsequent to Ingham’s interview with Soares, Harbourview confirmed its acquisition of a choose publishing catalog from Grammy-winning James Fauntleroy.)
In March 2024, HarbourView introduced a brand new supply of funding for future offers, having secured $500 million in debt from KKR through a non-public securitization of its catalog of music royalties.
Sherrese Clarke Soares is well-versed within the financialization of leisure rights. Previous to beginning HarbourView, between 2019 and 2021 she led Tempo Music, a pioneering music acquisition car created with and bankrolled by Windfall Fairness Companions.
Earlier than that, she spent 10 years at Morgan Stanley, the place – between 2017 and 2019 – she based and led the event of the agency’s leisure, media and sports activities structured options platform.
On this podcast, Ingham talks to Soares about HarbourView’s ambitions within the music and leisure house, the obvious current slowdown in streaming progress, the influence of elevated rates of interest on music M&A, and rather more.
Learn abridged/edited highlights from their dialog beneath, or hearken to the total podcast – both above, or in your most well-liked service…
It’s been three and a half years since HarbourView launched. To get an concept of your dimension and progress, may you carry us on top of things with the corporate’s key stats?
We’ve been fairly busy, as you may think about. We personal in all probability 75 to 80 underlying catalogs from throughout genres and vintages, starting from issues as seasoned as Fleetwood Mac and Pat Benatar to issues as current as Ruth B and issues within the Latin house like Eslabon Armado and Peso Pluma.
We’re actually targeted on constructing a portfolio that has one thing for everybody. I like to inform folks I’m the Netflix of the house, if you’ll.
“I like to inform folks I’m the Netflix of the house.”
That’s how we speak about portfolio and portfolio building, actually centering a worldwide viewers, with a heavy hand on knowledge and knowledge analytics, the place we expect progress and world audiences are.
That’s led us to about $1.6 billion of complete property beneath administration, or property bought – the worth could also be larger than that. We haven’t taken any heavy marks to our valuations.
Catalog M&A is a aggressive house, and it’s grow to be much more aggressive within the years since HarbourView launched. How does HarbourView differentiate itself from different consumers within the market?
One, we’re targeted on constructing an funding agency throughout the leisure, media and sports activities segments. We spend money on issues exterior of music [and] what that creates is a really wealthy ecosystem. It’s greater than buying solely music and music catalogs.
I feel it’s actually allowed us to do some differentiated sorts of transactional constructions with the artistry that we’ve labored with, whether or not it’s to do issues with simply catalog solely, catalog plus futures, catalog plus title, picture, and likeness – we’ve performed all the above, partnering with these artists round growing different sorts of content material or adjoining sorts of content material, offers with content material creators that we will take a look at investing in collectively. So we actually are differentiated in that respect.
“Music is] tremendous enjoyable, however as a consequence, that may be scary to buyers. And so we attempt to demystify that. We attempt to put numerous construction and institutionalization round how we take into consideration that.”
We actually attempt to strike this center notice of being translators to the investor neighborhood round how to consider issues within the leisure, media and sports activities phase. Notably as a result of, as you and I do know – we get to work in it each single day – it’s tremendous enjoyable, however as a consequence, that may be scary to buyers. And so we attempt to demystify that. We attempt to put numerous construction and institutionalization round how we take into consideration that.
So I feel these two issues have actually differentiated ourselves by actually being this center notice – translators for creators, actually centering creators within the creator ecosystem, but in addition being companion to our buyers and having the ability to reveal our self-discipline round how we take into consideration investing throughout the house.
What’s your shopping for standards? How do you resolve upon an asset you wish to purchase? And the way do you concentrate on decay curves?
First, with out getting too technical or spilling our secret sauce – one of many issues that we’re actually targeted on is that this world viewers body.
That implies that each single human being, [anyone] on the planet who has entry to web providers or methods to interact in music – is a possible viewers member. And the one manner for us to chop by means of that world viewers… is that we’ve actually centered knowledge analytics in the way in which that we take a look at issues.
We’ve seen over 600 to 700 catalogs since we’ve opened our doorways. We’ve performed lower than 10% of that. We are saying no rather a lot, and we are saying no rather a lot round issues that don’t essentially slot in our framework for a way we see these alternatives and what we expect that they imply to our portfolio.
“It truly is this concept of… having one thing for everyone, as a result of we expect that’s going to be positioned finest for progress in opposition to a worldwide viewers.”
We’re actually targeted on [artists] who’re double-clicking and triple-clicking into their viewers, [who have] actual resonance with their viewers. A whole lot of that we will see in varied knowledge metrics that we take a look at, but in addition, qualitatively, we now have a workforce that appears like a worldwide viewers, and that’s very intentional, as a result of we imagine that the world is plural and never singular.
What I imply by that’s that we wish to be sure that we now have no blind spots in the way in which that we’re or figuring out alternatives. I don’t personally should know or be a fan of the music that we spend money on, however what it has to point out, by means of the info that we get, by means of the way in which that we interact with the artists and their fandom, is that they know who their viewers is and that their viewers is hyper-engaged.
