Industry Vet Schulhof Talks Investing in the Music Biz

November 09, 2023 EST

David Schulhof, CEO and Founder of MUSQ, LLC, speaks with Crains Currency about his background in the music industry and why he launched the MUSQ ETF.

 

Below is an article written by Kristen Oliveri and published in Crain Currency on 10/9/23:

 

Schulhof has grown up in the music industry. A born-and-bred New Yorker, he happened upon the business out of his passion for music. He talked with Crain Currency about his professional journey and how it led him to his latest venture, MUSQ LLC.

 

Let’s start with your background. You and the music business — how did that happen? 

I always wanted to be in the music business. I loved hip-hop and R&B growing up in New York City. I went to tons of shows and fell in love with the music business at a young age. After graduating from Georgetown, I met a producer named Jimmy Lovine, who offered me a job at his new company, Interscope Records. I started learning about the industry working with artists and producers. I later worked at Disney for seven years overseeing music for Miramax and Dimension Films.

I subsequently started my first music publishing company. Evergreen Copyrights, which consolidated 26 music publishing companies and which I sold to KKR — it later became BMG Rights Management. Most recently, I was president of music publishing at Live One, a public company that owns Slacker Radio and Podcast One. 

Over my career, I have been an investor, owner, operator and executive across many segments of the music industry, including record labels, music publishing companies, distribution companies, streaming services, and live music and ticketing businesses. 

 

Why would family offices even consider investing in music? What’s the scope of the industry?

The music industry has become an attractive industry for investors to gain exposure in. According to a recent Goldman Sachs report, Music in the Air, the global music industry is expected to more than double to about $151.4 billion by 2030. The industry’s growth is attributable to the rise of paid streaming services (Spotify, Apple), the growth of content and distribution companies (Universal, Warner Music), and live music performances are shattering pre-pandemic levels and are expected to continue growing (Live Nation).

The music industry is also on the cusp of another major structural change, given the persistent undermonetization of music content, outdated streaming royalty payout structures and the deployment of generative AI, according to Goldman Sachs.

JPMorgan has also called music the best content story in the history of the media industry.

 

Talk to me about music catalogs. Family offices often have an interest in owning such things, but is it a good investment long term?

The acquisition of music publishing catalogs is quite popular today with investors. They provide steady cash flow returns, assuming the catalog acquired had a decent earnings history. In the last several years, we have seen multiples for these catalogs grow quite substantially. Bruce Springsteen, Bob Dylan, Neil Young, Stevie Nicks, Genesis, Justin Timberlake, Paul Simon and just recently Katy Perry have all sold their catalogs for record multiples. I think investors have become quite confident in the future growth of streaming and have factored these projections into their cash flow valuations. Whether or not they are good investments in the long term will be determined by the borrowing costs of financing those acquisitions and whether they are able to improve the cash flows through marketing and better administration. Whether they overpaid for those deals has yet to be determined.

 

You recently launched the MUSQ ETF. What was your "why" for that?

About one year ago, I thought about starting another music publishing company. I realized there was a lot of competition and capital in the space to acquire music catalogs. I also realized that investors were still investing in limited partnerships at private equity firms like Blackstone, KKR, Apollo, Providence Equity to get exposure to music and their money locked up and illiquid for many years. 

I decided that given the number of public companies in the music industry that are available worldwide, there should exist a liquid and portable way for investors to get exposure to streaming, content and distribution, live music and ticketing, equipment and technology, and satellite and radio. I also realized that this would be a great product for the younger generation to enjoy and learn about investing in stocks. And it’s also a great investment opportunity for RIAs and other investors who want exposure to a booming industry like the music industry.

 

For a full list of MUSQ holdings, please click here.

MUSQ Global Music Industry Index ETF is offered by prospectus. Carefully consider the investment objectives, risks, charges, and expenses. This and other important information can be found in the MUSQ ETF prospectus, which should be read carefully before investing and can be obtained by visiting https://musqetf.com or by calling 1-855- MUSQ-ETF(687-7383).

Risk Disclosures

There is no guarantee the Fund will achieve its stated objectives.

In addition to the normal risks associated with investing, international investments may involve the risk of capital loss from unfavorable fluctuation in currency values, differences in generally accepted accounting principles or social, economic or political instability in other nations.

Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume.

In addition to the normal risks associated with investing, investments in small- or mid-capitalization companies typically exhibit higher volatility.

The Fund’s concentration in an industry or sector can increase the impact of, and potential losses associated with, the risks from investing in those industries/sectors.

The Fund is non-diversified. 

The Fund is new and has a limited operating history for investors to evaluate. A new and smaller fund may not attract sufficient assets to achieve investment and trading efficiencies. 

The Fund may invest in securities denominated in foreign currencies. Because the Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if currencies of the underlying securities depreciate against the U.S. dollar or if there are delays or limits on repatriation of such currencies. Currency exchange rates can be very volatile and can change quickly and unpredictably.

All investing involves risk, and asset allocation and diversification do not guarantee a profit or protection against a loss. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, might be worth more or less than their original cost. ETFs are subject to risks similar to those of stocks, as well as other risks specific to the particular ETF.

ETF shares are traded on exchanges, and are traded and priced throughout the trading day. ETFs permit an investor to purchase a selling interest in a portfolio of stocks throughout the trading day. Because ETFs trade on an exchange, ETF shares are bought and sold at market price (not NAV). The prices of ETFs may sometimes vary significantly from the NAVs of a ETFs’ underlying securities. Brokerage commissions will reduce returns.

Exchange Traded Concepts, LLC serves as the investment advisor. The Funds are distributed by SEI Investments Distribution Co., which is not affiliated with Exchange Traded Concepts, LLC or any of its affiliates.