In a story about independent music publishers Bug Music looking to sell their business for the $300 Million range, they rep some of the biggest acts including Kings Of Leon.
I read and reread the New York Post article (I am worse at writing about business than I am writing about dance) trying to figure out what it all means… let me see if i can dumb it down for us all.
1) Bug Music is a music publishing house, which means they manage the artists catalogue. Specifically, one the songs are recorded getting them on albums and then getting the artists paid. in return they get shares in the catalogue. So everytime Kings Of Leon sell an mp3, Bug Music gets real paid.
2) They wanna sell for 300M and JPMorgan are handling the sale.
3) Look at the price of buying somebodies business similar to buying an apartment building. You take the buildings rent for a year and multiply it by, say, ten years. that is the cost.
4) But when you figure out music publishing multiples (appear to me to) mean, the multiple times a songs might be sold in various different medium.
5) Every time a song is licensed to be used it is considered one multiple.
6) Industry standard is each song is valued at 8 to 10 multiples. Bug Music are looking for 12 times.
7) Here I am lost: “Typical music publisher multiples currently range from 8 to 10 times net publisher’s share for quality assets. Historically they’ve trended more toward the 10 to 15 times range.” what is the difference between typical and historical? And why is Bug Music, in asking for 12 multiples, not in keepping with industry standards if “historically” the number is 10 to 15 multiples.
and
8) Revenue is 70M? I guess they mean by revenue gross annual revenue but how high can the overheads be? 50% ? Let’s say that makes net revenue $35M a year-or rather 8 and a half years TO BREAK EVEN.
Finally
10) Bug Music own shares in 8 songs in the top 100 songs. Isn’t that a little crappy? I mean if they have one album, isn’t that 14 songs alone?
11) Anyway, they own shares in over 250,000 songs. So they are asking for over ten dollars a song in just their shares.
This is somewhere between baffling and entertaining. Can anybody explain further?