It truly is this concept of – coming again to being the Netflix of the house – having one thing for everyone, as a result of we expect that’s going to be positioned finest for progress in opposition to a worldwide viewers.
And that takes out a few of that seasonality across the decay on the entrance finish. It takes out among the potential obsolescence threat you probably have issues which are solely in a single classic or one other. And that permits us to actually place ourselves with the strongest portfolio for the perfect alternative for upside for our buyers.
We’ve seen some slowdown within the music acquisition house up to now two or so years. That’s primarily been brought on by escalating rates of interest. How do you assume the rate of interest setting goes to play out over the following yr or so, and the way may that have an effect on music’s M&A sector?
It’s actually onerous to search out any asset class, and any market, that doesn’t have a correlation to rates of interest. That being stated… we now have seen actual resilience within the financing marketplace for our personal property, with the flexibility to have the ability to worth these property actually attractively. And we expect that exercise, at the least for us, will proceed.
I feel a big a part of that’s the asset class is non-correlated [to other asset markets] and [it’s] a diversifier. Additionally, the way in which that you concentrate on constructing a portfolio issues to [entities] like score businesses and banks and issues of that nature, which then point out what you may finance portfolios at, which we expect we middle in a reasonably differentiated technique to our peer set.
As we glance out on the horizon, we’re anticipating a Fed fee minimize earlier than finish of yr – perhaps one, perhaps two earlier than finish of yr – and perhaps a pair subsequent yr. [That will] profit threat property in a constructive manner, inclusive of music property.
You latterly made an funding into L.A.-based content material firm Mucho Mas Media, which was behind the profitable Netflix transfer ‘The Lengthy Sport’. What does this funding inform us about HarbourView’s technique in increasing throughout leisure and sports activities verticals?
Our saying is that content material is queen, and that’s not solely music content material, it’s all content material. If we wish to be positioned in opposition to a worldwide viewers, [that] leads us to creating comparable considerate bets and issues exterior of music, significantly on the movie and tv facet.
Mucho Mas is a movie manufacturing firm led by Javier Chapa, who’s a longtime movie producer on this house. He’s targeted particularly on Latinx audiences. We invested in Mucho Mas and in addition invested in creating product with him – creating movie product that’s designed for particular audiences with the concept round delivering top quality ROI.
We have been in a position to do this on this first movie referred to as The Lengthy Sport… a sports activities story about 5 younger Mexican-People who had a love for the sport of golf in 1956, and couldn’t play golf for plenty of causes that all of us perceive and know nicely, given the place and time in historical past. They constructed their very own golf course, they began their very own workforce, they usually went on to win the [Texas State] championship. And it’s a real story.
“Our saying is that content material is queen, and that’s not solely music content material, it’s all content material.”
We cherished the weather right here… we noticed some actual knowledge integrity coming off of our music catalog, really, the place we now have numerous Latin publicity, that informed us this might be a extremely fascinating factor to do.
After which, lo and behold, as folks continued to search out this movie on Netflix, it principally knocked [Beverly Hills Cop: Axel F] with Eddie Murphy out of the primary spot for a pair days when it comes to primary movies on Netflix.
It continues to show the thesis that if we make nice issues for all audiences, and we double-click and triple-click on that viewers, you may get actually resonant alternatives, with actual fee ROI.
HarbourView had a monetary milestone earlier this yr the place you secured a $500 million debt bundle with KKR. What does that imply for HarbourView’s spending energy, and does it inform us something about KKR’s perception in music asset lessons, in addition to leisure asset lessons?
The deal we did with KKR is a half billion greenback securitization, one thing that they did with us on the again of exiting their funding in Chord [Music Partners]. It’s an actual testomony to our franchise, it does give us incremental firepower, and we’ve bought extra firepower coming. So we’ve bought plenty of dry powder within the tank to actually proceed to establish top quality alternative units.
KKR, Apollo, they’ve all been nice companions of our agency. And I feel once you see massive scale institutional companions like that partnering round this asset class, however particularly backing a agency like ours, you perceive the ability of the asset class, but in addition the ability of the franchise that we’re constructing right here.
As I inform all my creators, we actually wish to be residents of this house. We’re not going anyplace. I personal HarbourView outright, that is my life’s work, so we now have to proceed to take a position with self-discipline in order that we ship an excellent return on funding for all of our buyers.
Common Music Group‘s newest outcomes, for Q2 2024, have been fairly sturdy total, however there was one determine that spooked some analysts: Development in subscription streaming revenues was decrease than what analysts had been anticipating. Does the priority round this determine correlate in any respect with the way you view the music market’s potential going ahead?
I feel Common delivered an excellent quarter. At HarbourView we consider them as an excellent strategic companion. A lot of our catalogs are distributed or administered by Common, so we took nice consolation in the truth that they delivered a really sturdy quarter.
I feel it’s important to keep in mind that within the place that we sit in, proudly owning legacy property or seasoned catalogs, we’re in an area the place we’re some progress, however we’re actually and pondering by means of money flows that needs to be steady to rising within the single digits.
