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Duologue with Leslie Heaney
The Business Behind the Music with Josh Gruss
01:11:00
What does it really mean to own a song? In this episode of Duologue, Leslie sits down with Josh Gruss, founder and CEO of Round Hill Music, to explore the hidden business behind the songs we love. From Nashville songwriting rooms to global music c...
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- [00:03]
A
Hey, everybody, this is Leslie and you're listening to Duologue. So, since moving to Nashville from New York, I've developed a new appreciation for music. Music is everywhere in Nashville and not just country music. It really is the epicenter for live music performance and also music creation. And living here also has kind of piqued my interest in knowing more about just how music is made and also kind of who owns it and who profits from it. I was also a self admitted Swifty. The whole Taylor Swift, Scooter Braun controversy over her recording rights was always of interest to me. So I thought maybe this might be a subject that might be interesting to all of you, my listeners. And I could think of no better person to usher us into this world of music production and ownership than my friend Josh Grus. Josh is the founder and CEO of Roundhill Music, which is one of the world's leading music publishing companies. And he is also one of the earliest pioneers in treating music rights as investment class. And before he became known for acquiring iconic catalogs and building one of the most respected firms in the industry, Josh was, like so many people in this space and in this industry, simply someone who loved music. So in this episode, we pull back the curtain on the hidden world behind the songs we love the songwriters, the rights, the royalties, all of it. And you'll leave this episode with both a newfound appreciation of how much goes into creating music. You also have a great understanding of the entire financial ecosystem behind it. So for all music lovers, this episode is for you. So music publishing rights, this is a subject that has fascinated me since I remember the Michael Jackson Beatles acquisition. I think it was that. Maybe it was. Maybe it was Revolution, maybe when Revolution was acquired by Nike and then the whole controversy around Scooter Braun and Taylor Swift and the ownership of those rights, I don't really know too much about it. I did a little research for our conversation today, but you're the expert, in my view, on this subject, in addition to so many others, Josh, that I'm so excited to have you on today to talk about this.
- [02:27]
B
Yeah, well, you're sitting in Nashville where so many songwriters live and are out there already making a living or trying to make a living. And so the context is great because it's very much a big business in Nashville music publishing.
- [02:47]
A
I interviewed Caroline Jones, who's the female singer, Zach Brown, man. It was really interesting because she was talking about how Nashville. She was so drawn to Nashville because of the whole singer songwriter culture here and how many people she's able to collaborate with. And then I happened to go to an event for one of my children's schools, and there was a guy that I met there, and we're just chatting at what he does, and he's like, I'm a songwriter. And he was going through a dry spell. He was saying just sort of creatively. But I never sort of understood kind of the whole relationship between songwriter and artist. Right. Sometimes it's the same. Right. In like a Taylor Swift case, it's the same. But then sometimes you have people who are writing songs but not performing them. I went to a concert. It was at the Regency. This is like, I don't know, 15 years ago in New York. It was like a dinner concert with Ashford and Simpson of the Solid as a rock group. And I didn't realize all the songs that they had actually written, they were singing Ain't no Mountain High Enough. They themselves were songwriters. They were explaining. Because it was kind of like a cabaret thing where they would talk about their songs, the backgrounds, before they sang them. But will you talk a little bit about that relationship? I would assume because of your experience in music publishing, you sort of know what those deals look like. And maybe it's like a. It's evolved over time, right. Where songwriters maybe have more rights or artists have more rights. What does that look like?
- [04:23]
B
Yeah, sure. So I think most people don't realize that most songs are not written by the artist. Right. And there are these people, this world that lives behind the scenes of professional songwriters who write the hits that we all know and love. Sometimes it's the artist is the songwriter as well. But I'd say in the majority of the cases that there's the artist and then there's the songwriter, and they're two separate things. So, you know, an artist might have a great voice and, you know, be able to dance and have all the right criteria to be a great artist, but they might not be great songwriters. Right. And it's sort of like an actor. Like, take Harrison Ford, he might be a great actor, but he might not be a great director, you know, or screenplay writer. And so a lot of times the record companies sign an artist, but then their A R department, what is A. Well, you know, the people that. Artists and repertoire is what it stands for. And they're. They're the ones who are discovering new talent and also guiding the artist towards a certain vision on how the. The record should turn out. Right. The. The record label is kind of steering it in. In the direction that they think might be the most commercial. And of course, Artists don't necessarily love that input sometimes, but it is part of the process. But if you ever watch like the Clive Davis documentary, I mean, he was, you know, famous for discovering so many artists and he ran Columbia Records and everything. But if you see the documentary, he's sitting in his office with like 300 cassette tapes around him. Because what he's trying to do is listen through all the demos that his network of songwriters have provided to him and he's, he's searching for the song for Whitney Houston or whichever artist he's working with to record. Right? So it all starts with a song. You don't have a hit until you have a song. And again, artists might be good at performing, but they're not necessarily all the time a great songwriter. So throughout history, you know, the Brill Building in New York was the epicenter of songwriting in like the 1950s, right. There was a whole building on Broadway. And this is kind of depicted, if you see Beautiful, the Carole King musical, the whole building was filled with publishers and songwriters would go in there and sort of pitch their songs, try to get a publishing deal. And those publishers would then take those songs and try to match them with artists that were, that had commercial product to put out. And you know, in Nashville, it's just, that's what it is. You have all these country artists and they're all looking to the top songwriters to give them that, that hit to go in and record it and what they call cut, you know, and publishers, it's part of a publisher's job to take to help their songwriter get those cuts, get those songs recorded on major artists releases. And at the end of the day, the artist just wants the best songs they can find to record and put out.
