Primary Wave Music Founder & CEO Larry Mestel: “Most of our competitors are only interested in a strategy of buying and then flipping quickly”

June 2024: Larry Mestel, founder and CEO of Primary Wave Music. He discusses why buying a catalogue is the easy part, what is behind a slip in the value of second- and third-tier catalogues, why music rights on their own are a damp squib purchase and what patient investment into underserved rights can really deliver. 

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“The Home Of Legends” is how Primary Wave Music, set up in 2006, wants itself to be understood. It uses the word “iconic” a lot – not about itself, but rather about the calibre of artists it works with. It has stakes in the works of acts like Bob Marley, Smokey Robinson, Burt Bacharach, Prince, James Brown and Whitney Houston. 

The Whitney Houston estate deal is perhaps the most illustrative of where Primary Wave sees itself in a competitive rights ownership market. In 2019, it paid $7 million to take a 50% interest in the Houston estate, including not just her music royalties but also, crucially, her name, image and likeness rights. There has already been a hologram tour and the 2022 biopic I Wanna Dance With Somebody, with a Las Vegas slot machine deal coming later this year.

Larry Mestel says that in four years the Houston estate went from being valued at $14 million to a valuation in excess of $100 million. 

“What would you rather do?” he asks of someone selling rights in an age of land grabs and skyrocketing multiples. “Sell to a financial institution at a slightly higher price? Or keep a big chunk of the equity and partner with us and then have a value that’s just astronomically bigger down the road?”

Investors missing a trick

Mestel has very precise requirements when taking a stake in catalogues and rights bundles. And he has very firm views on where other rights investors are getting it wrong, missing a trick, or both. 

What he terms “legendary catalogues” have, he says, always over-indexed in valuation terms as they create their own centre of financial gravity. These apex catalogues exist outside the vagaries of interest rates and macroeconomic forces. He feels, however, less legendary catalogues are rapidly losing their lustre currently. 

“The B- and C-level copyrights have certainly come down a bit,” he says, and feels that is because it is far more of an uphill struggle to work them to their full potential. “There’s not a lot you can really do from a marketing, a digital, a promotion and a brand perspective with lower-valued songs or copyrights,” he insists. “They’re naturally going to be more susceptible to market change, to interest rates, to various other factors.”

Buying rights wholesale is a mistake

For Mestel, buying up rights wholesale is a mistake. He says Primary Wave typically buys 50% or 60% of a catalogue because they want to collaborate on their plans with the actual artist (or their estate). “We want the artists as a partner,” he says. “So it’s easier for us to buy than, let’s say, somebody like Hipgnosis or Blackstone who have to overpay because they don’t have an infrastructure.”

He says Primary Wave has a staff count of 95 “who focus almost entirely on creating new revenue streams for our artists”. Buying into recorded or publishing rights should be the starting point here, not the end destination. Primary Wave will want to buy into something more than music copyrights so they can start working the rights in new ways, across multiple platforms. 

“We’re one of the few companies that understands what it means to buy name, image and likeness rights and actually how to market and exploit, in a positive way, the overall music and the artist brand because of those rights,” he argues. 

He lists all the things they have been able to do with the Whitney Houston estate – the hologram, the biopic, a Mac Cosmetics line – that were only possible because of all the rights they invested in beyond her actual music. 

We know how to take the assets and double them over a short period of time; then quadruple them over a longer period of time. Larry Mestel

“These are major additions to the estate’s income stream,” he says. “Our competitors have synchronisation teams, just like we have a synchronisation team, but that’s not marketing. Most of the industry is fielding calls that are coming in with their sync team. What’s marketing is going out and getting a Mac cosmetic line, or doing a Waterford Crystal line like we did with Luther Vandross, or creating a holiday for Smokey Robinson with American Greetings. That’s marketing.” 

The biggest problem, as Mestel sees it, for those aggressively buying catalogues is that due diligence comes after the cheque book wars, not before them. Deals therefore get caught with their wheels spinning in the mud, taking too long to complete or collapsing in inertia. 

“We’ve closed 100% of all of the binding letters of intent that we’ve entered into,” he says. “Unlike with our competitors, who I won’t name, most of them begin the process of negotiating price when they sign a letter of intent. We do due diligence upfront so that when we sign a letter of intent, the artist and the lawyers know we’re closing. And we always close. That’s the difference.”

Buying older music that endures

In keeping with its “The Home Of Legends” mantra, Primary Wave is not interested in new music. It only wants music that is 20 years or older (“That’s typically our sweet spot”) because it is proven that it endures. Within this, a quality catalogue that has been undervalued, or left to the weeds, by its owners is what the company is after. 

“I’ll give you a perfect example,” says Mestel. “We just closed the Neil Sedaka catalogue. One of the greatest writers of all time – ‘Laughter In The Rain’ and ‘Love Will Keep Us Together’ and all these great, great songs. But he hasn’t had the attention over the last couple of decades. So he’s the perfect type of artist for us.”

He also cites the Sun Records catalogue, which Primary Wave bought in early 2021. He says the open goal was the fact that around 40% of the label’s catalogue had never been digitised. 

“It gave us the ability to look at different platforms – technology platforms, social media platforms,” he says. “Digital to me isn’t just streaming. Digital is the entire universe of opportunity, from social media to technology platforms that use music.”

His other major criticism of the aggressive acquisition of rights is that it is, he believes, erroneously premised on the short term.

“Most of our competitors are interested in generating management fees and they’re interested in a strategy that you buy and then you flip quickly,” he says. “We’re in the long-term management and the long-term brand-building of these assets. When you’re in the long-term business, you have to build infrastructure to support it […] I don’t think a lot of our competitors have the wherewithal to get into the business of marketing, branding, digital strategy, because they just don’t have a long-term horizon.”

There is, among its competitors, an impatience and a reluctance to invest that hobbles what they can do with the assets they actually buy. He says it took four years to get the Whitney Houston biopic onto the screen and five years to open the Bob Marley Hope Road immersive experience in Las Vegas. 

“These are not the right assets to be in for the short term,” he asserts. “Our partners understand that it takes years to develop these things and to generate these phenomenal additional income streams […] We pay very significant prices for these assets. It’s just we know how to take the assets and double them over a short period of time; and then triple them and quadruple them over a longer period of time.”

Truly iconic catalogues are increasingly hard to come by: most have been sold while the rest are unlikely to ever be sold. Undervalued and underworked catalogues are, however, all around. If they can be resuscitated is another matter entirely. Lazarus does not come back to life every time.