Josh Gruss spent his early career bouncing between music and finance -- playing in a hard rock band and getting an MBA from Columbia University, and working at both Atlantic Records and his family’s investment firm. He went on to found Round Hill Music, a private equity-financed company that invests in publishing and recording assets, which is marking its fifth anniversary.
“My whole background is in finance, but I’m also a musician,” says Gruss, 43, sitting cross-legged on the floor of an empty Midtown Manhattan office where Round Hill was relocating later that day. “And I had this idea to create a private equity platform to invest in music royalties.”
Those investments have given Round Hill an interest in copyrights from a remarkably diverse range of songwriters -- Lennon & McCartney, Craig Wiseman, Eddie Holland, Gavin Rossdale and Gerald Marks, among them -- and in hits recorded by artists such as Bruno Mars, Tim McGraw, Pat Benatar, The Supremes and Frank Sinatra.
The music publishing business makes sense for investors, industry veterans say. It generates a steady flow of income, regardless of the swings of the stock market or the state of the broader economy.
Yet the world of music remains so alien to finance executives that Round Hill maintains two separate websites, one for investors and another for the entertainment industry.
Round Hill raised an initial fund of over $200 million and in 2012 made its first high-profile investment in six Lennon-McCartney compositions, including “She Loves You,” “From Me to You” and “I Saw Her Standing There.” Now its annual net publisher’s share, or gross profit, is “approaching $20 million,” says Gruss, and it has begun raising money for a second investment fund. “We’re targeting pension funds, endowments, family offices.”
Gruss leveraged his experience in finance to create Round Hill Music as a platform for private equity to invest in publishing and recording assets.Landon Nordeman
In Round Hill’s sightline are also rights to master recordings. In January 2016, it bought the recordings and publishing of The Offspring for $35 million. It previously acquired the first four Bush albums, in a 50-50 partnership with frontman Rossdale. It recently announced deals with the band Tesla and the estate of Warrant frontman Jani Lane. And although Round Hill focuses on acquiring catalogs, it also signs new songwriters. In July, the company signed Cobi, whose 300 Entertainment debut single, “Don’t You Cry for Me,” has earned 17.5 million on-demand streams, according to Nielsen Music.
Gruss can discuss the tax advantages of investing in publishing as easily as why he believes hard rock songs are undervalued. He comes from a family of prominent financiers: His grandfather founded the investment firm Gruss & Company, where he worked for several years with his father.
Says Gruss: “He likes this asset class for all the reasons I do.”
But he may be one of the few private equity CEOs who plays in a hard rock group -- he performs original music in the band Rubikon, as he has for years, playing to as many as 5,000 at one festival. “The ‘k’ [in our name] gives it the extra hardness,” he says.
You started Round Hill Music at an -opportune time. There was a lot of optimism about the value of publishing catalogs before 2008, but then the financial crisis changed things.
It was really good timing. The valuations got out of control -- as they did on various kinds of investments -- and 2008 brought everything back to normal. BMG took advantage of this, but they were operating on a much larger scale. So we had a fairly clear runway to buy what came to market that BMG didn't buy.
At the time, the idea of entities outside the music business investing in publishing was still relatively new.
Before Round Hill, there was no way to invest in music copyrights except for buying a catalog. It’s typical for endowments and foundations and pension plans to invest in private equity [in order] to invest in oil and gas or real estate, but no one had created a platform for those groups to invest in music publishing.
It’s extremely attractive to those kinds of investors, who want to diversify their portfolios. And I had the finance background to help me come up with this product. But when we went out to talk to institutional investors, hardly anyone had ever heard of this as an asset class.
Was it hard to explain music publishing to institutional investors?
There was a huge learning curve. From the most sophisticated investors on down -- Harvard’s endowment, Yale’s endowment -- none of them had come across this asset class that has been around for hundreds of years. So you have to explain all of that stuff, and it’s hard for some people to wrap their heads around. It’s a lot harder to understand than real estate. When you start using words like “mechanical” or “synch,” their heads explode.
How do songwriters react to having their compositions owned by private equity?
We want songwriters to feel like we’re a boutique-size publisher -- which we are. In this day and age, everyone is touting their technology, but it’s really not about technology -- it’s about people. Technology will not help you get a synch on a show -- having someone meet with music -supervisors for lunch every day will.
What kind of catalogs do you look to acquire?
This is where, if you don’t have a deep understanding of music, you’re going to make some huge mistakes. There’s a qualitative aspect to it. If you want to use The Offspring as an example, I can’t think of a bigger American punk band from the ’90s, besides Green Day. We were able to buy the publishing and the masters, and it’s great to have them together. We want quality, not quantity. We want to own high-quality catalogs.
You own rights to a few Beatles songs. How did that happen?
In the early ’60s, before The Beatles came to the United States, they made a deal with a publisher, which ended up with “She Loves You,” “From Me to You,” “I Saw Her Standing There” and their B-sides, in North America only. We acquired the rights from the son of the founder. One of the things we pride ourselves on is digging for opportunities, and not waiting for deals to come to us.
Where do new writers fit into this?
Our investors expect a steady, annuity-like yield. So if we were signing all new stuff, we wouldn't have any consistency. One of the few frontline projects we bet on was the band American Authors, which had a No. 1 song [on Billboard’s Adult Top 40 chart in 2014] with “Best Day of My Life” -- and I would venture to say that the song has been among the most synched songs in the last 10 years.
Will you go public one day?
We’re only at the very beginning of what, hopefully, will be some nice growth. So I want time to add value to these catalogs, and it usually takes a few years to do that. Overall, we can pay our investors with income, and they want that income.
There’s no rush to do anything. I like the idea of going public as a music-rights company, just earning royalties and sending out dividends. But it’s really about what’s right for our investors. If someone were to come along and offer to buy what we have, I have to do what’s in their best interest.
You’re still playing in Rubikon, right?
Yeah, we had a gig last week. Back in the day, we toured in an RV and played the biggest dumps -- maybe our largest crowd was at a festival, in front of 5,000 people. Rubikon has an administration deal with Round Hill, and we were able to get about 10 synchs on the Showtime show Shameless. That was probably the most we made for anything; about $10,000 in synch royalties.
Given your taste for hard rock, what is the most metal thing you have ever done?
At my wedding a few months ago [Gruss is married to Jessica Elizabeth Siebel, a financial real estate consultant], the guys and I took over from the wedding band and launched into “Hot Blooded” by Foreigner.
And your wife was OK with this?
I also played “How Sweet It Is (To Be Loved by You)” right before that. But I love Foreigner. I would love to own that catalog. Mick Jones, call if you’re interested.
Hits Enrich Round Hill Roster
A sampler of the publisher’s most notable copyrights
“All of Me”
Songwriter - Gerald Marks
Artist - Frank Sinatra, Michael Buble
“Best Day of My Life”
Songwriter - American Authors
Artist - American Authors
Songwriter - Joy Moi, Tyler Hubbard, Brian Kelly
Artist - Florida Georga Line
Songwriter - Gavin Rossdale
Artist - Bush
“Hit Me With Your Best Shot”
Songwriter - Eddie Schwartz
Artist - Pat Benatar
“I Saw Her Standing There”
Songwriter - John Lennon, Paul McCartney
Artist - The Beatles
“Just the Way You Are”
Songwriter - Ari Levine
Artist - Bruno Mars
“The Kids Aren’t Alright”
Songwriter - the Offspring
Artist - the Offspring
“Live Like You Were Dying”
Songwriter - Craig Wiseman
Artist - Tim McGraw
“You Can’t Hurry Love”
Songwriter - Eddie Holland
Artist - The Supremes