- [07:58]
A
Okay, so you were talking about the Brill building in the 50s. So is that really kind of when the industry of music publishing were like. And would that be. Were they part of record labels in that building? So the label would own the rights. The singer songwriter comes in off the street, they're like, here's my song, right? Let's take like an eight note mountain high enough that my buddy Ashford and Simpson or my buddies wrote. They would go in with the song and they'd say, we love this song. We're going to buy the rights to this song. Do they purchase it or they negotiate and maybe the artist or, excuse me, this songwriter is like, I'm going to keep the, you know, do they keep a portion of it? Do they get royalties from it? It's probably all.
- [08:37]
B
Yeah. So a typical Publishing deal today would look like the following. And it might have looked different back then. So essentially, a publisher finds a songwriter they want to sign and sets up a deal whereby they pay the songwriter what they call an advance. Okay. And let's just say the advance is $100,000. That would typically give the publisher half of the publishing rights that would come out from the next three years of that songwriter's songwriting. So everything the songwriter wrote for a certain term, let's say three years, the publisher would own half the publishing on. And they call that a co publishing deal.
- [09:27]
A
So that's like a common sort of structure today. That's really interesting. It's almost like. It seems like almost sort of like book publishing or. I know certain screenwriters will have a contract with HBO or something where they only write for HBO for three years, and HBO obviously owns that episode, but they would get royalties from that episode of whatever their writing was. That's really interesting. And so then does the publisher. Are they. Then you mentioned the Clive Davis example. Are they then sending those demo tapes. They'd have someone in studio just performing that song just so you could get a sense of the song. Right. And then.
- [10:10]
B
Yeah, so the songwriter will. This is how it works in Nashville. Like, day in, day out, songwriters will have songwriting sessions booked. So every. Every weekday they wake up, they might have two or three songwriting sessions they'll go into a room with. And again, it's important to remember it's usually a collaboration. It's very rare that it's a song is written by one person. Right.
- [10:41]
A
Okay.
- [10:42]
B
So going back to, like, specialties, like, an artist specializes in the singing and the performing. You might have a songwriter who specializes in just the lyrics. Right. Like I'm the lyric guy, or I'm the top line guy. That's the person that top line would refer to the melody.
- [11:03]
A
Right, Right.
- [11:04]
B
I'm good at writing top line. Or you might have, like, the track guy, the person that's good with recording on a computer and coming up with a drum loop and chord sequences.
- [11:19]
A
Is that where the producer comes in? So I didn't direct you?
- [11:21]
B
No, producer's different. Later stage, and I'll get to that. I guess these songwriters will go into walk around music row, have a songwriting session. It might be at another songwriter's home. It might be in a studio. It might be at their publishers. Usually publishers have offices that contain what we call writers rooms, where it's like a quiet room with a few guitars and maybe a keyboard, and they'll come over and write. So they write and they try to get, you know, one song out of a session, and then at some point, they have to create a demo of it. Like something to hand the publisher to, to go pitch artists and artist managers, you know, hey, check this out. So usually artists, managers, A and R people, the people that surround the artists, you know, again, are constantly playing demos in their songs on their way, you know, driving around all day. They're. They're going through, you know, 50 to 100 different demos, like, just to find a song that they. They think is a fit. And then they might show it to the artist, and the artist will be like, yeah, I love this. Let's cut it. And that's where the artist goes into a proper studio, usually has a producer. And the way I'm describing this is kind of the Nashville way. It's different with pop music, but in Nashville, you'd go into a studio and you'd hire session musicians. Like, you know, Nashville is also full of session musicians. These guys who are great guitar players, great pedal steel players, great drummers, and they're there to lay down the tracks and just very efficiently get a song cut. And then the, you know, and then the artist has a song that, you know, is cut. And the record label might be involved in deciding whether that song makes the album or not. But, you know, songwriters get very excited when they hear, you know, Jason Aldean just cut my song. That's great. Okay, that's step one. Now let's see if it gets onto the album. That's step two. And then let's see if it becomes a single. That's step three. So you can see how it's. It's almost like a miracle for a song to actually, like, get to, like, a be a number one song has to go through so many different steps. So interesting.
- [14:05]
A
You sang things like lay the tracks. It remind me of Puff Daddy and his rap. I forget which one he was talking about. Him and Biggie laying the tracks. So that's. So. I never realized, like, I guess I didn't know that Bernie Taupin and Elton John. Right. I forget one of them writes the music. I think it's Elton John or the melody, and then the other writes the lyrics.
- [14:24]
B
Bernie Taupin wrote all the lyrics and Elton John wrote the music. Yeah, it's a great example.
- [14:31]
A
Is there a usual time? Is it more often, like a songwriter will hear a melody and then write lyrics to fit it or. It sounds like nowadays it's more of a collaboration and they're kind of in the same Room listening.
- [14:45]
B
Collaboration. Yeah. I mean, I haven't sat in the room on too many songwriting sessions. I would have very little to add to the songwriting mix. I'd be an alien in that room. But a lot of the times I'm told it starts with a song title, you come up with the title and you go from there. But in general, good songwriters come prepared to those sessions with some sort of idea, whether it's a lyric, whether it's a title, whether it's a chord pattern or a melody. The songwriters can't just come in being like, okay, what do you got? Nothing. I got nothing. What do you got? Nothing. They have. They need to come into the room with. With something to offer to get the.
- [15:35]
A
Somebody came in the room and was like, okay, the song is Last Friday Night. Right. And then they broke it down. I don't know if they knew that Katy Perry was going to be the person to record it, but it makes sense that that would be. You can kind of. If you start with Last Friday Night, you can really. I feel like I could maybe come up with some lyrics from that just based on that title. But what about people that are really established singer songwriters, like a Taylor Swift? Is she going to a publishing? She probably has her own music publisher. I mean, I guess in her case, she would own everything. Right. It wouldn't be because she wouldn't need the distribution piece or the network piece or all that other components that a publisher would offer a singer songwriter.
