For a company that posted a pre-tax loss of $50 million in its FY 2019, some thought this target was a touch rich.
Today, however, there can be little doubt that Kobalt has surpassed that $1bn valuation – thanks to confirmation of the fact that Sony Music is paying $430m to acquire both Kobalt’s AWAL, plus its Kobalt Neighbouring Rights subsidiary.
Despite these disposals, Kobalt keeps full ownership of what is by far its biggest operation, Kobalt Music Publishing.
Kobalt Music Publishing generated $405.3 million in net revenues the 12 months to end of June 2019, according to Kobalt’s financial filings. That was up 28% year-on-year, and equivalent to over 70% of Kobalt Music Group’s total net turnover across all its divisions in the year.
It therefore appears likely that Kobalt Music Publishing’s turnover in its FY2020 (the 12 months to end of June 2020) would have hit somewhere around half a billion dollars.
Here’s something else of which we can be fairly sure: Kobalt’s core publishing division is profitable.
Up until its FY 2018, Kobalt used to print adjusted EBITDA figures for each of its divisions within its annual public accounts.
In the last year in which this breakdown is available (the 12 months to end of June 2017), Kobalt Music Publishing posted a $15.4 million adjusted EBITDA on revenues of $260.5 million (although costs/resources shared across Kobalt’s various divisions were counted separate to any individual subsidiary’s fiscal results). That’s a profit margin of 5.9%.
Kobalt’s music recordings division (encompassing AWAL) posted an $11.2m adjusted EBITDA loss in the same 12 months (see below).
Shorn of the resource demands of AWAL and Kobalt Neighbouring Rights, Kobalt Music Group will either become profitable – or closer to profitability than it has been in recent memory – overnight.
The big question now, of course, is what the future holds for Kobalt Music Group (KMG).
Without AWAL and KNR, will Kobalt follow a long-term road-map within its core strength of music publishing?
Or has the disposal of AWAL and KNR simply made Kobalt’s music publishing operation a neater asset to sell to a buyer in future?
KMG, founded by Willard Ahdritz nearly 21 years ago, is now left with two flagship divisions – Kobalt Music Publishing and publishing collection society AMRA.
In addition, KMG remains the parent of Kobalt Capital, which manages rights acquired by a $600 million fund born in 2017 that itself owns the catalog of SONGS Music Publishing. (A bundle of rights previously managed by Kobalt Capital and owned by a separate fund was sold to Hipgnosis Songs Fund for $323 million last year.)
Ahdritz, now Chairman of Kobalt Music Group, said today that Kobalt’s capabilities in the music publishing space will “only grow stronger” following the Sony Music disposals, “and play a continued role in making the industry better for creators”.
“As Kobalt moves forward under the leadership of our CEO, Laurent [Hubert], we are both excited for the big opportunities ahead across music publishing, AMRA and Kobalt Capital.”
Willard Ahdritz, Kobalt Music Group
KMG announced its double-sale to Sony Music in a press release titled: “Kobalt Strengthens Music Publishing Business”.
In it, Ahdritz noted: “As Kobalt moves forward under the leadership of our CEO, Laurent [Hubert], we are both excited for the big opportunities ahead across music publishing, AMRA and Kobalt Capital.”
He added: “It’s clear that, right now, musicians need more support than ever. To not only drive faster collections and payments for their great music, but to also help them find the best songwriting and networking opportunities around the world.”
“Kobalt’s mission from the start has been to create transparency and fairness for creators. I could not be more excited to focus 100% of our efforts on our incredibly successful music publishing business.”
Laurent Hubert, Kobalt Music Group
Kobalt Music Group CEO, Laurent Hubert, added: “Kobalt’s mission from the start has been to create transparency and fairness for creators. I could not be more excited to focus 100% of our efforts on our incredibly successful music publishing business.
“Through our world-class creative and synch team’s ‘one roster, one territory’ approach combined with our global tech infrastructure, Kobalt has become the destination of choice for some of the most successful music talent in the world.”
Added Hubert, “As the digital transformation of the business is accelerating, in part due to the global pandemic, our unique digital collection society, AMRA, gives us an unparalleled advantage with a true end-to-end solution, from creators to digital platforms.”
Kobalt Music Publishing represents over 700,000 songs for songwriters including Dave Grohl, Enrique Iglesias, Lorde, Zayn Malik, Marshmello, Max Martin, Paul McCartney, Ozuna, Elvis Presley, Roddy Ricch, The Weeknd, and many more.Music Business Worldwide