Presented by HarbourView
How Latin catalogs are valued, marketed, bought and sold in a global economy.
How Latin catalogs are valued, marketed, bought and sold in a global economy.
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MusicTranscript
00:00 [Spanish]
00:15 I am Hannah Karp. I'm the editorial director of Billboard. I'm so happy to be here.
00:25 And over the past few years, we at Billboard have spent a lot of time reporting on some eye-poppingly big deals in the Latin music world.
00:35 Artists from Shakira to Maluma to Ozuna have been selling their catalogs, meaning that they're
00:42 selling the income streams they receive from either their publishing copyrights or their master recording rights or their performance rights,
00:51 sometimes for tens of millions of dollars.
00:54 And while the buying frenzy has cooled off a little bit lately for reasons that we're going to talk about today,
01:00 there are still plenty of opportunities for artists and songwriters who want to sell their catalogs and for buyers who might want to buy in.
01:10 So, to explain it all, I am thrilled to have here with us today three of the top dealmakers in this space.
01:20 Charisse Clark Suarez, the founder and CEO of Harborview Equity, who has been betting very big on a very diverse portfolio of Latin music and other genres
01:33 since she founded her company just two years ago, and perhaps most notably buying Luis Fonsi's publishing catalog, which of course includes the right to "Despacito."
01:45 We also have Denny Marty, who helped broker that deal and who has become the go-to guy, the one-stop shop for anybody that's looking to buy or sell music catalogs in the Latin space.
01:59 He's helped to sell catalogs for Nicky Jam and Raul Alejandro, Maluma, just to name a few.
02:06 And then we have, last but not least, Angie Martinez, the real Angie Martinez, who is one of Billboard's top music lawyers for many years running
02:17 and who represents artists looking to sell their catalogs and strike these deals.
02:22 And she's also advised on the Fonsi sale to Harborview, and she has a lot of very valuable advice and many warnings, urgent warnings for anyone out there who's thinking about selling their catalog.
02:35 So, if I wanted to buy a Latin catalog today, what is available on the market right now? What can I buy and how much will it cost?
02:44 Denny, I think that's your question.
02:48 In terms of that question, it really depends on the earnings of the catalog.
02:53 So, if it's a writer or a producer and they're earning a number, then you multiply that number.
03:01 The problem is that there's a lot of misinformation, so people hear all these names that are selling the catalog, so they assume that their catalog will sell for the same.
03:09 It's like real estate. Your home is not going to go for the same price that the other home went down the block because they might have a pool, they might have a basement.
03:17 So, every catalog is different in terms of earnings, depends on the contract, who their administrator is, if it's a publisher or admit, what is in particularly in that contract.
03:30 Reversions, how much does the actual writer or the artist owe to the company?
03:36 And then it depends on the actual asset themselves, the catalog.
03:40 And also, it also depends on the buyer that I'm pitching to.
03:45 Every buyer has certain criteria of what they're looking for and it depends on where they are in terms of their structure of their company.
03:54 For example, if a buyer has XYZ amount of money and they have to deploy that before the end of the year, then they have certain levels of things that they have to get to be able to deploy that money.
04:05 And if that catalog does not meet those criteria, that's also more of an internal thing between the buyers.
04:10 But in general, it's like the housing market. I use that as a perfect example for those that don't understand the catalog business.
04:18 There's a good time to sell your home and there's not a good time to sell your home. So, same thing with the catalog business.
04:23 But with that being said, I think it's important because everybody sees these huge numbers and they say, "Oh, I can do that too."
04:30 It has to be catalogs that have matured. That means that it has to have at least five years of existence.
04:40 I'm going to say it in Spanish too, just in case. I think it's important that everybody understands that a catalog, to be considered and to be able to truly take advantage of the value, has to have five years of existence, whether it's the composition or the recording.
04:59 So, Charisse, maybe we can back up and can you tell us why you are so bullish on Latin music? Why you got into this space so early before everybody else? And what exactly it is that you own?
05:15 Yeah, so great to be here. And I'm going to apologize in advance. My Spanish is not as eloquent as the Angie Martinez. But I am really proud of our company and the fact that we were really early on, in particular, regional Latin music.
05:33 As well as looking at and seeing such a great opportunity in partnering with Fonzie and partnering with Denny and Angie.
