On the latest Music Business Worldwide podcast, MBW founder Tim Ingham is joined by Sherrese Clarke Soares, founder and CEO of HarbourView Equity Partners.
HarbourView has earned plenty of headlines since it was founded in 2021. Under Soares, the company has acquired premium recorded music and publishing assets performed by stars such as Wiz Khalifa, Nelly, Lady A, Florida Georgia Line and the late, great Christine McVie.
One of HarbourView’s biggest deals to date is its reported $325 million purchase of SoundHouse Acquisitions LLC in 2022, a catalog that includes royalty streams for songs by artists such as Tech N9ne, George Jones and Trey Songz.
HarbourView has made all of these acquisitions with the financial backing of Apollo Global Management, who partnered with Soares to launch the firm. (Apollo recently partnered with Sony Music Group via a $700 million investment which is believed to have partly funded Sony‘s buyout of Queen‘s catalog.)
Over the past year, HarbourView has expanded its remit beyond music into other entertainment verticals, a good example being its investment in content company Mucho Mas Media, which produced the Netflix hit The Long Game.
(It’s also continued to buy in music: subsequent to Ingham’s interview with Soares, Harbourview confirmed its acquisition of a select publishing catalog from Grammy-winning James Fauntleroy.)
In March 2024, HarbourView announced a new source of funding for future deals, having secured $500 million in debt from KKR via a private securitization of its catalog of music royalties.
Sherrese Clarke Soares is well-versed in the financialization of entertainment rights. Prior to starting HarbourView, between 2019 and 2021 she led Tempo Music, a pioneering music acquisition vehicle created with and bankrolled by Providence Equity Partners.
Before that, she spent 10 years at Morgan Stanley, where – between 2017 and 2019 – she founded and led the development of the firm’s entertainment, media and sports structured solutions platform.
On this podcast, Ingham talks to Soares about HarbourView’s ambitions in the music and entertainment space, the apparent recent slowdown in streaming growth, the impact of elevated interest rates on music M&A, and much more.
Read abridged/edited highlights from their conversation below, or listen to the full podcast – either above, or on your preferred service…
It’s been three and a half years since HarbourView launched. To get an idea of your size and progress, could you bring us up to speed with the company’s key stats?
We have been pretty busy, as you can imagine. We own probably 75 to 80 underlying catalogs from across genres and vintages, ranging from things as seasoned as Fleetwood Mac and Pat Benatar to things as recent as Ruth B and things in the Latin space like Eslabon Armado and Peso Pluma.
We are really focused on building a portfolio that has something for everyone. I like to tell people I’m the Netflix of the space, if you will.
“I like to tell people I’m the Netflix of the space.”
That’s how we talk about portfolio and portfolio construction, really centering a global audience, with a heavy hand on data and data analytics, where we think growth and global audiences are.
That’s led us to about $1.6 billion of total assets under management, or assets purchased – the value may be higher than that. We haven’t taken any heavy marks to our valuations.
Catalog M&A is a competitive space, and it’s become even more competitive in the years since HarbourView launched. How does HarbourView differentiate itself from other buyers in the marketplace?
One, we’re focused on building an investment firm across the entertainment, media and sports segments. We invest in things outside of music [and] what that creates is a very rich ecosystem. It is more than acquiring only music and music catalogs.
I think it’s really allowed us to do some differentiated types of transactional structures with the artistry that we’ve worked with, whether it’s to do things with just catalog only, catalog plus futures, catalog plus name, image, and likeness – we’ve done all of the above, looking at partnering with those artists around developing other types of content or adjacent types of content, looking at deals with content creators that we can look at investing in together. So we really are differentiated in that respect.
“Music is] super fun, but as a consequence, that can be scary to investors. And so we try to demystify that. We try to put a lot of structure and institutionalization around how we think about that.”
We really try to strike this middle note of being translators to the investor community around how to think about things in the entertainment, media and sports segment. Particularly because, as you and I know – we get to work in it every single day – it’s super fun, but as a consequence, that can be scary to investors. And so we try to demystify that. We try to put a lot of structure and institutionalization around how we think about that.
So I think those two things have really differentiated ourselves by really being this middle note – translators for creators, really centering creators in the creator ecosystem, but also being a good partner to our investors and being able to demonstrate our discipline around how we think about investing across the space.
What is your buying criteria? How do you decide upon an asset you want to acquire? And how do you think about decay curves?
First, without getting too technical or spilling our secret sauce – one of the things that we’re really focused on is this global audience frame.
That means that every single human being, [anyone] in the world who has access to internet services or ways to engage in music – is a potential audience member. And the only way for us to cut through that global audience… is that we’ve really centered data analytics in the way that we look at things.
We’ve seen over 600 to 700 catalogs since we’ve opened our doors. We’ve done less than 10% of that. We say no a lot, and we say no a lot around things that don’t necessarily fit in our framework for how we see those opportunities and what we think that they mean to our portfolio.