- [16:22]
B
Yeah. And then trying to explain it, it's very complicated how the whole music ecosystem works. It's just very complicated. So I try to do my best to explain it and hopefully I make some sense when I do. But you have to remember that there's. At the end of the day, the music business is made up of two copyrights. There's the real estate of the music business is the intellectual property of the rights you don't have. The assets of a Sony Music or a Warner Music or Universal Music is entirely made up of copyright. And that's either the music publishing copyright, which is the copyright in the song, or it's the copyright in the recording, an artist's interpretation of the song. Those are the two assets that make up close to 100% of the value of those businesses.
- [17:28]
A
You got me thinking about the Scooter Braun, Taylor Swift, all that kerfuffle, and stop me, because obviously you know a lot more about this than I do. But I think that he owned or he bought. This is the first go round. He bought the rights to the song, the sound of what she had written. Right. Not the lyrics themselves, but the actual recording is what he bought. And then because she did this brilliant kind of jiu jitsu on him and was like, okay, well I'm gonna re record all the songs that I wrote. Right. Which to get out of. So then there's Taylor's version.
- [18:09]
B
Yep.
- [18:10]
A
Am I right about that?
- [18:11]
B
And now I think no, you are right. And everything, yeah, everything that has transpired in the last few years regarding Taylor Swift and her recordings has to do with her recordings. And no one ever talks about her publishing. When she started off in Nashville, I think she did a publishing deal with Sony, but I don't know where that stands. Don't know where that stands. But just to review the. The Taylor Swift history, there is a Nashville based company called Big Machine Records which was founded by Scott Borchetta, who, he's the one who discovered Taylor Swift and he signed her to a record deal when she was very young. It called for, I think it was six or seven records. You know, very typical type of record deal. This record company, Big Machine was a new record company. He hadn't had any hit artists at that point. And Taylor, he signed Taylor Swift and she blew up to become a huge artist. And so the value of his record company, Big Machine, grew on the back of her success. They signed a few other things. I think they had Florida Georgia Line and a couple other things. But 80% of the revenue from that business was Taylor Swift. So fast forward to when her record contract and her. She delivered her final album, what have you. And this is like 2019, he decides to sell his record company and again, her master recordings made up the majority of the value of his record company. He sold that, the entire record company to Scooter Braun and then it became a hot potato of sorts.
- [20:01]
A
Or.
- [20:03]
B
He might have just sold Taylor Swift's assets and kept the rest. I'm not sure about that one. But again, her assets were the bulk of the business. So Scooter Braun buys it and then it becomes this hot potato and he enters the bullseye of her wrath and she's upset.
- [20:25]
A
Was it because. Is it Porschetta Bruschetta?
- [20:28]
B
Who's the. Yeah, I know, I want to say Bruschetta too.
- [20:32]
A
I mean, I want to put it on a piece of toast. But is he the. Because he didn't go to her to sell it first he went to Scooter. And was Scooter her agent or was her friend or just. I know he discovered, I think Bieber or something. But what was the cause? I couldn't understand why. I mean, I could understand why she was upset that someone else owned her work, but that whole thing played out was curious to me. Yeah.
- [21:00]
B
Yeah. And it's. I think there's a lot. A lot of things there that don't seem quite right to me. So I very much don't think that she was surprised by that. And I say that because I know, and a lot of people know that Taylor Swift's father was a shareholder in Big Machine and he was a board member of Big Machine.
- [21:23]
A
Oh, interesting.
- [21:24]
B
Very. Doesn't seem to make sense to me that her father wouldn't have known that the company that he was a board member and shareholder of was going to be put up for sale and that Taylor wouldn't know about it. So my guess is that maybe I'll get into trouble somehow. I'll enter Taylor Swift's bullseye for saying this now, but my guess is that when she found out it was going to be put up for sale, she probably made some offer and tried to get involved, but maybe it wasn't the price that he was looking for. And she probably said, well, if you sell it to someone else, there's going to be, you know, there's going to be trouble. And that's how it played out.
- [22:07]
A
I see. That makes sense.
- [22:09]
B
Yeah.
- [22:10]
A
All right. So you talked about, like, the record companies, like their. Their assets or their property are these rights. When did the purchasing of those rights kind of outside of record companies, like doing what you do, when did that become its own business where there are people who are investing in and identifying certain songs and saying, I want to own those songs because I see the value in them and I can distribute them, use them, have them be used in different ways and. And make royalties from that, use that download or the commercial or whatever.
- [22:50]
B
I started my company, Roundhill, in 2010, and we were the very first private equity platform dedicated to purchasing music rights. But there was before Roundhill a very long history of deals and acquisitions of these rights and companies being sold, but all within the music sector. Right. So Universal Music is the biggest music company in the world. It's $55 billion business. But it grew to be so big through many, many, many mergers and acquisitions over a long, long period of time. So if you look up, if you open the financials of Warner Music or any publicly traded music company, they're going to have two segments. They're going to have their music publishing segment and their recorded music segment. All the major record labels not only are they the biggest record labels in the world, they're the biggest music publishers in the world. So they've always transacted in both copyrights, dealing with songwriters on the publishing division and dealing with artists on the. On the recorded music division. And a lot of the times, you know, especially in the 80s, bands used to be so desperate for a record deal. I gotta get a record deal. That was the dream of every band for a long period of time. Well, the record labels, when they went to sign those artists, took advantage of some of that desperation. So, well, we're going to do a record deal, but we're also going to take your publishing as part of that. So that's kind of how, in part, their publishing divisions grew alongside their record division.
- [24:41]
A
And wasn't there something the Beatles, or maybe it was Paul McCartney with his legal representation that he bought back. Right. Didn't he buy back the publishing rights to the Beatles catalog? Am I getting that right? Or maybe I'm.
