Oct 30, 2017 · 43m · capital-allocators
Larry Mestel – Making Music Royalties Sing (Capital Allocators, EP.30)
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of Capital Allocators, host Ted Seides interviews Larry Mestel, founder and co-CEO of Primary Wave, exploring the valuation, proactive marketing, and portfolio management of iconic music publishing rights. Mestel shares how his firm transforms legacy music catalogs into dynamic multi-platform assets through creative branding, disciplined underwriting, and strong artist partnerships.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Ted holds 25% of the talking time here. How this is scored →
Ted as informed peer 2.6 Guest teaching 2.9 Guest disagreement 0.4 Ted pushing back 0.1
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 33:29 Boundary set on artist confidentiality
Larry explicitly refuses Ted's request for a personal backstage anecdote about working with artists, citing the need to respect artist privacy.
Hardest push from Ted ▶ 30:47 Testing genre allocation thesisTed presses Larry on whether Primary Wave actively hunts for specific missing genres like country or hip-hop to balance portfolio construction.
Biggest teaching moment ▶ 30:58 Schooling on catalog underwriting criteriaLarry corrects Ted's assumption regarding genre diversification, explaining that cash flow predictability and historical longevity (7-10+ years) supersede genre categorization.
Ted holds their own ▶ 36:26 Synthesis of modern artist rights trendsTed demonstrates deep industry grasp by connecting modern copyright retention trends (exemplified by Taylor Swift) to future private equity catalog supply.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| Larry Mestel's Career Path and Recorded Music Industry Shifts | 2 | 3 | 0 | 0 | Ted prompts Larry to explain his transition from major labels to publishing, asking for a breakdown of industry shifts since 1989. Larry walks through the CD boom, Napster disruption, and eventual digital streaming stabilization. | |
| Founding Primary Wave and the Creative Publishing Model | 3 | 3 | 0 | 0 | Larry outlines Primary Wave's proactive marketing approach compared to conventional administrative publishers, detailing TV and entertainment synergies. Ted follows up with engaging questions regarding their specific television productions. | |
| Weathering the 2008 Financial Crisis and Expanding Business Lines | 1 | 2 | 0 | 0 | Ted inquires about the expansion into entertainment, prompting Larry to recount how the 2008 collapse of their primary hedge fund equity backer forced them to diversify into talent management and TV production. | |
| The Kurt Cobain Catalog Deal and Focusing on Iconic Hits | 2 | 3 | 0 | 0 | Ted asks how the seminal Kurt Cobain catalog acquisition was structured with Courtney Love and EMI. Larry explains the strategy of focusing on a curated roster of legendary hits rather than mass-catalog accumulation. | |
| Creative Monetization Strategies: Converse, Lotteries, and Holidays | 2 | 2 | 0 | 0 | Larry shares creative monetization case studies including Nirvana Converse sneakers, Aerosmith lottery campaigns, and a Smokey Robinson Father-Daughter holiday. Ted follows along with quick conversational clarifications. | |
| Financial Underwriting, Valuation Multiples, and Deal Sourcing | 4 | 3 | 0 | 1 | Ted guides the conversation toward institutional finance, inquiring about cash flow valuation multiples and deal sourcing mechanics. Larry details their 5x to high-teens multiples and explains why they deliberately avoid auctions. | |
| Sponsor Message: Ridgeline Investment Management Platform | 2 | 3 | 0 | 0 | Following the mid-roll break, Ted asks about due diligence pitfalls and memorable missed deals. Larry explains copyright reversion risks and details losing the Jerry Leiber and Mike Stoller catalog in an auction escalation. | |
| Portfolio Construction, Genre Diversification, and Catalog Age | 3 | 4 | 1 | 0 | Ted asks whether Primary Wave fills portfolio allocation targets by specific music genres like hip-hop or country. Larry clarifies that they do not buy by genre quotas, focusing instead on iconic status and catalog seasoning (7-10+ years). | |
| Managing Artist Relationships, Trust, and Long-Term Value | 2 | 3 | 3 | 0 | When Ted asks for a specific personal story illustrating how he manages artist relationships, Larry directly declines to answer in order to protect artist confidentiality, which Ted readily accepts. | |
| Data Analytics, Market Competition, and the Future of Artist Rights | 5 | 3 | 0 | 0 | Ted offers an insightful prompt regarding data tracking and whether artists following Taylor Swift's model of self-ownership will reduce available catalog inventory in future decades, leading to a thoughtful response from Larry. |
Statements from this episode (15)
Mestel: Recorded music revenue has bottomed out and started growing again
“Wasn't until relatively recently that mechanical revenue, which is physical sales of physical CDs, downloads, coupling with digital streaming now really started to level off and now is starting to ascend again.”
