Round Hill Music's latest deal is a 'back door' to hitmaker royalties

With its latest acquisition, private equity firm Round Hill Music will begin collecting royalties on songs, despite never striking deals with their artists.

The music rights company has acquired prolific rock producer Steve Lillywhite's producer royalties and other related rights, a vast catalog that spans more than 500 albums with bands including the Rolling Stones, Morrissey, the Talking Heads, Phish, Counting Crows—plus U2 and the Dave Matthews Band.

"I don't think you'd ever get the Dave Matthews Band or U2 to sell, but if they did, it would be super expensive—a huge bite for Round Hill to chew," said chairman and CEO Josh Gruss. "This is a more backdoor way to those same royalty streams at a much more reasonable valuation and size."

The terms of the deal, which closed prior to the new year, were not disclosed.

Round Hill's latest deal fits squarely within the booming market for music rights acquisitions, in which the firm was an early player. Round Hill is among several firms snapping up music rights, which deliver returns to investors through the royalties paid for every stream and sale.

As of February, Lyric Capital Group had raised more than half of a music royalties fund targeted at $500 million.

In October 2021, Blackstone backed Hipgnosis  with $1 billion to invest in rights acquisitions and has since made a $100 million deal with Justin Timberlake, a potentially $500 million deal with Pink Floyd and a prospective $200 million deal with Justin Bieber, according to reports. 

This fall, HarbourView Equity Partners acquired Incubus' music publishing catalog and songs by Florida Georgia Line for undisclosed amounts.  

Artist-focused mega-deals would pose a risk for Round Hill, which aims to create portfolios with a wide array of artists and income streams from publishing, recording and neighboring rights, among others, Gruss said. Round Hill's entire third fund, which invested in the Steve Lillywhite deal, attracted $291 million in commitments.

"If we did a Bob Dylan deal for $500 million, then our LPs in that fund would be highly exposed to one artist: Bob Dylan," Gruss said. "We need diversification across artists."

Apollo Global Management's agreement in December to buy into Concord Music's $1.8 billion securities sale, which allows Apollo to tap into royalties from more than 1 million songs, showed another way for a single deal to provide broad exposure.

Featured image of CDs and artwork of rock band U2 by Kraft74/Shutterstock

This article originally appeared on PitchBook News