- [24:55]
B
Well, no, Paul McCartney was always upset because Michael Jackson beat him to the deal. You know, Paul McCartney and Michael Jackson used to be really good friends. And I can't remember the name of the duet they had. Oh, say, say, say, say, say, say. Yeah, yeah, that's it.
- [25:14]
A
I mean, I could drop a few lines on that right now, if you wanted to. I mean, we could. You could play Paul.
- [25:20]
B
The story goes, is that Paul McCartney would tell Michael Jackson what a wonderful business music publishing was, and Michael would joke with him and say, like, one day I'm going to buy your music, Paul, you know, and. And he thought that that was a joke. And then I can go into how music, the Beatles music was available to sell for, you know, to anybody. It has to do with when the Beatles first started out, for tax reasons, they put all their publishing into a publicly traded company in England that was eventually taken over in a sort of hostile takeover by a big, bigger British media company called atv. Oh, yeah, ATV snapped up the rights to the Beatles because the Beatles had made their rights vulnerable being part of a publicly traded company. So then ATV owned the Beatles assets, and then it was ATV that was up for sale. And that's what Michael Jackson bought in the 80s, this company called ATV. And then a few years after that, Sony came knocking on Michael Jackson's door and wanted to buy half of what Michael Jackson bought. And so Michael Jackson sort of cashed out a little bit at that point. But the publishing division is still to this day called Sony ATV because it was like the beginning of Sony's publishing business.
- [27:05]
A
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- [29:20]
B
So growing up, I thought I was going to be in the music business. I did internships at recording studios. When I was in high school, I worked at Sony. My first job out of college was Atlantic Records. But then sort of the Napster thing started to oh yeah, it's ugly head. And all of a sudden the music business didn't look like the, the place to focus on as a career. So I, I did a 180 degree turn into finance and I did that for about 10 years. And yes, I played in bands etc, but there came a point where I got, I couldn't take the finance thing anymore. I was. So I felt this is not me, this is not what I'm passionate about. I have to find something that, that involves music because I think you would agree, you know, you can only be good at something, really good at something professionally if you're, you're into it, you're passionate about it. So then I started thinking about, okay, how can I enter the music business? Do I want to own a venue like Peter Shapiro, you know, in Brooklyn Bowl? Okay, he does this extremely well. He can stay out every night to like one or two in the morning at his venues and making sure everything's running smoothly.
- [30:49]
A
I can't stay up, yeah, I can't.
- [30:52]
B
Stay up past like 10:00pm Like I, I knew I couldn't do that. And then, okay, could I start a record label? Well, starting a record label is very, very risky. You have to have a hit right out of the gate or you end up just spending a lot of money that goes nowhere. So too risky for me there. Music publishing is again, it's so hidden behind the scenes that the average person knows nothing about it, including me. Back then I knew nothing about it. But as I started unravel music publishing and seeing, okay, here's a royalty business, here's something where music is making money in your sleep. It's making money from bars and restaurants that play music, from radio broadcasts, from television broadcasts, from the sale of music, from streaming of music, all that stuff. It's a royalty business. And the average person understands royalty, right? They understand like it's like you get paid in a very sort of passive way for something. And as I sort of dug into it, even though the music business kind of sucked in 2010 and Napster and piracy was like wreaking havoc on the record side of the business, the music publishing side of the business was fine because it didn't make the bulk of its money from the sale of music, which was getting kind of eaten alive by piracy, it made money from like radio stations playing music and television stations playing music and all these other things. That very diversified set of income such that there was protection, right? The diversification of the income was so diversified that it was very well protected and that was like, okay, Eureka, this is where I would be comfortable because I'm not like a very, I'm a risk averse kind of guy. And so then my next step was like, okay, there's gotta be private equity funds that have focused on this. Nope.
- [33:03]
A
Yeah.
- [33:04]
B
So then I was like, okay, this, this, this is it. This, this, this could work. Now, the ensuing six years or so were very quiet in that investor awareness of this space was absolutely nowhere. And as much as I ran around the world taking meetings with investors, raising funds for my business for Round Hill, I wasn't moving the needle very much in terms of awareness of this as an asset class. But then in like 20 from, in the last six or seven years, it's just exploded. And now, now every like private equity firm, whether it's BlackRock, Blackstone, KKR, whomever, they've all gotten involved in this space one way or another.
- [34:00]
A
Well, you know, part of it though, you know, obviously you saw this gap. Like you were probably, as you just described, were kind of shocked that no one had kind of figured out the value here and that it's just sitting there and no one's looking, no one's investing in it, no one's looking for these different properties. Roundhill is unique because you need someone to really kind of know what songs are going to be downloaded and played and in commercials you have to have a sense of what is going to be success. Right?
- [34:30]
B
Yeah. So we're right to that point. The very, the number one thing to get right and understand right at the outset when you're looking at something to acquire very simply is will this song stand the test of time?
- [34:47]
A
Yeah.
- [34:48]
B
Will this song have an extremely long shelf life? Yes or no? And if you don't have a background in music, if you haven't been listening to music, reading about music, studying music, performing music, just basically putting in the 10,000 hours of understanding music, you will have absolutely no clue how to answer that question. We just closed on a deal over the weekend for a band from the 80s called Modern English. They had one song called Melt with youh.
- [35:27]
A
Yeah, say no More, by the way, your entire catalog, which I'm gonna get to in a second. Not your entire, but some of your top hits that you shared with me. It's like my karaoke list. I mean these are go tos including like the Muppet, you know, that Muppets themes or that song like Phenomena. Yeah, like all those things. So, okay, so Modern English. Now how does that. Is that you saying like I love that song, like I wonder who owns that song. And then contacting Modern English's publisher, sometimes.
