As expected, the global investment firm KKR and Kobalt Capital Limited have announced that KKR, together with its co-invest partner, Dundee Partners, the investment office of the Hendel family, have purchased the KMR Music Royalties II portfolio from KCL for approximately $1.1 billion.
The catalog includes over 62,000 music publishing copyrights, with songs by the Weeknd, Lorde and many more artists across multiple genres. According to the announcement, Kobalt Music Publishing — one of the world’s largest publishers — will continue to administer and service the works in Fund II under a multi-year agreement. The company represents over 600 publishers, more than 25,000 songwriters and over 700,000 songs and is regularly one of the top three publishing companies in market share. The announcement states, “Kobalt will continue to build on its award-winning music publishing business and global digital collection society, AMRA.” The Kobalt-KKR deal was first tipped earlier this month by Billboard.
The transaction has been completed by Chord Music Partners, a platform established by KKR with Dundee Partners. KKR will also contribute other music assets purchased over the past year to Chord; according to the announcement, music strategy firm mtheory was instrumental in the development of Chord.
Sources said Kobalt, which sold 33,000 copyrights from a different fund to Hipgnosis Songs for more than $322 million last year, has been lining up a sale for several months, if not longer. The company was founded in 2000 based on stated principles of transparency and technology that allowed its artists to see their earnings in relatively real time, a major development in music publishing that defied the industry’s previously opaque royalty practices and attracted major artists like Paul McCartney, Max Martin, Childish Gambino and the Foo Fighters’ Dave Grohl; it also acquired the catalog of SONGS publishing in 2017, including catalogs by the Weeknd and Lorde, for $150 million. However, industry sources tell Variety that it has faced challenges as other publishers adopted similar practices, and was outpaced by the majors’ larger infrastructure and collection capabilities in many global territories, although its AMRA digital collection society is one of the largest in the world.
For its part, KKR, which has invested in song catalogs by hitmaker Ryan Tedder (Onerepublic, Beyonce, Adele) as well as Gibson guitars, ByteDance (TikTok), Jio Platforms (JioSaavn), Nielsen and Epic Games, adds a major asset to its music holdings.
“We are thrilled to purchase this diverse collection of iconic songs. We look forward to investing in the success of this music and working collaboratively with Kobalt and the artists and songwriters who created it,” said Jenny Box, partner at KKR. “This transaction positions us with significant scale, which we will continue to grow by providing flexible, creative capital to music rights owners. Across KKR, we are investing in innovative technology, media and entertainment businesses that are connecting fans to music in new ways and we are excited about how this can enhance the value and reach of these songs.”
Kobalt Capital chief investment officer and Kobalt founder and chairman Willard Ahdritz said: “When we launched Kobalt Capital in 2011, we wanted to work with music we loved and would continue to live on for many decades to come. Our announcement today acknowledges this focus, our predicted market development and the great work we have done at KCL. I am also proud that creators and rights owners put their belief in us to take care of their timeless music and represent it well. We are excited to welcome KKR and Dundee Partners as Kobalt Music clients as the new owners of the Fund II works.”
Kobalt Capital CEO Johan Ahlström added: “This agreement represents a great outcome for our investors and, just as importantly, the ownership of these copyrights will be transferred seamlessly to new investors who share our commitment to putting creators first and being respectful stewards of great music.”
“Kobalt Music Publishing will continue to act as the core administrator and synch licensing partner for the Fund II portfolio,” said Kobalt CEO, Laurent Hubert. “We are excited to work with KKR, Dundee Partners and the many songwriters we have partnered with for years as we continue to deliver market leading service to all stakeholders to grow the reach of the music we all love.”
KKR has broad experience investing in artist-centric businesses, including household names in the music industry such as Gibson Brands and Alpha Theta (f.k.a. Pioneer DJ), as well as leading digital media and content companies, such as ByteDance (TikTok), Jio Platforms (JioSaavn), Epic Games, OverDrive, RBmedia, ArtList, UFC, Leonine, Next Issue Media and Nielsen.
KKR is investing through its Dislocation Opportunities Fund and certain other private credit investment funds and vehicles. KCL was advised by Russell’s. Music strategy firm mtheory advised KKR and Dundee Partners on the transaction. Latham & Watkins LLP and FTI Consulting advised KKR and DLA Piper, Manatt, Phelps & Phillips, LLP, Jefferies LLC and Inkling Capital, LLC advised Dundee Partners.