Mestel: Major labels neglect legacy artists to chase high-margin new acts
“Major labels tend to be much more interested in frontline product and in new music and young artists that they can develop and break and the margin is, and the upside is enormous if you break a new act and major labels typically don't spend a lot of time or al…”
Mestel: Music royalty collection and administration is a commodity
“We want to be a company that delivers opportunity for artists, not focus on what we think is a commodity, Which anybody can do well, and which a lot of companies do do very well, which is collecting and administering. We want to focus on marketing and promotio…”
Mestel: Primary Wave's $5B hedge fund backer collapsed overnight in 2008
“And the hedge fund that had Been supplying us all of our equity capital ended up literally going out of business overnight. I mean, it was really one clean swoop and they were amazing partners and they were just absolutely fantastic. But you know, they went fr…”
Primary Wave's first major deal was 50% of Kurt Cobain's catalog
“Well, the first really big deal that we did was for the Kurt Cobain Music Publishing Catalog. We partnered with Courtney Love on that. We bought a 50% interest in the music publishing assets.”
Mestel: Primary Wave holds thousands of copyrights, not millions like majors
“Unlike the Warner chapels of the world or the universals of the world, the Sony's of the world, the BMG's of the world that have millions and millions of copyrights. We only have thousands of copyrights, but all of our copyrights are exceptional.”
Mestel: Primary Wave licensed Cobain lyrics onto Converse sneakers
“One of the things that we did very early on with the Kurt Cobain catalog was we did a deal with Converse... We put Kurt's artwork and lyrics On the side of these niche Converse sneakers, and they became a very successful niche Converse sneaker. And it was grea…”
Mestel: Primary Wave created multi-state lottery game using Aerosmith's 'Dream On'
“We approached GTech with the idea of doing a lottery called Dream On... We approached GTech with just doing it in Massachusetts, and the company loved it so much they rolled it out in multi-states. I think there were over 10 states that this rolled out in, and…”
Mestel: Music catalog assets trade between 5x and high-teens cash flow
“There's a big range of what assets trade for as little as five times and as high as the upper teens.”
Mestel: Primary Wave avoids auctions to focus on artist partnerships
“Frankly, we do not like to buy at auction. We almost never Participated in auction every once in a while. If the assets unique, we will, but we are really focused on artists that want the service that we have because we like to partner with the artist.”
Mestel: Primary Wave evaluates iconic status over target genre quotas
“We don't look at it and say, oh, we're light in country music or light in hip hop or light in R&B. We want to be diverse in terms of artists. And when I say genre diverse, I'm talking about we don't only want to have rock and roll music. We don't only want to …”
Mestel: Primary Wave avoids buying music younger than 7-10 years
“In our case, we like older music. We don't like to buy music that's younger than, let's call it, you know, seven to 10 years, because we want historical, predictable income streams. And the newer the music, the less predictable, more likely the revenue is decl…”
Mestel: Financially Backed Independent Competitors Have Flooded Music Publishing Since 2006
“Well, when we started in 2006, there really wasn't as much independent competition as there is now over the last few years. A lot of independent financially backed competitors have come into the marketplace”
Mestel: Non-Wealthy Artists Must Still Trade Catalog Rights for Capital
“Well, the smart artists of today are putting themselves in a position to own their own music, their own copyrights. I think that it depends on the resources that the artists themselves have. Most artists aren't wealthy to the extent that artists need money. Th…”