- [35:59]
B
It'S like, yeah, it's probably like 50, 50, like what you just said, where you kind of dig to try to figure out where the rights sit that you might be interested in. But the other half is being shopped around by lawyers that represent the artists who want to sell. So in this case, it was the latter. But what I was trying to say is if you're just a finance guy or just say you don't know who Modern English is, right off the bat, if you have to turn to somebody and say, okay, tell me about Modern English, you've already sort of lost the game. Because anyone that knows that band knows that they're. They've been around for 40 years. They had one really big hit hit song. It was all over MTV back in the day. That song is heavily featured in Hershey's commercials. Hershey's, like, for the last five years, has a campaign with that song, you know, melt with you in it. They still tour. And. And so, like, I. I just already have this upstairs in my head.
- [37:01]
A
Yeah.
- [37:02]
B
So I'm like, yeah, that. That's an ideal song to go after. Because, you know what? If it's been doing well since 1983, when it came out over 40 years ago, it's probably going to keep going for another 40 years. Yeah.
- [37:20]
A
I like that. So is that kind of your mantra or your guide of will it stand the test of time?
- [37:27]
B
Is that, I mean, that's number one, and then what can I do to add value to it? Or what? What's the upside? Right. And I do have this thesis that good things happen to good songs over time. Right. So a good example of that is Fast Car, Tracy Chapman.
- [37:46]
A
Yeah, yeah, yeah.
- [37:47]
B
Right. Going back, tying in Nashville. Right. Luke Combs covered that song a year ago or so. And it went from a hit that people kind of remembered from, like, the early 90s, Tracy Chapman. And then, I don't know, 30 years later, it's like a number one hit all over again. With the country artists, it was always a great song, and it did fine. But the earnings on that song probably quadrupled or more and will kind of stay a lot elevated going forward because it was covered in that way. And that's just one example. Songs get rediscovered through movies all the time now, or they go viral on TikTok or something happens where a good song from the past gets a whole new life out of the blue. And so you don't really know when it's going to happen. But that's why investors, and we tell our investors like, this is a long game, right. It's going to earn steady growing cash flows. But you have to put on that Warren Buffett hat of being a patient investor here because these rates will only grow in value over time. But you can't get impatient on it.
- [39:14]
A
You just mentioned, though, you were talking about your value add and when you mentioned songs being rediscovered through movies and tv, I know there was that Kate Bush song, that was the. That's another great example for Stranger Things, right?
- [39:29]
B
Yeah.
- [39:30]
A
So someone in your position, right, you're owning these, you own the rights. Are you actually kind of going out and trying to sort of shepherd opportunities for some of these songs? Is that part of what Round Hill does? And is that part of what is that where like the black rocks and people like that. And by the way, I don't know, do they hire people in the music industry to kind of like someone with your. I mean, no one, obviously, Josh, has your, you know, your skill set, but like people that have that, that knowledge, that music knowledge, like. Or are they going out to kind of try to find opportunities for songs to be resurrected that, you know. Yeah, like a fast car or something like that.
- [40:09]
B
Now, now you're getting to like the. That's a great question. Now you're really getting to like the heart of what Roundhill does and, and, and sort of separating the wheat from the chaff in terms of ability to add value. Right. So this concept of putting songs into films, TV shows, ads, it's called synchronization. And yes, we have 15 people, we have 60 or so people overall, we have 15 people dedicated just to pitching our songs to be used in those forms of media.
- [40:45]
A
I see.
- [40:46]
B
Okay. Now you have to have the administrative rights with the songs to be able to actually do that type of licensing. A lot of the times when you buy these rights, the actual administrative control sits with a different publisher. That might sound complicated, but essentially you can, you can be active with these rights or you can be passive. And we're always looking to get that administrative control so we can be active. And a lot of players in the space are just passive. They own a passive right to it. They don't have their own in house folks to pitch the songs. They outsource that to another company and essentially they operate as a small group of private equity people sitting in their office waiting for the check to come in. And that even when people are set up that way, they still say that they add value and that they are proactive, but they're not. So that's really what you have to dig into those finer details. But we bought a company actually a few years ago called Zinc. And they, before we bought them had a 10 year history of just doing synchronization, licensing. Just a sales force of mostly women that just have the network sit in la, know all the music supervisors, people in New York who know all the advertising people. And rather than sort of build that out organically, we just bought a company that did that well, and that's still kind of our setup today.
- [42:40]
A
And then you also own like, besides like sort of like rock pop songs and classic songs that you own. You own like the University of Miami fight song. Will you explain that? I guess it makes sense that there would be that that would have publishing rights. But what was your thinking behind that? Just would that be something that would always be used or that it was just a great song that could be applied other places?
- [43:04]
B
Well, to be honest with you, I don't know. Everything that we pick up, we have 200,000 songs. And when we buy a big company like this company Carlin that we bought, it had been around for many decades and they must have bought that somewhere along the way. And it was part of the package.
- [43:24]
A
I see. Okay.
- [43:25]
B
So yeah, there was no thinking about that song in particular.
- [43:30]
A
Okay. So that might happen. You're just picking up catalogs and.
- [43:33]
B
Yeah, catalogs. And it'll come with lots of songs. And you know that catalog. The biggest song in that catalog is Total Eclipse of the Heart by Bonnie.
- [43:45]
A
Tyler, which probably is worth whatever you, I mean, whatever else was in there, just paying for that.
- [43:50]
B
Yeah, well, you really buying these things based on songs that earn the money. A lot of the times portfolios will have many songs that didn't earn very much money. So you're picking them up for free. Right. Because it's not about how you're not buying on a per song basis. You're buying on this portfolio. Earn X amount of dollars overall and you pay on that. And so if you know, 10 songs out of 100 made up 99% of the earnings, then you're getting, you know, nine, 90 songs for free. And in that portfolio, funny enough, is also Take Me out to the Ball Game, which is such an old song that it's actually in, in the public domain everywhere except, except for South Korea that has longer copyright duration laws. So the only money we make from that song at this point is when they're playing baseball in South Korea.
