The Exchanges

Q What was the deal that you most wanted that ended up going away?

A That's another good question. This is an easy one. I wanted to buy for our company, the Jerry Lieber, Mike Stoller catalog. Lieber and Stoller were one of, if not the greatest songwriting duo, you know, in American history. They wrote Elvis Presley stuff. They wrote, they just wrote so many hit songs. I developed a relationship with Both Jerry and Mike Stoller. They were just fantastic people, and I, I know, uh, you know, their attorney had introduced me, and we had many, many meetings. I mean, we had at least four meetings, and I really, really wanted to buy that catalog just because the music was some of the greatest ever created, and we put an exceptionally high price in, and a major music publisher came in, This is back, I think, around 2008 or so. They came in with a, with a higher price than ours, and I still believe that Jerry and Mike wanted to sell to us, even though it was a lower price, but they were doing a lot of estate planning at the time for their family, and I came back with a, and I, we rarely, this is why we rarely participate in auctions, and we came back and sweetened our offer, Which was not still up to the same level of pricing that this other, this major music publisher was at, and then the major music publisher came back in at an even higher price. And I said, basically, they had to make a decision on whether or not they wanted to be in business with us…

AI assessment note: “I wanted to buy for our company, the Jerry Lieber, Mike Stoller catalog.”

Q So when you started primary wave, did you have in mind a business model that would inflect and what was that model?

A Well, Having been involved in running major record labels, 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, 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 allocate a lot of resources to their icons and legends. And so when I started primary wave in 2006, the vision was to provide a service on the music publishing side, which really didn't exist and to spend a lot more human focus, our human resources in focusing on iconic and legendary artists that weren't really getting all that much frontline attention at these major record labels. So when we started in 2006, As opposed to investing in accounting people and royalty people and copyright registration people, most of the partners that I brought on very early were marketing people, promotion people, advertising people, video game people, people that could drive the top line, the people that could create new revenue streams, and we focused In the early years, a lot less, and still today, a lot less on the collections, administration, royalty function of copyrights, and much more on the creative aspect of, of opening new revenue sources and driving income. And that was our premise when we, in 2006 and still today, that we want to be a company that delivers opportunity…

AI assessment note: “when I started primary wave in 2006, the vision was to provide a service”

Q And what are the, you know, from someone from the outside, if they were coming in because they were all excited about doing a music deal, what are the kind of things where people would trip up?

A There's a very extensive due diligence process when you're acquiring catalogs. You have to look at where the income is coming from. You have to analyze the income. Is it consistent income? Is it one-offs? Is it settlements? There are a lot of things in those royalty statements that you have to take a look at, and when you buy, you have to have an understanding of what the income stream is, what the expectation is to be able to value the income stream. So we spend a lot of time doing legal due diligence, copyright due diligence. One of the main issues you've got to worry about when you're buying copyrights is You have to look at how long do the copyrights last for, before they go into public domain? When do the copyrights revert? If you're not buying from an artist and you're buying from a company, there are different rules. There's different rules to pre-nineteen 78 and post-nineteen 78 songs. There are a litany of due diligence items that you have to look out for. You know, are people claiming or are third parties claiming ownership interest in copyrights? There are a lot of issues that you've got to be aware of, and if you're just writing a check and you're not doing due diligence, you're, you know, you're putting itself at the extreme risk.

AI assessment note: “There's different rules to pre-nineteen 78 and post-nineteen 78 songs.”

Q So do you think about your investing as a portfolio?

A You have to. I mean, absolutely, especially with the business that we have today. We don't like to have too much concentration in any one artist, any one genre of music. So, yeah, we look at it absolutely as a portfolio. But a portfolio where these are among the greatest songs of all time. I mean, when you talk about Smokey Robinson's, you know, My Girl, and Tears of a Clown, and all these great Smokey Robinson songs, and then you couple it with Green Onions, and Knock on Wood, and Sitting on the Dock of the Bay, and Midnight Hour, and the song Crazy by CeeLo Green, and Life is a Highway, and then you keep going. I mean, we want to develop a portfolio Of songs that are just incredible songs.

AI assessment note: “You have to. I mean, absolutely, especially with the business that we have today.”

Q Is what drives the price sort of perception of the particular artist, the catalog?

A I think there are a few things that are driving the price. One is how iconic are the songs? How under exploited is the particular catalog or the particular artist? Also, the competition itself, how much money is chasing these assets, and frankly, we do not like to buy at auction. We almost never Participated in auction every once in a while. If, 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. We like to help the artist. Unlike other music publishers, we're interested in helping the artist with their brand. We're interested in helping the artist sell more tickets. If they're on the road, we're interested in helping the artist Build their digital strategy, build their social media, build their footprint. It's a lot different than, than what a normal music publisher would focus on. So if it's just about price and just about cash, that's not really a relationship that we're interested in. We're interested in one where we're willing to pay a very fair price, even a high price, but that the artist distinguishes us from another.