“It really is this idea of… having something for everybody, because we think that is going to be positioned best for growth against a global audience.”
We are really focused on [artists] who are double-clicking and triple-clicking into their audience, [who have] real resonance with their audience. A lot of that we can see in various data metrics that we look at, but also, qualitatively, we have a team that looks like a global audience, and that’s very intentional, because we believe that the world is plural and not singular.
What I mean by that is that we want to make sure that we have no blind spots in the way that we are looking at or identifying opportunities. I don’t personally have to know or be a fan of the music that we invest in, but what it has to show, through the data that we get, through the way that we engage with the artists and their fandom, is that they know who their audience is and that their audience is hyper-engaged.
It really is this idea of – coming back to being the Netflix of the space – having something for everybody, because we think that is going to be positioned best for growth against a global audience.
And that takes out some of that seasonality around the decay on the front end. It takes out some of the potential obsolescence risk if you have things that are only in one vintage or another. And that allows us to really position ourselves with the strongest portfolio for the best opportunity for upside for our investors.
We’ve seen some slowdown in the music acquisition space in the past two or so years. That’s mainly been caused by escalating interest rates. How do you think the interest rate environment is going to play out over the next year or so, and how might that affect music’s M&A sector?
It’s really hard to find any asset class, and any marketplace, that doesn’t have a correlation to interest rates. That being said… we have seen real resilience in the financing market for our own assets, with the ability to be able to price those assets really attractively. And we think that activity, at least for us, will continue.
I think a large part of that is the asset class is non-correlated [to other asset markets] and [it’s] a diversifier. Also, the way that you think about building a portfolio matters to [entities] like rating agencies and banks and things of that nature, which then indicate what you can finance portfolios at, which we think we center in a fairly differentiated way to our peer set.
As we look out on the horizon, we’re anticipating a Fed rate cut before end of year – maybe one, maybe two before end of year – and maybe a couple next year. [That will] benefit risk assets in a positive way, inclusive of music assets.
You recently made an investment into L.A.-based content company Mucho Mas Media, which was behind the successful Netflix move ‘The Long Game’. What does this investment tell us about HarbourView’s strategy in expanding across entertainment and sports verticals?
Our saying is that content is queen, and that’s not only music content, it’s all content. If we want to be positioned against a global audience, [that] leads us to making similar thoughtful bets and things outside of music, particularly on the film and television side.
Mucho Mas is a film production company led by Javier Chapa, who’s a longtime film producer in this space. He’s focused specifically on Latinx audiences. We invested in Mucho Mas and also invested in creating product with him – creating film product that is designed for specific audiences with the idea around delivering high quality ROI.
We were able to do that in this first film called The Long Game… a sports story about five young Mexican-Americans who had a love for the game of golf in 1956, and couldn’t play golf for a number of reasons that we all understand and know well, given the place and time in history. They built their own golf course, they started their own team, and they went on to win the [Texas State] championship. And it’s a true story.
“Our saying is that content is queen, and that’s not only music content, it’s all content.”
We loved the elements here… we saw some real data integrity coming off of our music catalog, actually, where we have a lot of Latin exposure, that told us this would be a really interesting thing to do.
And then, lo and behold, as people continued to find this film on Netflix, it basically knocked [Beverly Hills Cop: Axel F] with Eddie Murphy out of the number one spot for a couple days in terms of number one films on Netflix.
It continues to prove the thesis that if we make great things for all audiences, and we double-click and triple-click on that audience, you can get really resonant opportunities, with real rate ROI.
HarbourView had a financial milestone earlier this year where you secured a $500 million debt package with KKR. What does that mean for HarbourView’s spending power, and does it tell us anything about KKR’s belief in music asset classes, as well as entertainment asset classes?
The deal we did with KKR is a half billion dollar securitization, something that they did with us on the back of exiting their investment in Chord [Music Partners]. It’s a real testament to our franchise, it does give us incremental firepower, and we’ve got more firepower coming. So we’ve got lots of dry powder in the tank to really continue to identify high quality opportunity sets.
KKR, Apollo, they’ve all been great partners of our firm. And I think when you see large scale institutional partners like that partnering around this asset class, but in particular backing a firm like ours, you understand the power of the asset class, but also the power of the franchise that we’re building here.
As I tell all my creators, we really want to be residents of this space. We’re not going anywhere. I own HarbourView outright, this is my life’s work, so we have to continue to invest with discipline so that we deliver a great return on investment for all of our investors.
Universal Music Group‘s latest results, for Q2 2024, were pretty strong overall, but there was one figure that spooked some analysts: Growth in subscription streaming revenues was lower than what analysts had been expecting. Does the concern around this figure correlate at all with how you view the music market’s potential going forward?
