The Barometer Music Royalty Fund 1 Inc.
This fund invests in the revenue-generating potential of popular songs across multiple genres of music.
This investment model has been used by some of the world’s largest pension funds and private equity firms (including the Ontario Teachers’ Pension Plan) and now you have an opportunity to participate as well.
Investing in the Transformation of the Music Industry
As the global music industry continues to evolve, digital music streaming in particular has been driving growth and breathing new life into the entire music business.
Streaming services, such as Spotify and Apple Music, provide direct and easy access to virtually every piece of recorded music from around the globe. This inexpensive and convenient way to access music continues to reshape the music industry landscape.
With all of this as a backdrop, an innovative new alternative investment opportunity has emerged.
At Barometer Capital Management Inc. (“Barometer”), we are taking a leadership position in creating a product that provides investors with unique access and an opportunity to take part in the resurgence of the music business.
With the launch of our new Barometer Music Royalty Fund 1 Inc. (a joint venture corporation), we are aiming to capitalize on the music industry’s growth by developing a fund that invests in royalty-paying music catalogs.
As always, our objective is to provide stable returns for our clients, while maintaining an innovative and measured approach to investment management.
How Do Music Royalties Work?
Every time a song is played, the songwriter earns a small amount of revenue. This is their royalty.
Royalties are generated when a song is played:
- on the radio;
- through a streaming service;
- live at a concert, club, live broadcast or other venue;
- as part of a video game, movie, TV commercial or television show, and
- in many other ways, such as downloads, CDs, vinyl, DVDs, ringtones and so on.
This is how songwriters make a living. When a song becomes a hit – and is played heavily in any of the areas previously mentioned – the royalties for that song can generate quite a significant amount of money.
It’s important to note that older songs have seen an upswing in revenue generation as streaming allows listeners to immediately play whatever music they like.
How Does the Barometer Music Royalty Fund Work?
The Barometer Music Royalty Fund invests in both sound recordings and music publishing assets.
With respect to music publishing, if a songwriter (or their estate) decides to sell the rights or ownership to their songs, all future royalties will be paid to the new owner of the songs. A songwriter may sell their rights for any number of reasons, but basically, they (or their estate) would be looking to cash out and take a lump sum of money by selling their song rights to someone else. The new owner then becomes the recipient of all future royalties for this music.
Savvy owners of music catalogs (or groups of songs from one or more songwriters) will do their best to market this music in order to increase where and how it is played, because this is how royalties are generated. In other words, they will market their product in order to increase sales (or number of times that a song is played).
The Barometer Music Royalty Fund 1 Inc. is managed by Barometer Musik Management — a newly-formed joint venture between Barometer and two highly-regarded professionals with extensive music industry experience (see below). Barometer Musik Management purchases song catalogs for the fund, becomes the owner of the songs and therefore the recipient of all music royalties going forward.
As mentioned earlier, with the advent of music streaming services such as Spotify and Apple Music, songs of all kinds are being played more and more frequently. Not only does this generate more royalties, but it also adds to the exposure of the music, which can lead to ancillary royalty opportunities, such as having a song used in a movie, television show or commercial advertisement.
As an investor in the fund, you benefit from this revenue stream.
The Benefits of Music Royalties as an Investment
- The music industry is on a growth cycle, largely driven by the popularity of streaming services.
- There is a lack of market correlation.
- Cash flows are inflation protected.
- Stable cash flows support quarterly distributions.
- There is great potential for fund management to drive value-add initiative that can provide further upside in revenue generation.
Barometer Music Royalty Fund 1 Inc.: At-A-Glance
- Barometer Musik Management aims to create a portfolio of music publishing and sound recordings for the fund by selectively looking for attractive opportunities to acquire promising music recordings and catalogs with investments generally ranging from US$1 million to US$20 million in equity per transaction.
- The fund will invest directly in mid-size, high-quality song catalogs.
- The fund intends to pay a quarterly distribution to investors from the royalty streams.
- The fund will have a seven-year term.
- Minimum investment of US$250,000.00
- Investors will receive a combination of preferred notes yielding 8% along with 80% of the common shares of the fund.
- The fund is denominated in U.S. dollars.
- Distributions will be paid on a quarterly basis.
- The portfolio will be appraised annually.
Potential Alternative Liquidity Events
At any time before the end of the seven-year term, the fund may liquidate assets in several potential ways, including:
- Private sale of the entire fund catalog of songs to a single buyer,
- Sale fo the fund’s assets in a piecemeal fashion to a collection of strategic buyers, or
- Taking the shares of the corporation public through an Initial Public Offering (IPO).
The Investment Team
Barometer has partnered with two of the top names in the music industry to form the investment team for the Barometer Music Royalty Fund 1 Inc.
Andy Gershon has been in the music industry for over 25 years and has, among other things:
- managed various English alternative bands (including Love and Rockets, Cocteau Twins and The Sundays) (1986-1990),
- discovered and managed The Smashing Pumpkins (1993-1997),
- formed Outpost Recordings, a joint venture with Geffen Records where Outpost’s first four records under his management were certified as being gold or platinum (1995-2000),
- was hired by Richard Branson to run V2 Records and signed The White Stripes, The Black Crowes and Moby to the label (2001-2005), and
- was part of Sony/BMG where he marketed various rock acts, including Chevelle, Incubus, Ozzy Osbourne, Los Lonely Boys and Cyndi Lauper (2006-2009).
Mr. Gershon is currently a partner in n3 Media and pursues ventures in various Broadway musicals, in addition to managing various artists, including Bryan Ferry and OK Go.
Darren Michaelson has been in the music industry for 25 years. Over the course of his career, Darren has:
- managed The Smashing Pumpkins, Echo & the Bunnymen and The Sundays (1993-2000),
- was an Executive at Virgin Records where he worked with David Bowie, The Rolling Stones, Janet Jackson and George Michael (2000-2002),
- was appointed by Elton John to the executive management team at Twenty First Artists (2007-2012) and
- was hired by Madonna and Michael Bublé to assist on various live performance projects and to consult on new releases (2005-2011).
More recently, Mr. Michaelson has been a consultant at L25 Group, raising capital for music firms by syndicating equity investments and assisting with financing institutional debt.
Contact us to learn more
If you are interested in learning more about investment opportunities with Barometer, please feel free to contact us.
One of our knowledgeable Investment Relationship Managers will get back to you and can answer any additional questions that you may have.