Morgan Stanley Bets Big on Music Copyrights with $700m Investment in Kobalt

Nov 2, 2023 | News | 0 comments

Kobalt announced a new partnership with investment funds managed by Morgan Stanley Tactical Value to invest more than $700m to acquire music copyrights over the next few years.

As part of the venture, Kobalt will manage the creative, synch, licensing, administration, and investment services for the copyrights.

“Kobalt is a pioneer in investing in music, increasing the value of copyrights, and creating music as a viable asset class,” said Laurent Hubert, Chief Executive Officer, Kobalt.

“Morgan Stanley Tactical Value’s trust in Kobalt is a testament to our platform and leadership in the music industry. We are proud to form this unique partnership.”

Morgan Stanley Tactical Value is a private equity and credit investment platform within Morgan Stanley Investment Management.

Cameron Smalls, Managing Director, Morgan Stanley Tactical Value, said: “Morgan Stanley Tactical Value has profound respect for songwriters and the immense value of their art.

“We are thrilled to partner with the leading creator-first publisher that is a pioneer in maximizing royalty collections for songwriters and rightsholders. Together with Kobalt’s infrastructure and deep commitment to bettering the music industry, we are excited about our partnership and the opportunities ahead.”

Goldman Sachs acted as an advisor in the new partnership.

The Morgan Stanley deal represents a return to managing investment for outside capital for Kobalt.

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Kobalt’s previous investment management arm, Kobalt Capital, facilitated the sale of two music-owning funds in the past few years for a total of around $1.4bn:

  • Fund One was sold to Hipgnosis Songs Fund  for $323m in late 2020;
  • Fund Two was sold to KKR/ the Hendel family for $1.1bn in October 2021

Since that October 2021 sale, Kobalt has used money from its own balance sheet to fund M&A activity in music.

Now it’s got Morgan Stanley’s money to play with.

Last September, Kobalt confirmed that it had been majority-acquired by private equity company Francisco Partners (FP).

As a result of that deal, FP gained a controlling stake in Kobalt that equates to around 90% of the music company.

Minority investors who own the remainder of Kobalt include Matt Pincus’s MUSIC, Dundee Partners, and Kobalt’s founder and Chairman, Willard Ahdritz.

Kobalt currently serves over 700,000 songs, representing songwriters including Roddy Ricch, Max Martin, FINNEAS, Karol G, Andrew Watt, Stevie Nicks, Phoebe Bridgers, The Lumineers, Gunna, Justin Quiles, The Foo Fighters, and Paul McCartney.

Kobalt also runs AMRA, its global digital music collection society “designed to maximize value for songwriters and publishers in today’s digital age”

Source: Music Business Worldwide

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