Owner of Rush, Timbaland Songs Hunting for Equity PartnerBy and
Ontario Teachers’ Pension Plan is seeking to cash out
Company has $500 million credit facility for acquisitions
Ole, owner of rights to songs from Timbaland to Canadian rockers Rush, aims to ramp up acquisitions and double its profit as it looks for a new equity partner.
The closely held Toronto-based rights management company had been trying to sell itself for the past year but its asking price of about $600 million was too high for prospective buyers, according to two people familiar with the matter who asked not to be identified because the deliberations were private.
Ole declined to comment on any previous sale process but the company isn’t currently trying to sell itself, Chief Executive Officer Robert Ott said in an email. It is looking for a new equity investor however as the Ontario Teachers’ Pension Plan seeks to cash out after investing more than C$150 million ($119 million) in the company, Ott said in an interview at Bloomberg’s Toronto office.
“We’re not in a panic,” Ott said. “It’s a great cash business with great margins, so there can be a tendency to really just clip the coupons.” Ole has a $500 million credit facility backed by 12 financial institutions led by City National Bank, the Hollywood banker that is owned by the Royal Bank of Canada.
Ole aims to boost its earnings before interest, taxes, depreciation and amortization to more than $80 million in the next three to five years by buying assets ranging from song catalogs to instantly licensable music, he said.
The music industry has rebounded from nearly two decades of decline thanks to the growth of paid streaming services Apple Music and Spotify, and music spending is poised to jump for a third year in a row according to a report from the Recording Industry Association of America. Optimism about growth has buoyed the values of music rights, leading to a flurry of deals.
Carlin America Inc., owner of rights to Elvis Presley, AC/DC and Billie Holiday music, is selling to Round Hill Music, the owner of early Beatles hits “She Loves You” and “I Saw Her Standing There,” Bloomberg reported in September. Earlier that month, billionaire Len Blavatnik’s Warner Music Group also acquired Dutch electronic music label Spinnin Records for about $100 million, according to trade reports at the time.
Music licensing is like owning an apartment complex: the building is the music catalog business and each apartment equates is a song, said Ott. You can increase the appeal of your music catalog by getting your songs used in other media platforms. The songs that attract the most recordings and plays are the ones that attract the most revenue.
Music licenses can range anywhere from $100 to hundreds of thousands of dollars. “It’s a landlord’s dream,” the CEO said.
Ole owns music from Tom and Jerry cartoons, some of which were produced in the 1940s and still air globally, and Franklin cartoon anthems, a perennial top earner in their catalog. One of Ole’s recent bets is on the new Sam Smith single “Pray” and it negotiated to have Rush hit “Tom Sawyer” in the trailer for the movie “Ready Player One,” after buying Rush label Anthem Entertainment Group.
The proliferation of new platforms and music distribution has multiplied, resulting in a ‘tsunami of data’ of all the broadcasters, radio services and media platforms worldwide using your intellectual property, said Ott.
“That intellectual property is attached to money,” he said. “It’s a huge challenge for us and for everyone in that intellectual property regime in that world, and so we’ve attacked it through technology because the sheer scope of this data is just unimaginable.”
The company controls 75,000 songs and 60,000 hours of TV and film music in its catalog. So it’s created Conductor, a proprietary software to track the data and royalties for its creators. He’s patented the technology and is considering making Conductor a standalone business and licensing it to third parties.
“There’s lots of pennies adding up,” Ott said.