05:43 So, our company really is genre-agnostic. And a lot of that comes from and stems from who I am as a person.
05:51 Harborview is the name of the community in Jamaica that my father grew up from.
05:57 And so, as a person of Caribbean descent that really understands the power of global music, it was really easy for me to see how important and impactful Latin music, or what I like to call hyper-local music or diasporic music, was to the communities that they served.
06:15 So, for us, we have no blinders on. We have no preconceived notion that one should be in the catalog space only chasing global icons or global pop stars.
06:27 We know that there are large communities of people of color, of people of different language backgrounds, of people of different heritage that love different types of music.
06:39 I always give people the example all the time that growing up, I grew up on Byron Lee and the Dragonaires, which most people may not know, but maybe a lot of you who are of Caribbean origin know that that's a huge soca band of my parents' generation.
06:52 But understanding how important and how impactful music like that, music like copa, music like bachata, is to specific audiences and understanding how deeply connected it is to who they are,
07:06 and it was a no-brainer for us to be sure that we were looking with very open eyes.
07:10 Then you compound that on the fact that, I think I was just reading a stat from the Latitude conference that was last week, that the Latino market globally, if measured as GDP, would be the fifth largest nation in the world.
07:25 You put all these things together, right, and you put how powerful our experience, and when I say our, I'm including myself obviously, even though I'm not Latino or Latina, in the fact that people who come from communities that are not necessarily represented by mainstream culture or what is defined as mainstream culture are just as important.
07:44 And you see that growth, you see technology really pulling and allowing us each to participate in the things that we find important to us.
07:53 It's a no-brainer. We saw so much growth in the underlying market, not just from a demographics perspective, but also from a usage perspective.
08:00 We happen to have in our portfolio the song of the summer, Ella Vaya Sola, with Peso and with Eslobon, because we were really early on thinking through and being bullish on this segment of the market.
08:12 Wow. So let's start with some basics. When you buy these catalogs, do you have control over how that music gets used, or does the artist retain any control or approval on how you use that music?
08:28 So Denny said it well, each deal is bespoke. Each deal is unique to what the artist owns and/or controls, or songwriter owns and controls at that point in time.
08:40 We like to think of our firm as one that partners and is really looking to partner with artists and creators in a multifaceted way.
08:47 So one of the things is we buy a lot of music, yes, but we also invest outside of music.
08:51 And so in that, when you're entering into a relationship with Harborview, you're really entering into a long-term partnership around not only the works, but who you are as an artist and where you think you want to go over time.
09:02 Some people just want to sell and move on and that's it, but others really want to enter our ecosystem and really participate.
09:09 And so when you're talking about participation, it's okay, what can we do more together around driving engagement around that title?
09:14 What can we do more together around driving who you are and who your artistry is and how it's exposed to other segments of the market, whether again through film, television, sports, or other?
09:24 So at the time that you bought Luis Fonsi's catalog, interest rates were super low and investors were paying more than 20 times the net income of these catalogs that they were generating.
09:37 So interest rates have obviously gone up a lot over the past year or two and because of that, it's become more expensive to finance these deals and there are more attractive returns elsewhere.
09:49 And so, Denny, you mentioned to me last week you've seen some investors leave the catalog market. Is that right?
09:55 Not necessarily leave the catalog business. They're just not acquiring, not buying catalogs as much as they were two years ago or a year ago.
10:06 And with the Fed Reserve as of March 15th of last year.
10:11 So that's when I started getting the phone calls or having the conversations with different buyers and they're like, "Oh, no creo que puedo, no, eso está muy caro."
10:21 And so they start having, it becomes a domino effect.
10:25 And for the buyers that are borrowing money from banks or institutions, they're affected tremendously.
10:33 So you have private funds and investors and then you have family funds. Now I'm getting Saudis that are buyers that are coming into the--
10:42 So new buyers are also coming in.
10:44 Yeah, buyers are coming in from everywhere, from Korea, from everywhere. I mean, there's markets everywhere. It's just not the U.S. It's in general.
10:50 So it's kind of like a monkey see, monkey do kind of a thing. And one starts and the next one and so on.
10:58 And I've been, you know, buyers that have been in the space for a number of years. I have a buyer that's been in the business for 30 years, but under the radar.
11:05 Completely doesn't do interviews, very quiet. And we do deals and they don't publicize, they don't talk about it. They don't want me to say anything.
