The board of Downtown Music Holdings, the parent company of independent distributors CD Baby and FUGA, as well as a host of other publishing and rights management businesses, is exploring a sale, sources familiar with the deal say. Advertising sign.
The publisher of the catalogs of John Lennon and Yoko Ono, Miles Davis and the Wu-Tang Clan, among many others, Downtown has been in talks with private equity firms and at least one major music label, as longtime backer the family of the late Douglas Myersappears to be exiting its investment, according to two of those sources who spoke on condition of anonymity because the talks are private.
The fast-growing independent sector of the music industry has seen a flurry of deals in the past year, as both outside investors and traditional music companies seek ways to control a larger portion of the market that serves and distributes the music of do-it-yourself artists, songwriters and indie record labels.
In June, the consortium consisting of Denis Ladegaillerie, EQT and TCV have bought 95% of the outstanding shares of French music label Believe after Warner Music Group backed out of a takeover bid submitted earlier in the year. Later that month, Chicago-based private equity firm Flexpoint Ford bought a stake in Create Music Group for $165 million. Last year, Apple veteran Larry Jackson raised around $1 billion and bought distributor Vydia as the engine to launch its new label gamma, while Exceleration Music bought indie distributor Redeye for an undisclosed sum.
Downtown declined to comment on a potential sale beyond an emailed statement that said: “There has always been strong market interest and enthusiasm for our platform. We remain steadfastly committed to serving our customers and growing our business, continuing to drive innovation in the global music industry.”
The market share of recorded music revenue generated by record companies and artists releasing music outside the major label system has been growing globally for about a decade. The collective share of non-major labels and self-released artists in the recorded music revenue market increased from 28.6% in 2015 to 36.7% in 2023, according to MIDiA research.
Founded by Justin Kalifovich Founded in 2007 as a publisher in New York, Downtown has quickly grown into a global company with more than 20 offices worldwide, and its scale makes it among the most attractive acquisition targets in this segment of the music industry. It reaches more than 4 million creators and serves approximately 50 million tracks from 5,000 business customers.
Downtown has explored a sale in the past, and that process led to it selling its 145,000-song release catalog in 2021 to Concord for about $400 million. Over the past few years, Downtown has transformed from a leading indie publisher to a full-stack music label.
It has made over a dozen acquisitions in recent years, including direct-to-creator distributor CD Baby and direct-to-business technology and distribution platform FUGA, as well as rights management company AdRev and service providers DashGo, Soundrop, Simbals, Found.ee, Curve and Sheer Music Publishing.
It operates in four divisions — artist & label services, which includes CD Baby. distribution services, which includes FUGA; publishing services, which includes manager Songtrust; and rights and financial services, which includes Curve — Downtown is expected to generate about $40 million in EBITDA on about $130 million in net income or $900 million in total revenue, according to three sources familiar with the company's finances.
Sources say Downtown uses the agency accounting model to record its finances, which only counts fees from companies like FUGA in the company's total revenue.
Sir Douglas Myers was a New Zealand businessman and long-time chief executive of drinks company Lion Nathan, who sold his stake in the company to Japanese brewer Kirin in 1998. Myers, who died in 2017, reportedly invested in Downtown because of his son Campbell Myerslove for music. Cambell Myers served as Downtown's director of business development for a year from 2009-2010, according to his LinkedIn profile.
Advertising sign could not specify which companies are in talks with Downtown. But the CEO of Warner Music Group Robert Kyncl told investors in May that it was exploring mergers and acquisitions that could expand its services for independent creators and companies, and in June hired Goldman Sachs' global head of music and live entertainment for investment banking. Michael Ryan-Southern to lead mergers and acquisitions.
Kyncl said on a conference call discussing WMG's quarterly earnings on May 9: “We have a clear plan to grow this area of our ecosystem and are building solutions internally while remaining alert to M&A opportunities, which will they could accelerate our capabilities. “