So we don’t see that as something that creates any detrimental view for us. We’re centering on world audiences, we’re [looking at more] than simply paid subscriptions. Truly, [our investments are] rather more listed to ad-supported, significantly in non-Anglo markets or ex-US markets.
So it could possibly be simply the combo for the time being, for Common, as to why that degree of paid streaming appears to be extra de minimis than one would really like. However for us, primarily based on the combo of the portfolio that we now have and the age of portfolio that we now have, we aren’t seeing any degradation on revenue that we’re anticipating, and in reality, our precise efficiency, relative to our forecast, is usually a really constructive variance.
We’ve seen some consolidation amongst music’s new class of acquisitive catalog house owners. On this context, do you assume HarbourView might be a purchaser or a vendor? And what’s your total ambition for HarbourView?
First, no, we’re not on the market. We’re undoubtedly a purchaser, and we’re comfortable to be a purchaser of all of those platforms that wish to roll issues up.
I do assume that you’ll proceed to see consolidation on this house, largely as a result of there’s not that many totally unbiased corporations, or if they’re, they’ve been one-product corporations, which is likely one of the issues that could be a true level of differentiation for us – that we’re actually centered on being an asset supervisor throughout leisure, media and sports activities, and never solely a music catalog platform.
Music is a majority of our enterprise in the present day, and it’ll proceed to be a good portion of the whole lot that we do. However as we proceed to diversify our product providing for our institutional buyers, we’ll proceed to see increasingly more issues beneath the HarbourView banner.
HarbourView was created in partnership with Apollo International Administration, which is a big investor in a number of completely different industries. We’ve reported that they simply invested $700 million right into a partnership with Sony Music Group, to cowl Sony’s acquisition of Queen’s catalog. What’s your view on Apollo teaming up with Sony? How significantly is Apollo taking music property?
Apollo has been an excellent companion to our agency. They staked our agency. We’re the funding supervisor on that, we make investments that with our personal discretion, topic to some guidelines. They offer us working capital to construct on our agency, and in change, they take part in our agency’s success. They’ve been wonderful companions. They’ve been mentors to our agency.
We have been their first foray into the general music house, however they choose companions who’re knowledgeable at executing. We’re all just a little bit completely different, clearly. Sony’s an excellent and excellent world leisure platform. [Apollo have] labored rather well with Harmony, which is an incredible writer, after which we’re an asset administration agency – three alternative ways to interact.
They proceed to assist our agency in a myriad of various methods, and we proceed to see that they are going to proceed to place extra capital behind this house, whether or not it’s with us or with others.
I’m going to presume that if the HarbourView experiment hadn’t paid dividends, fairly actually, they in all probability wouldn’t be transferring into music–
We paved the way in which for all of them! [Laughing.]
The primary time that the majority MBW readers would have heard your title is when Tempo Music Investments launched. Why did you in the end find yourself leaving Tempo, and launching HarbourView?
I feel the one factor that I didn’t totally admire once I launched Tempo was I used to be new to launching an asset administration agency. I solely owned a small proportion of that enterprise, and I had began actually from scratch, from once I was pregnant with my son in 2015.
What I didn’t concentrate on was what I’d have wanted to actually be capable of scale the group [in terms of] of human capital, for myself, possession for myself, but in addition for my workforce.
“We’re nonetheless very a lot firstly. I inform folks on a regular basis that HarbourView is my third youngster. My daughter is sort of 12, my son’s nearly 9, and my firm’s solely three and a half years previous. So I’ve a toddler.”
There was nothing [behind the decision to leave] aside from I knew I needed to construct one thing. And Tempo was… very narrowly targeted simply on music. I knew I needed to construct a agency round these themes, round leisure, media and sports activities. It was an entire white house that we noticed when it comes to institutionally expert corporations, or at the least only a few corporations that do that in a multiproduct manner.
And candidly, we’re nonetheless very a lot firstly, I inform folks on a regular basis that HarbourView is my third youngster. My daughter is sort of 12, my son’s nearly 9, and my firm’s solely three and a half years previous. So I’ve a toddler.
And like anyone who’s a father or mother and is aware of what it’s to have a toddler, you may take off among the massive proof locks, they usually can put meals of their mouths themselves, and issues of that nature. However we nonetheless are rising.
For those who had a magic wand and you can faucet it to vary something in regards to the music enterprise, what would you alter?
I don’t know. I like it a lot… I don’t actually have a ton of issues that I’d change.
I feel we’re seeing the start of a change – the truth that we’re plural, we’re not singular.
What I’ll proceed to hope to see in music is that this mashup: Shaboozey, a baby of immigrants, crushing it on the nation chart; Publish Malone going from pop to rock to nation music; the Okay-pop collaborations with artists like Chris Brown; I actually wish to proceed to see this mashup, as a result of I imagine strongly that Gen Z and Gen Alpha, that is the life and the world that they like to stay in.
They like to stay on this plural, “multi” dynamic, and it’s not singular. And so if I had a magic wand, I’d speed up our pacing in opposition to that and actually get the world to see that it’s the reply, the intersectionality and the worldwide viewers of all of it, and it’s not within the singular, it’s within the plural.