11:15 I do NDA, it's like all this secretness. And they're legit, you know, but they borrow from money, they borrow from investors.
11:23 It's just a bag of different buyers. And as a broker, it's my job to kind of find the match, the right match.
11:31 Because, yeah, people are buying catalogs, but you also want to find a buyer that's passionate about it.
11:35 When we did the deal with Cherise, she knew the song, her kids were excited. It became like a real fun acquisition.
11:44 The lawyers involved, Angie and her lawyers. And we were on a time constriction getting the deal done and we worked around the clock.
11:52 I think we were doing phone calls on the weekends and Louis Fonsa's calling, "Yo, what's up?"
11:56 But in general, yeah, as a broker, you want to find the right match for a particular catalog.
12:04 Some of my sellers that own these catalogs, they're like, they don't care. They're like, "Búcame el cheque más grande. Vamos, vamos, vamos."
12:12 They're like, "Get me the biggest check." Some are very conservative in terms of like, "Okay, I really don't need that much. I just need this amount, so I want to do this."
12:21 Or probably, "I'll only sell this portion. I'll sell the performance, but not the mechanicals."
12:25 If it's masters, neighboring rights, sound exchange, these are all income streams that you could sell as a creative person.
12:33 Yeah, but I think it's really important because people see these big numbers and then they say, "Oh, but my catalog was worth at least that much."
12:42 That's not the game. The game is interest rates for the most part, depending on who your buyer is.
12:49 So don't get offended. It's not a statement on the worth of your catalog. It's just there are different opportunities.
12:55 There's more leverage when interest rates are down to sell your catalog as opposed to when they're up.
13:01 I'm just going to say it in Spanish real quick because I know.
13:05 [Spanish]
13:34 [Spanish]
14:01 So do you think that artists should wait until interest rates go back down so they can get a better price, or is it case by case?
14:08 I think ultimately, just like any decision around things that you may own or you want to invest in, it depends on what your outlook is.
14:18 If you have needs today, then you will navigate the market as it is today.
14:26 If you can wait three to five years, then you wait until it either gets more seasoned or until interest rates come back into orbit.
14:34 If they do, I think there's a large prevailing view that economists are batting around as to whether or not interest rates will stay higher for longer.
14:43 Or if this is at peak rates, I think we go back and forth with macro views as to which one it is.
14:50 So it really is dependent on what you're looking to do.
14:55 The way that I've purchased from various artists in the past to selling at a particular point in time really created some agency for them.
15:03 So that allowed them to not have to take the next most immediate deal with a record label.
15:09 They could take their time and choose the right home for them because they now had liquidity to be able to pay bills for the next two years while they figure out what the right relationship is.
15:21 Whereas other people may be sitting in a situation where they're just like, "I don't need this much cash today. I'll wait for a few more years."
15:28 So I think it's just like anything else. I mean, it looks good, but I die at all.
15:33 So what I mean to say by that is I've been around for a long time.
15:37 This is a cycle like anything else. I was around for the dot-com bust and boom in 1999.
15:44 I was around for the 2008 global financial crisis when the world went to crap.
15:50 I was around for the '11 and '12 dislocation in the market where you couldn't get more than 5 to 6 percent out of the market.
15:55 And then I lived through completely zero interest rates.
15:58 This too is a cycle. It just depends on what your outlook is to that cycle and what your willingness is to wait or how you're prepared today to navigate that cycle.
16:09 So we've seen a lot of big reggaeton catalogs trade already.
16:14 And I know, Cherise, you're an exception. You're very early on a lot of different kinds of Latin music.
16:19 But what about regional Mexican? Have we seen a lot of those catalogs come to market yet, or is there more opportunity there?
16:25 There's been interest. I think the Mexican sellers are more timid about it because they don't trust buyers.
16:39 They don't trust the bank. They'd rather go as they're going right now.
16:42 I think it's a matter of guidance, and I think it's a matter of education.
16:47 I also think, and I have to say this, very important for everybody in the audience.
16:51 If you want to sell your catalog, that's the culmination of doing things right.
16:59 That's the culmination of getting producer agreements. That's the culmination of getting your songs registered.
17:05 That's the culmination of getting song split agreements.
17:09 That is very important because day or tomorrow, yeah, we can go back and forth based on your...
