Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Warner Music is in talks to acquire the Red Hot Chili Peppers’ catalogue for more than $300mn, as the record label seals a $1.2bn joint venture with private equity group Bain Capital to make a big push into buying song rights.
Talks to acquire the rock group’s repertoire — which includes hits such as “Californication” — are ongoing, according to people familiar with the matter, who cautioned a deal might not materialise.
A deal would be a coup for the partnership between Warner and Bain, announced on Tuesday, which they hope will expand an additional “multibillions” of dollars over the next several years.
Warner Music chief Robert Kyncl said the arrangement would combine the label’s “deep expertise” with Bain’s “financial prowess” to “make us the destination of choice for pre-eminent catalogues”.
Songs have become an attractive asset class to professional investors over the past several years as streaming resuscitated the music industry. Wall Street groups such as Blackstone, Apollo and KKR others have invested billions of dollars in songs.
Warner — the major record label behind artists including Charli XCX, Megan Thee Stallion and Dua Lipa — has in recent years acquired song catalogues such as David Bowie’s for $250mn and David Guetta’s for $100mn.
For Bain, the joint venture marks a re-entry into music, after the private equity group was one of the investors that helped buy out Warner Music in 2004, when the industry was ravaged by online piracy.
As part of the agreement, Bain and Warner will each contribute half of the $1.2bn in equity and jointly search for music to buy. Warner would handle marketing, distribution and administration of the catalogues they acquire.
After an influx of entrants to the music rights space, Bain and Warner anticipated consolidation among these investors and hoped to be a big player in that, said people close to the joint venture.
Some investors had feared the music rights market, which bubbled up with a series of frothy deals during the period of ultra-low interest rates, could crash when the Federal Reserve increased interest rates.
But songs have proven a resilient investment, even during the Covid-19 pandemic and the subsequent rise in borrowing costs.
“How these assets performed during the Covid period . . . They were rock solid and actually grew because people flocked to forms of entertainment, and music is still a relatively inexpensive form of entertainment,” said Angelo Rufino, a partner at Bain Capital.
“So from our perspective, we are interested in the long term — and that’s iconic copyrights with good cash flow profiles that can be materially grown over time,” he added.
Catalogue prices have softened slightly from the peak in 2022, but there has not been a big correction. In 2024, music catalogues fetched a price of 17.4 times their annual net royalties, down from 18.8 in 2022 but well above 13.7 in 2019, according to investment bank Shot Tower Capital.
The major record companies — Universal Music, Sony Music and Warner Music — have increasingly partnered with investment groups as a way to avoid taking on the full financial cost of buying song catalogues. Apollo last year helped Sony Music buy Queen’s catalogue for more than $1bn.
Warner Music is controlled by billionaire Sir Leonard Blavatnik, whose Access Industries acquired the group in 2011 in a deal worth $3.3bn. Shares in Warner Music have fallen 13 per cent this year, underperforming the broader stock market.
A representative for the Red Hot Chili Peppers did not immediately respond to a request for comment.
Additional reporting by Antoine Gara in New York