- [44:52]
A
Wait, tell me about that. So Is there like these copyrights have a. Or the publishing rights have an expiration date?
- [44:59]
B
Yeah. And the general rule of thumb is the rights last 70 years after the death of the last surviving author on the song. So if you have Paul McCartney and John Lennon. John Lennon passed away in the 80s, but Paul McCartney is still alive. They co wrote most of those songs. 50. 50. So those Beatles songs would go into the public domain 70 years after Paul McCartney dies. That's just a general rule of thumb. Some countries it's slightly different, but that's just kind of the general rule.
- [45:41]
A
Now what about new songwriters in the movie business? Right. Certain studios will buy or option a book from an author sometimes even before it's been written. They've seen the treatment, they know what the subject is and it's whoever it is, an author, that James Patterson or something, they know that they can make it into a movie. Are there any songwriters out there today that people like you or other publishing houses will want to buy everything they're producing or have some kind of a relationship with them? I know you mentioned the publishing houses do that, but would someone like you who's buying the rights after the fact ever want to get in beforehand?
- [46:27]
B
Yeah. Historically we want our investors to know that we're buying mostly very established, safe, time tested, proven out cash flow streams. So that's why we're buying a lot of catalogs from the 80s and 90s. But we do do really small part, like 5% of our investment goes into newer things that has been pretty successful. We've had countless number of number one songs, especially in country music. We came to Nashville in 2014 and really focused on if we're going to sign new writers, let's do it in country music because it's a lot less competitive than pop. Pop is like what every record, major record label, they want to have the big pop hits. Like if you're the, the CEO of Sony Music Publishing, you're probably compensated at the end of the year by how many hits you guys came up with. How much market share on radio did you have? And so they're very focused on what we call frontline, which is that go forward, the hit of tomorrow type business. We're not, we're focused on the catalogs, but we have done the frontline thing and to the extent we get involved, it's been mostly on the countryside. And just to answer your question, there's one deal we did with a songwriter you should be aware of in Nashville named Ashley Gourley. He is a machine. He is I think up to 80 number one songs he's written. He's only in his 40s. He's only been in Nashville for maybe 15 to 20 years. He's an ASCAP songwriter. He's been ASCAP country songwriter of the year, I think 10 or 11 years straight in a row. So with someone like him, you can kind of almost guarantee that there's going to be the next. However whatever the term is of the deal that you have moving forward with him. I think we did a four year deal with him, but, you know, we could pretty much bank on the fact that those next four years would produce a certain amount of number one songs. And it actually exceeded our expectations. So he's a huge deal in Nashville. He's actually as a relatively young guy entering the Songwriters hall of Fame, which happens next week. So he's the. The king of country, modern country songwriting in Nashville today.
- [49:18]
A
So Round Hill has like. That's an example of someone that you've. Who work, you know, and you're like, we're going to. We want to.
- [49:25]
B
Yeah. So we had four years of his songwriting and then four years came up and. And it did great. But then he's free to enter another. Into another deal with anybody he wants to for the next four years.
- [49:38]
A
But would Rattail still own part of the.
- [49:41]
B
Yes. And so we continue on the half of the publishing, you know, that typical co publishing deal on songs that were released commercially during that. Those four years. So one of those songs was a Morgan Wallen song called you Proof.
- [49:59]
A
Okay.
- [50:00]
B
Which was a big number one hit. And I just was reading through Billboard magazine, just put out a list of the top country songs of the 21st century and it was like within the top 10. So we, you know, we got like a song that's probably going to be around for a long time out of that.
- [50:20]
A
And then you like. There's another company called Concord, I think, that bought some of your. You did a huge deal with them a couple years ago for 51 catalogs, 150,000 songs you sold to them. Was your thinking that you wanted to kind of monetize some of these rights so you could reinvest in other properties or you just saw it as a good opportunity or. Yeah.
- [50:41]
B
Okay. So that one needs a little extra explaining because normally we don't want to sell these assets because going back to my point, it's like you got to be patient and you have to see the value build up over a long period of time. We've always been set up as a private equity firm. So we have these funds that in typical private equity fashion, are supposed to wrap up within 10 years or so on a typical private equity fund like you raise the money, you go out and you invest the money, and then you're supposed to return the money within five to 10 years. So our first fund that we raised was raised in between 2012 and 2014. So circa 2019, it was time for us to really look, how are we going to get liquidity for these investors? How are we going to monetize this for them? So we came up with a nifty solution which was we're going to take it public on the London Stock Exchange. And in doing so, we can, we can return the original investors capital through the proceeds of the ipo, but then carry on managing these assets well into the future as a publicly traded entity. So that was the plan. And that plan got fucked when after Covid, the interest rates and inflation started to happen and interest rates went from being 0% to where they are today, kind of hovering around 4.5%, 5%. That had a real drastic effect on our stock price because our stock price issued a 4.5% annual dividend. And this might be too much financial mumbo jumbo for your listeners, I don't know. But a 4.5% dividend was really attractive back in 2019 when interest rates were zero. But if all of a sudden interest rates move up and you can just put your money in your checking account and earn 4.5%, then something's got to give on a publicly traded stock, which is more risky, you know. So what happens is the stock price came down to adjust for where interest rates move to. And all of a sudden our stock was trading at a massive discount to its net asset value, so that the net asset value was $1.20 and our stock was trading at $0.60. So it was incumbent upon me as the CEO, to do the right thing for shareholders and narrow the gap between the stock price and what the stock was actually worth. And so I fielded offers to sell it. That's the best way to make that gap close really quickly. So one day when the stock was trading at 60 cents, there was a announcement about our deal. Concord Music offers $1.15 to buy Roundhill. And our investors saw the stock price go from 60 cents up to 115. And everybody was happy and it was the right thing to do, but it was, it sucked to have to sell from, from my standpoint, it was just an outcome of the financial environment and sort of the, the Right thing to do as a steward of people's capital, but as someone who worked so hard to buy those rights, and I confess, very emotionally attached to a lot of those rights. It was. It was tough that way. That's why that deal happened. And it was, you know, it was a big deal in our space.