17:14 Having access to, I don't know, your royalties. Check your royalties.
17:19 Make sure everything is correct with your royalties because that's what they're looking at.
17:23 You could be a nice guy. You could be a great artist.
17:26 What the buyer really wants is to know what the numbers are.
17:30 And if you don't know what the numbers are, then how can you sell your catalog?
17:34 Talk about that process. If you're an artist and you decide you want to sell, what are all the things that you have to do?
17:42 I know we can't go through them all, but what are the first basic steps you need to take if you're going to sell?
17:46 And how much do you need to be prepared to spend on that preparation?
17:50 Well, I think it's really important to, first of all, if you're doing a deal, make sure you get an attorney.
17:57 Okay? I'm just telling you.
17:59 Angie's available.
18:01 No, and whether it's me or whether it's somebody else, this is something that they say about record deals, publishing deals.
18:07 In the first page, they give you the world, and in every other page, they start taking it away slowly but surely.
18:13 So it's very important that your first deal, because what happens, like he was saying,
18:19 if you give away your publishing in perpetuity, then you can only sell your right.
18:24 You can't sell the copyright. You can only sell your right to receive money.
18:29 If you, for example, the approvals, if you have no approval over the use of your catalog,
18:35 then whatever Cherise is buying is whatever you're selling,
18:39 and whatever you're selling is what you settled on with whoever you made a deal with.
18:43 So it's just really important for you to be involved, and you know,
18:48 [Spanish]
18:51 You can't be a lawyer and an artist at the same time.
18:55 Your manager is also not going to know everything that there is to be said.
18:59 There's a reason why lawyers are there is to protect your interests.
19:02 So I'm just telling you, it's really important that when you do deals,
19:05 have somebody look at them, because it's going to then set the stage for the next deal,
19:12 if you want to go and sell your catalog.
19:14 And I'm not going to say it in Spanish. I hope that your translators are working.
19:17 Thank you.
19:20 Yeah, well, and another thing that's interesting is because a catalog needs to be five years old,
19:26 basically, right, to be considered, I mean, you might argue that,
19:30 but it seems like there's a lot of opportunity for older legacy artists,
19:35 and Angie, could you talk a little about what you need to be mindful of
19:40 when your catalog is approaching 35 years old?
19:44 Yeah, so it's really important,
19:47 (Spanish)
19:50 I'm going to say it in Spanish because I really feel like this audience is going to get it more in Spanish.
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25:52 Sometimes we have to turn away clients because it's just too much.
25:55 Or their catalog is too young.
25:58 It's like only two years.
26:00 (Spanish)
26:01 (Spanish)
26:03 You know, like a year ago.
26:04 And I'm like, well that's not gonna count.
26:06 We need to see at least minimum three years of statements.
26:09 For some buyers. Some buyers need to be five years.
26:12 But some of the buyers that I deal with in my portfolio,
26:16 I've trained them.
26:17 I'm like, okay, you don't want to buy this now.
26:20 But then you want to buy it later.
26:22 Later's gonna be more money.
26:23 So let's talk about like, where can we meet a happy medium
26:27 for the client and for you.
26:29 My job is to be the bridge between the buyer and the seller.
26:32 And making sure that everyone's happy.
26:34 Because if you have a happy client, a happy buyer,
26:36 you have a happy broker.
26:38 That's how it works.
26:39 And Cherise, is that true for you,
26:41 that you don't consider catalogs that are younger than five years old?
26:44 No, that's not true for us.
26:45 I mean, we do have a portfolio construction
26:48 that we're focused on so that as we build our overall portfolio,
26:53 which we own something like 24,000 songs,
26:56 and our cash flow is kind of in the high double digits
27:01 across all of the things that we own,
27:03 we have a pretty aged catalog across that.
27:07 Like the weighted average age of what we own
27:09 is in the low double digits.
27:11 But that means I own some things that are less than three years old,
27:14 and I own some things that are greater than 40 years old, too.
27:17 So in the things that we've looked at when they've been younger,
27:20 we have--the challenge usually with young catalogs
27:25 is actually expectation management of the seller.
27:30 A seller will have a young catalog,
27:32 and they will expect to get a high price or a "high multiple."
