Industry vet Schulhof talks investing in the music biz
David Schulhof has grown up in the music industry. A born-and-bred New Yorker, he happened upon the business out of his passion for music. He talked with Crain Currency about his professional journey and how it led him to his latest venture, MUSQ LLC.
Let’s start with your background. You and the music business — how did that happen?
I always wanted to be in the music business. I loved hip-hop and R&B growing up in New York City. I went to tons of shows and fell in love with the music business at a young age. After graduating from Georgetown, I met a producer named Jimmy Lovine, who offered me a job at his new company, Interscope Records. I started learning about the industry working with artists and producers. I later worked at Disney for seven years overseeing music for Miramax and Dimension Films.
I subsequently started my first music publishing company. Evergreen Copyrights, which consolidated 26 music publishing companies and which I sold to KKR — it later became BMG Rights Management. Most recently, I was president of music publishing at Live One, a public company that owns Slacker Radio and Podcast One.
Over my career, I have been an investor, owner, operator and executive across many segments of the music industry, including record labels, music publishing companies, distribution companies, streaming services, and live music and ticketing businesses.
Why would family offices even consider investing in music? What’s the scope of the industry?
The music industry has become an attractive industry for investors to gain exposure in. According to a recent Goldman Sachs report, Music in the Air, the global music industry is expected to more than double to about $151.4 billion by 2030. The industry’s growth is attributable to the rise of paid streaming services (Spotify, Apple), the growth of content and distribution companies (Universal, Warner Music), and live music performances are shattering pre-pandemic levels and are expected to continue growing (Live Nation).
The music industry is also on the cusp of another major structural change, given the persistent undermonetization of music content, outdated streaming royalty payout structures and the deployment of generative AI, according to Goldman Sachs.
JPMorgan has also called music the best content story in the history of the media industry.
Talk to me about music catalogs. Family offices often have an interest in owning such things, but is it a good investment long term?
The acquisition of music publishing catalogs is quite popular today with investors. They provide steady cash flow returns, assuming the catalog acquired had a decent earnings history. In the last several years, we have seen multiples for these catalogs grow quite substantially. Bruce Springsteen, Bob Dylan, Neil Young, Stevie Nicks, Genesis, Justin Timberlake, Paul Simon and just recently Katy Perry have all sold their catalogs for record multiples. I think investors have become quite confident in the future growth of streaming and have factored these projections into their cash flow valuations. Whether or not they are good investments in the long term will be determined by the borrowing costs of financing those acquisitions and whether they are able to improve the cash flows through marketing and better administration. Whether they overpaid for those deals has yet to be determined.
You recently launched the MUSQ ETF. What was your "why" for that?
About one year ago, I thought about starting another music publishing company. I realized there was a lot of competition and capital in the space to acquire music catalogs. I also realized that investors were still investing in limited partnerships at private equity firms like Blackstone, KKR, Apollo, Providence Equity to get exposure to music and their money locked up and illiquid for many years.
I decided that given the number of public companies in the music industry that are available worldwide, there should exist a liquid and portable way for investors to get exposure to streaming, content and distribution, live music and ticketing, equipment and technology, and satellite and radio. I also realized that this would be a great product for the younger generation to enjoy and learn about investing in stocks. And it’s also a great investment opportunity for RIAs and other investors who want exposure to a booming industry like the music industry.