- [54:51]
A
Yeah.
- [54:52]
B
100.
- [54:52]
A
That's how I knew about it, because I was in my research. Yeah. But, you know, obviously opened up other opportunities for you, though, Right. To acquire other properties, I would think, having that capital.
- [55:04]
B
And it's also, you know, what. What is something worth? It's only worth what someone will buy something for.
- [55:11]
A
Yeah.
- [55:12]
B
And so in the world of private equity, until someone buys it, you can have appraisals done and valuation firms like, try to pinpoint what it's worth, but it's not until you sell something that you absolutely know what something's worth. So it's great, moving forward with Roundhill to be able to say, hey, you know what? We had a liquidity event two times on the same asset. Well, first we took it public. Those investors got their money back. Then when it went public three years later, we sold it to another party, and those investors got their money back. So I've now been able to prove twice that I can go out and I can buy these assets, but I can also exit them. And that's not something everybody can point to.
- [56:08]
A
Yeah, no. 100%. So you all are in. You've got your office in New York. You could be home in New York, but you're in New York right now. I'm not sure if you're in your home office. And then you. London and Nashville, what do you see? Sort of as are those kind of the epicenters for music publishing. And what do you see? Kind of. Yeah.
- [56:29]
B
Let me talk about Nashville for a second. So I had never been to Nashville before 2014, but as soon as my flight landed and I. Even before getting out of the airport, I fell in love with that town.
- [56:40]
A
Yeah.
- [56:41]
B
I fell in love with. As soon as you get off the plane, there's someone performing music in the airport, and there's. You know, they don't call it music city for no reason. And so for someone who loves music as much as I do, it was an instant love affair with Nashville as a city. And I immediately ended up buying an apartment. And I knew I wanted to plant roots there. And within a couple years, I shifted all of our employees from New York to Nashville. And it's just such. It used to be the headquarters for country music Today, it's the headquarters for all music. All the music companies have done what we did and shifted the bulk of their employees there. So many artists, whether they're country or not country, have moved there, and it's just so vibrant that way. And it's definitely just going to keep growing as the center for the music business.
- [57:54]
A
Well, you and I talked about this a couple months ago when we were seated next to each other at a dinner. Remember you kind of saying that used to be you could be discovered and a band could be discovered in a bar in LA or something. But here, and you mentioned the airport, I had the same experience getting off the airplane and people are playing live music and the people that are playing the live music are excellent. It could be. I mean, but there's so much live music that it seems like this is the place where everybody who is in that performer, artist, piece, because we talked about the songwriter versus the artist, those artists are coming here, be discovered. Right. Not only just to be in this collaborative community, but all the people that are looking to find that next talent are here too. Right. I think.
- [58:46]
B
Yeah. I'm not sure if everyone's dream is to be a country artist. I think a lot of them want to be songwriters. They'll drive an Uber for a few years and, you know, do what they need to do to get to that place where they're. They're making money from. From songwriting. That's. I see that a lot. And then it's also an amazing. It's really where you have to be if you want to be a session musician or like a touring backup art, you know, anyone who's like, got. Because I play guitar. Right. The Nashville is full of amazing guitar players. And for you to even have a chance of sort of rising up the ranks in Nashville as a guitar player, you have to be really, really, really, really, really good. So, you know, if you're like some amazing guitar player, you grew up in England, but you're like, your dream is to, like, be a professional guitar player and go on tour with a great musician and get paid to play guitar. Yeah. You move to Nashville and you give it a shot.
- [60:03]
A
All right, so what's next for you, by the way? You have a new, an incredible store. I've just seen this online. Round Hill Music. Right. In Greenwich. Yes, but what's next for Roundhill Music? Josh, when are you going on tour? Tell me.
- [60:21]
B
Going on tour? Yeah. So I. We just opened a store called Roundhill Music Company in Greenwich and it sells vinyl and guitars, high end guitars. And it's just a sort of passion project of mine. I think that the experience of sifting through vinyl, buying physical music is just an amazing experience that you and I grew up with, but has gotten lost over the years. But amazingly, vinyl is actually on the upswing again. And so, yeah, actually one of my.
- [61:03]
A
Kids asked for a record player for Christmas.
- [61:06]
B
Yeah. And I don't know if I quite understand it.
- [61:08]
A
Yeah.
- [61:08]
B
But the store is like we thought we were going to be selling mostly guitars. We're now selling mostly vinyl. Vinyl is going to be sort of like a side, like a. Not the main product. And now we're selling so much vinyl. And it's great market insight for me because I can see in real time what people want to consume, music wise. And that helps me on the investing side.
- [61:34]
A
That's really interesting.
- [61:35]
B
But it was more like, you know, just there wasn't a music store in Greenwich. It's a great way to sort of be part of the community and create more community. I needed a store like this and it's been great so far.
- [61:54]
A
And what about for you on the publishing side? Is there something. I know we talked about the songwriter here who's young and who's writing new music, but is there type of genre that you're like, you haven't really explored that you want to look into? Or is there something that you want to purchase that maybe you can't tell me, that maybe that's top secret, Some song that you'd love to own? Or is there like what's kind of next for you or what are you looking towards?