AI assessment note: “there are a few things that are driving the price. One is how iconic”

Q your business might look like 10 or 15 years from now, in that the iconic songs we've been talking about in artists are from, you know, 1520 years ago, and today you have sort of a Taylor Swift who's figured out how to monetize every single angle, and if people follow her lead, do the iconic songs of today for tomorrow sort of get increasingly owned by the artists themselves?

A Well, the smart artists of today are putting themselves in a position to own their own music, their own, 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. They're going to partner with, you know, a music company, whether it's a recorded music company or a music publishing company. And they're going to take an advance and there's going to be an interest that those companies are going to take in the music of, of that artist. I think that attorneys today, business managers today, in general, artists today are generally smarter about the business that they're doing than they were years ago. But again, that's why it's all about how much value can you add to an artist? If you, if it's only a check, And the artist doesn't need a check, then it's going to be very hard for you to be associated with the artist unless you have a special service.

AI assessment note: “the smart artists of today are putting themselves in a position to own their own music”

Q And did you start the entertainment business alongside the publishing business at the beginning?

A That's a great question. So, very interesting. We had raised a lot of money in 2006 and 2007 from a hedge fund and a big bank. And it was a lot of money. We got very lucky and we were able to buy a lot of these great assets early on. And then the financial crisis hit 2008, 2009. 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 from a five billion dollar hedge fund to not a lot overnight. And so we, we lost our partner, our financing partner in terms of equity. And then that put us in a situation where Where we could no longer draw down on our senior credit facility at this major bank. And so, you know, being entrepreneurial back in 2009, you know, we had this great company. We had these amazing assets. They were cash flowing, but we couldn't buy 20, 30, forty million dollar assets anymore, right? So as a way to continue to grow our business, we spread out from music publishing. And we started a management business and CeeLo Green, one of the first management clients that we brought on and we managed just fantastic, amazing talent and great people. I mean, we managed, you know, CeeLo Green, Melissa Etheridge, Fantasia, Eric Benet, Cypress Hill, lots of really, really fantas…

AI assessment note: “as a way to continue to grow our business, we spread out from music publishing.”

Q Most of the people I talk to have different roots into the investment business, and I know your path is quite a bit different. When did you first get interested in music?

A Well, I started in the music business in 1989. I had actually, the way I got into the business was I was working for a company that was advising a company called Polygram Records on their acquisition Of Island Records and a few other record labels back in 1988 and 89, and I had met Chris Blackwell back then, and a gentleman that worked for him who has since passed away, a gentleman named Mel Klein, and you know, they were absolutely incredible. I was just completely enthralled by how incredible they were, how amazing entrepreneurs How they built this creative company from, or how Chris had built this creative company from scratch. He was a legend, and still is, a legend in the business, and I'd gotten to know the company, and one thing led to another. Very short period of time, almost a blink of an eye, I was working in Island Records, and that's how I got started in the business, but I, I was always interested in music, you know, it was music and sports. I would have loved to have been a sportscaster, but I think the, the road to success was a little bit longer than in music. I ran Island Records with Chris, and I did that for about 11 years, and then when Clive Davis got reassigned at Arista Records, and L.A. Reid came into Arista Records in 2000, I came in to run Arista with L.A., was there for about four years, and went to Virgin Records for a couple of years, and I decided…

AI assessment note: “I started in the music business in 1989... but I was always interested in music”

Q So how does that work? So was that sitting in the hands of a publishing company? And then you approached them with Courtney to buy the rights?

A The Kurt Cobain assets were being administered by a company called EMI. But you know, they were providing typical administration services for Courtney. And I think Courtney, in addition to knowing that she had a very valuable asset, she wanted a partner that could think a bit out of the box and, and market very effectively and try to grow the revenue stream. So we really focused on that aspect of the business. So that really put us on the map, acquiring Kurt Cobain's music. I mean, Kurt was obviously legendary and iconic, and our whole thing about our business is we're in the icon and legend business. We're in the icon legend and hit business. We're not in the real estate business. We're not interested in songs that aren't great songs. We're not interested in signing hundreds of artists or having hundreds of writers. The ones we sign We really want to focus on and 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. And frankly, it's just easier to market songs that you've heard of. That's why we focus on that as our business. And frankly, we think we have a fantastic staff of marketing people and people that drive opportunities, but it's very unusual in the music publishing space to hav…

AI assessment note: “The Kurt Cobain assets were being administered by a company called EMI.”