27:37 And the challenge with young titles
27:39 is that they're going to go through their growth and their explosion,
27:42 and then they're going to hit the proverbial decay curve
27:45 and start to reduce earnings over time.
27:48 And so as a consequence of that,
27:50 you can't get a super high multiple on something that's young.
27:53 If the sellers have appropriate expectation
27:57 for the age of what they're looking at,
28:00 we've looked at things across the spectrum.
28:02 As I said, I own things that are greater than 40 years old,
28:05 and I own things that are less than three.
28:07 In fact, like I said, the song of the summer, "Ea Biasola,"
28:09 is in our portfolio.
28:11 That's one where we did a partnership with a label.
28:14 We purchased catalog, and then we also purchased
28:17 a way to help them to do futures as well.
28:20 So we've done new titles.
28:22 We also happen to have some other recently released titles
28:27 that have been in the top 100 as well from other big artists.
28:30 So we're not opposed to young things.
28:32 It's more about, for us on the back end,
28:34 how we're managing our portfolio construction,
28:37 and it's important for us for our portfolio construction
28:40 for the average age of our portfolio to be sufficiently aged.
28:44 But the only way we can look at younger things
28:46 is if the expectations are appropriately managed.
28:48 So working with people like Angie and Denny who get it is a dream
28:51 because they help to manage their clients and their artists
28:55 and their songwriters around what's appropriate
28:58 for what it is that they're looking at.
29:00 So we've done the full gamut.
29:02 Can you explain more about what is the decay curve you're talking about?
29:06 Why does music decay after a certain amount of time?
29:10 Well, I mean, I think it's generally true,
29:13 but it's not always true for every specific title
29:17 or every specific artist.
29:19 But in general, in mass, when a song is released--
29:23 what was last week's big song?
29:25 I don't know.
29:26 Maybe we take one of the Barbie songs.
29:28 Or I think Shakira just had a huge release last week.
29:32 And so as a song like that is released,
29:35 it's supported with a lot of marketing,
29:37 a lot of engagement from the labels and from the DSPs, etc.
29:42 So it peaks in popularity, and then it peaks in income.
29:46 And that generally happens in the first 18 months or so of a song's life.
29:51 And the cash that's associated or the earnings that's associated
29:55 with that activity also generally peaks around that same time frame.
30:00 And then the label moves on to what is their next title,
30:03 even for that same artist or for other artists.
30:06 And then that popularity of that title starts to come back down to earth.
30:11 And that is when it starts to hit into its decay curve.
30:14 The reason why a lot of buyers like to only look at things
30:17 that are 5 years old is that typically at 5 years old or later,
30:21 it's sort of past most of its decay.
30:24 Now, that's again all in general.
30:26 I've seen some things that are still decaying at year 10.
30:29 I've seen some things that are still growing at year 4.
30:32 So it just depends on what's happening in the underlying catalog.
30:36 But that general peak to trough is kind of anywhere from 0 to 2.
30:40 It kind of gets to peak income.
30:42 And then from 2 to 5 years old, it gets to sort of its trough income.
30:46 And broad strokes, the trough income is something like 20% of peak income.
30:51 So if you're selling something that's 2 years old
30:54 and it made $1 million a year last year,
30:57 a buyer can expect that million to go to $200,000 in a few years.
31:02 This is why they can't pay you 20--
31:05 the interpretation for a multiple is almost like the number of years
31:10 that that income will repeat.
31:13 So if it's $1 million a year and I'm paying $15 million,
31:17 I'm assuming that on average over 15 years I'll get $1 million.
31:21 Now, if something's only 2 years old and I just told you
31:24 I'm going to get to 20% of $1 million in 5 years,
31:28 then I'm not going to get $1 million on average for the next 15 years.
31:33 I'm going to get something closer to some average of $200,000.
31:38 So this is why multiples cannot be high for things that are less than 5 years old
31:43 or still in that life cycle of Dirty Caker
31:46 because that's what the investor's buying.
31:48 I'm buying that cash flow into--
31:51 for as long as it lasts or until copyright termination or otherwise.
31:57 And so if it's going to decay, then I can't overpay for that cash
32:01 because then I lose money.
32:03 That makes sense.
32:05 So, Denny and Angie, you've helped a lot of artists sell their catalogs.
32:10 Do any of them regret it?
32:12 No, none of my clients.
32:14 I make sure that we have that conversation.
