Downtown Music holds talks with PE firms, major music company regarding sale (report)

Music industry giant Downtown Music Holdings is reportedly exploring a potential sale and has been in talks with private equity firms and at least one major music company.

That’s according to Billboard, which reported on Thursday (July 11), citing sources, that Downtown is also in talks with its longtime backer, the family of the late Douglas Myers, which is considering exiting its investment. Myers, a New Zealand businessman, ventured into philanthropy when he retired and also invested in certain assets including Downtown.

Downtown, which oversees popular platforms like CD Baby and FUGA and represents high-profile artists such as John Lennon, Yoko Ono, Miles Davis, and Wu-Tang Clan, has experienced changes in recent years. The company has been shifting focus in recent years from owning copyrights to providing services for copyright holders.

Over the past five years, Downtown has been on a services-focused M&A spree. In 2019, it acquired AVL Digital Group, which includes services for independent artists like distribution platform CD Baby, for USD $200 million. This was followed by the acquisition of FUGA, a B2B tech and services company, in 2020, and Curve in 2023.

Less than a month ago, Downtown’s newly established Royalties & Financial Services division introduced Curve Royalty Services following its acquisition of royalty processing platform Curve in January 2023.

“There has always been strong market interest in and excitement for our platform. We remain steadfastly focused on serving our clients and expanding our business by continuing to drive innovation across the global music industry.”

Downtown Music Holding

About a month ago, Downtown partnered with SymphonyOS to offer discounted AI-powered marketing tools to help artists with their marketing efforts. In September 2022, Downtown created a division to manage its global services for artists and songwriters.

The independent music sector has seen a surge of deal-making activity as companies aim to capitalize on the growing market of DIY artists, songwriters, and indie labels. Downtown’s extensive reach, servicing over 5 million tracks for 5,000 business clients, makes it an attractive target for potential buyers.

While Downtown declined to comment on specific sale details, the company acknowledged strong market interest in its platform, Billboard reported.

“There has always been strong market interest in and excitement for our platform. We remain steadfastly focused on serving our clients and expanding our business by continuing to drive innovation across the global music industry,” Downtown reportedly said in an email cited by Billboard.

The company has previously explored a sale, resulting in the $400 million sale of 145,000 copyrights to Concord in 2021. Since then, Downtown has expanded its operations through multiple acquisitions, solidifying its position as a full-stack music company.

Three sources familiar with the company’s financials reportedly estimate Downtown’s annual net revenue at around $130 million, or $900 million in total revenues, with projected EBITDA of approximately $40 million. The company’s agency accounting model, which only counts fees from platforms like FUGA towards revenue, has also influenced its financial valuation, the report said.

While Billboard could not identify which companies are in discussions with Downtown, the news outlet noted that Warner Music Group CEO Robert Kyncl mentioned in May that the company is looking into mergers and acquisitions to expand its “lower-touch” services for independent creators and labels. Kyncl noted during an earnings call that WMG is “staying vigilant about our M&A opportunities, which could accelerate our capabilities.”

In June, Warner Music Group hired Michael Ryan-Southern, Goldman Sachs’ global head of music and live entertainment investment banking, to lead its M&A efforts. He previously worked for six years at EMI Music Publishing, and spent eight years in senior leadership positions among a number of Mubadala Capital and Mubadala Investment Company portfolio companies.

Music Business Worldwide