- [62:23]
B
Yeah, well, going back to my little story there on the history of the publicly traded fund and all the ups and downs with that, one of my takeaways is I never want to be in a position where I have to sell these assets. And so a next step for Roundhill is looking to take our existing remaining funds, there are five of them, and consolidating them into one new fund that doesn't have such a short duration as five to 10 years. Like, it'll be more of an evergreen type of fund, they call them. It becomes a much longer term investment strategy. And that'll be the first of its kind in our space where we're structured differently. And it becomes much more. It looks a little more like a hedge fund than a private equity fund because there's ways for it to get liquidity and for investors to come in and out. And it was really inspired by the publicly traded vehicle that we had. Same concept. Just instead of being Public being private, your listeners, if they're not finance folks, that's probably more finance mumbo jumbo for you.
- [63:46]
A
Oh, if they are, by the way, it's interesting. There probably are some investors. Listen, Josh. Yeah, exactly.
- [63:56]
B
If you're an investor, you get what I'm saying. If you're not, you fell asleep half an hour ago, so.
- [64:02]
A
Yeah, no, are you kidding? Just such an exciting. I mean, I've sort of watched not knowing enough about it, which is when I was. You and I were chatting at that dinner and I was talking to our very close mutual friend, Nick Goodman. He's like, you got to get. I mean, it's. Because it's such a fascinating space that I, you know. Well, you know, listen, I love. I love music. You know, I love karaoke. Like, I, you know, and many of the songs that you own are on my. On my song list, but I don't really have a full understanding or appreciation of all of the components to it. And it's such a fascinating industry. Not just like the process of, you know, making music and who owns it and all of that, but just how these publishing rights have such. Staying.
- [64:50]
B
Not a very well understood industry whatsoever. Which is why it's interesting in part as an investment, because it's. There's a lot of inefficiencies there because it's not something that's been. It's not like real estate or something where, you know, it's been combed over a lot already. It's. But at the end of the day, we listen to music because it puts us in touch with our emotions. It helps us control ourselves emotionally when we're, you know, when times are great, we're blasting our tunes with the top down and singing along and living our best life. And then when things aren't going so well in our life, we're still resorting to music, to listening to music to make us feel better, to lift us up. And that's why, you know, country music does such a good job tapping into people's emotions because the lyrics are usually just like, I think that's the best part about country.
- [65:50]
A
But that is so true. It's like telling a story. Like it's telling a story of someone's.
- [65:54]
B
Life or something, and we relate to it and. And so music's never going to go away. People will always be listening to music in good times and bad. Music is the main ingredient for TikTok and YouTube and so many of these new digital platforms that are growing so quickly. Like, if you think about it, music is everywhere you go, all throughout your day, and we're the ones making money. Every time you hear that music, it's a royalty event. Every time you hear music. If you're streaming a song on Spotify, it's not a lot, it's like a fraction of a penny, but there's billions and billions of those that add up. So that's the business we're in. And if you love music as much as me, then it's not a job. It's just fun. And so I've been so lucky to. I think it's such a rare rarity to have your profession be something that you just love to death. I mean, it's really the holy grail for life, I think, is to find that. And I just feel so blessed that I get to do this. It's a dream job to me.
- [67:17]
A
It's actually really inspiring to have watched you make that pivot and sort of know what's possible when someone does pursue, because it's not. You had, obviously, this background and passion for music, but then having been in finance for a bit, that certainly helped. Applying that skill set to what you're doing now, kind of marrying that experience, while it might have been suffocating for you during that period, but taking that and applying it to something that you're passionate about, where you found value in, is pretty amazing.
- [67:53]
B
I grinned and bared the finance part of my life, but you're absolutely right. I. I couldn't do what I do today at all without having gone through that, because at the end of the day, it's also about numbers and, you know, making proper investments and really understanding how to value something. Also, when talking to very sophisticated investors, you know, who are the ones that come on board at Roundhill, you have to speak their language. You have to. You have to. You can't have any blind spots in your. In your financial toolbox.
- [68:32]
A
You've got to know the lingo. Yeah, yeah. And actually, what's happening. But, I mean, I know my husband.
- [68:39]
B
It's not. It is lingo, but it's like if. If you're just faking your way through financial lingo, it's very easy to get twisted up and, And. And people will pick up on that in two seconds. Right. So, yeah, And I. The finance is. So most music people, like, they. They see a spreadsheet and they, like, they. They start getting the hives, you know, so it's interesting. In our space, it's rare to find there are music people who will get the music but have no idea how to deal with the numbers. And then there's finance people who know how to deal with the number numbers, but are not the music people. And for some reason I was. You know, all the stuff I did when I was younger, there was a result from that that was beneficial to what I did.
- [69:35]
A
The whole thing rolled into one, Josh.
- [69:37]
B
The whole thing rolled into one.
- [69:39]
A
Well, I can't wait to see what Roundhill does next. I can't wait to come visit the store. And I can't wait to come down to Nashville, hopefully soon so we can see each other in person.
- [69:48]
B
Yeah, definitely. And I'm so happy you're in Nashville now. So many people are moving there. It's the only place besides New York that I could see myself ever living. So maybe one day I'll. I'll be your neighbor.
- [70:04]
A
All right, my friend. All right.
- [70:05]
B
All right. Thanks, Leslie. Thanks for having me. I appreciate it.
- [70:09]
A
Thank you. That brings us to the end of the this episode of Duologue. A huge thank you to Josh Grus again for joining the podcast. I learned so much, and as I mentioned, sort of now I listen to songs and appreciate songs and artists a little bit differently after learning so much from him. A big shout out to our sponsor, Cozy Earth. You can check out all of their amazing products on their website, cozyearth.com don't forget to include the promo code Duologue at checkout for 20% off. And most importantly, thank you all so much for listening and supporting the podcast. If you enjoyed this episode, please rate or review us on Apple Podcasts or Spotify or wherever you get your podcasts. We have another new episode coming out next Wednesday. Until then, this is Leslie, and thanks for listening to Duolog.