32:16 Now, I've had clients that are emotionally attached to their catalog,
32:21 and those are the worst sellers
32:23 because you kind of have to do a little psychiatry and sit with them and whatnot.
32:28 And it depends where they are in their life, you know,
32:30 if they really need to sell it.
32:32 But those particular clients, so the two attached to their catalog,
32:35 tends to be a little bit more misogynistic, more conversations.
32:39 As of today, none of my clients have--
32:42 a lot of my clients are very smart
32:44 because they use that money and reinvest in other businesses,
32:47 which is great, you know?
32:49 So sometimes they really don't need to wait too long
32:52 because they know, "I need XYZ amount, and I'm going to use that money to real estate."
32:57 There was a time it was Bitcoin,
33:00 so I had one client that took all their money, put it in Bitcoin,
33:03 then about nine months later have a conversation.
33:06 I was like, "Di, no sabe loco."
33:08 Boom.
33:09 And he gave me the number that he made.
33:11 I was like, "Wow, you made like 10 times more than what we did. That's great."
33:14 So everyone's different, you know? Everyone's different.
33:17 The one thing I would just add to the emotional attachment to the music,
33:20 it makes a ton of sense.
33:22 If you're an artist or a songwriter, this is deeply personal work.
33:26 It is important to us that we are never coercing anyone to sell.
33:31 Like, we're here forever.
33:33 Like, we're going to be buying, God willing, this is my firm,
33:35 it's our name on the masthead, I own it, I don't owe anybody anything.
33:39 I'll be buying in 10 years, I'll be buying in 18 months,
33:42 I'll close a deal with you in six weeks if you need to.
33:44 So it's important for sellers to find buyers
33:47 that are not trying to push you into one thing or the other.
33:50 And then the last thing I'll say to the emotional attachment
33:52 is you are forever attached to that work.
33:56 Like, as an artist, as a songwriter,
33:59 what's so beautiful about the creative spaces
34:02 is that your legacy will always be attached,
34:05 your name will always be attached to that work,
34:07 whether you've taken an economic benefit for it or not.
34:11 On that note, I also have buyers that are very sensitive to that topic,
34:15 so they will give the option to the seller to buy that catalog at a later date.
34:22 But of course, it becomes with a high premium
34:25 because they need to make back their investment and then add on.
34:28 Similar to the major companies, whether it's a record company or a publisher,
34:33 when you have to pay them or get out of the deal,
34:35 you have to pay them like 110, 115%, so very similar to that.
34:38 But some buyers now have become very flexible to that way of thinking,
34:42 especially if they really want that asset,
34:45 and it's really important for their portfolio to have it
34:47 because then it complements other songs
34:51 or other pieces of their asset that could generate more money.
34:55 Everyone structures their business differently.
34:58 Yeah, but I've had clients that were not totally convinced on buying,
35:02 so what I did was we talked to the buyers, we pursued that route,
35:12 but I also talked to the publisher and negotiated an extension,
35:19 did a whole new renegotiation of their deal,
35:23 and we ended up renegotiating because ultimately it was just a better situation for that.
35:29 So I also think it's a matter of, like, there's opportunities to be creative,
35:33 and I think to your point, sometimes you don't need all that money.
35:37 Sometimes, why would you sell Despacito?
35:41 Why would anybody sell Despacito?
35:43 Well, ultimately there's a time value of money.
35:47 You could wait 20 years or 30 years to make that money,
35:51 or you could get all that money now, invest it now,
35:54 and then be able to finance or do whatever you want.
35:58 I think the only people that would ever complain about having sold their catalog
36:06 is those people who did not invest correctly, but that's not our fault.
36:11 Yeah, that's really up to the client and their team.
36:15 I'm glad your client got Bitcoin when the getting was good.
36:19 Oh, yeah, you're right.
36:21 They have parties. It's not happening now, but at that time, yeah, it was good.
36:24 Do not go buy Bitcoin right now.
36:26 If you take nothing else from this panel, do not go buy Bitcoin.
36:30 Well, thank you all so much.
36:31 Thank you to Harborview for partnering with us on this panel,
36:35 and if you're looking to sell your Latin music assets, please walk.
36:40 Don't run to the stage.
36:41 I'm sure Angie and Denny would be happy to help.
36:43 Thank you.
36:44 Thank you.
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