I think Universal delivered a great quarter. At HarbourView we think of them as a great strategic partner. A number of our catalogs are distributed or administered by Universal, so we took great comfort in the fact that they delivered a very strong quarter.
I think you have to remember that in the position that we sit in, owning legacy assets or seasoned catalogs, we’re in a space where we’re looking at some growth, but we’re really looking at and thinking through cash flows that should be stable to growing in the single digits.
So we don’t see that as anything that creates any negative view for us. We are centering on global audiences, we are [looking at more] than just paid subscriptions. Actually, [our investments are] much more indexed to ad-supported, particularly in non-Anglo markets or ex-US markets.
So it could be just the mix at the moment, for Universal, as to why that level of paid streaming seems to be more de minimis than one would like. But for us, based on the mix of the portfolio that we have and the age of portfolio that we have, we aren’t seeing any degradation on income that we’re expecting, and in fact, our actual performance, relative to our forecast, is typically a very positive variance.
We’ve seen some consolidation among music’s new class of acquisitive catalog owners. In this context, do you think HarbourView will be a buyer or a seller? And what’s your overall ambition for HarbourView?
First, no, we’re not for sale. We are definitely a buyer, and we’re happy to be a buyer of all of these platforms that are looking to roll things up.
I do think that you will continue to see consolidation in this space, largely because there’s not that many fully independent firms, or if they are, they’ve been one-product firms, which is one of the things that is a true point of differentiation for us – that we are really centered on being an asset manager across entertainment, media and sports, and not only a music catalog platform.
Music is a majority of our business today, and it will continue to be a significant portion of everything that we do. But as we continue to diversify our product offering for our institutional investors, we’ll continue to see more and more things under the HarbourView banner.
HarbourView was created in partnership with Apollo Global Management, which is a huge investor in multiple different industries. We’ve reported that they just invested $700 million into a partnership with Sony Music Group, to cover Sony’s acquisition of Queen’s catalog. What’s your view on Apollo teaming up with Sony? How seriously is Apollo taking music assets?
Apollo has been a great partner to our firm. They staked our firm. We are the investment manager on that, we invest that with our own discretion, subject to a few rules. They give us working capital to build on our firm, and in exchange, they participate in our firm’s success. They have been amazing partners. They’ve been mentors to our firm.
We were their first foray into the overall music space, but they pick partners who are expert at executing. We’re all a little bit different, obviously. Sony’s a great and outstanding global entertainment platform. [Apollo have] worked really well with Concord, which is an amazing publisher, and then we are an asset management firm – three different ways to engage.
They continue to support our firm in a myriad of different ways, and we continue to see that they will continue to put more capital behind this space, whether it’s with us or with others.
I’m going to presume that if the HarbourView experiment hadn’t paid dividends, quite literally, they probably wouldn’t be moving into music–
We paved the way for all of them! [Laughing.]
The first time that most MBW readers would have heard your name is when Tempo Music Investments launched. Why did you ultimately end up leaving Tempo, and launching HarbourView?
I think the one thing that I did not fully appreciate when I launched Tempo was I was new to launching an asset management firm. I only owned a small percentage of that business, and I had started literally from scratch, from when I was pregnant with my son in 2015.
What I didn’t focus on was what I would have needed to really be able to scale the organization [in terms of] of human capital, for myself, ownership for myself, but also for my team.
“We’re still very much at the beginning. I tell people all the time that HarbourView is my third child. My daughter is almost 12, my son’s almost nine, and my company’s only three and a half years old. So I have a toddler.”
There was nothing [behind the decision to leave] other than I knew I wanted to build something. And Tempo was… very narrowly focused just on music. I knew I wanted to build a firm around these themes, around entertainment, media and sports. It was a complete white space that we saw in terms of institutionally skilled firms, or at least very few firms that do this in a multiproduct way.
And candidly, we’re still very much at the beginning, I tell people all the time that HarbourView is my third child. My daughter is almost 12, my son’s almost nine, and my company’s only three and a half years old. So I have a toddler.
And like anybody who’s a parent and knows what it is to have a toddler, you can take off some of the big proof locks, and they can put food in their mouths themselves, and things of that nature. But we still are growing.
If you had a magic wand and you could tap it to change anything about the music business, what would you change?
I don’t know. I love it so much… I don’t really have a ton of things that I would change.
I think we’re seeing the beginning of a change – the fact that we are plural, we are not singular.
What I will continue to hope to see in music is this mashup: Shaboozey, a child of immigrants, crushing it on the country chart; Post Malone going from pop to rock to country music; the K-pop collaborations with artists like Chris Brown; I really want to continue to see this mashup, because I believe strongly that Gen Z and Gen Alpha, this is the life and the world that they love to live in.
They love to live in this plural, “multi” dynamic, and it is not singular. And so if I had a magic wand, I would accelerate our pacing against that and really get the world to see that it is the answer, the intersectionality and the global audience of it all, and it is not in the singular, it’s in the plural.