Baby, You’re a Rich Man: Ex-Wall Streeter Owns the Beatles, Wants More

There’s a certain amount of cliché in a story of a one-time Wall Streeter picking up a guitar, growing his hair long and listening to the Beatles. But Josh Gruss has a different twist on the tale: He owns the Beatles, or at least some songs.

Gruss, the scion of a New York hedge-fund family and a one-time Bear Stearns & Co. investment banker, in early 2011 created a music publishing company, Round Hill Music, which has among its holdings the music and lyrics to six early Beatles songs.

Round Hill now has designs on scooping up more assets, including in portfolios that will be sold off following the $2.2 billion expected purchase of EMI Music Publishing by an investor group that includes Sony Corp., Blackstone Group LP, Abu Dhabi’s Mubadala Development Co, Raine Group and entertainment mogul David Geffen.

To win clearance from regulators in Europe and the U.S., the consortium earlier this year agreed to sell off world-wide publishing rights to several of its smaller catalogs, including Virgin Music Publishing’s songs in the U.K., the U.S. and Europe, as well as Famous Music’s catalog of U.K. compositions. Those sales are now in process.

Sony controls 251 Beatles songs, which it won’t be selling.

Round Hill also sees an opportunity as a boutique to entice artists to sign with it in the coming years. With music-world veterans as executives, including president Neil Gillis, a former executive at S1 Songs and Warner/Chappell Music Inc., and what it touts as a “manageable” portfolio, the company hopes to lure artists away from large music publishing houses.

But music publishing’s level returns, low profit margins and minimal overhead costs mean that nearly all the opportunities for earnings growth lie in expansion, typically by acquisitions of other publishers’ catalogs.

To help fuel such growth, Round Hill is seeking to raise an investment fund that would allow investors a slice of the royalty fees it earns every time a song to which it owns rights is sold or played, people familiar with the matter say.

The 38-year-old Gruss studied at Berklee College of Music and has two MBAs, working on Wall Street and in the music industry before starting Round Hill. He continues to play in a band named Rubikon.

Like other music publishers, Round Hill makes a few cents whenever a song in its library is sold on CD or as a download, and a smaller amount when one is played on the radio or over the Internet. Publishers negotiate fees for uses in commercials, television shows and movies, which can be substantial.

Round Hill, for example, licensed a cover of the Beatles’ “From Me to You” for a Canadian phone company commercial. The other Beatles songs in the catalog are “She Loves You,” “I Saw Her Standing There,” “Misery,” “I Wanna Be Your Man,” and “There’s a Place.”

An unrelated example shows what a Beatles song can command: A song not owned by Round Hill was used in an episode of “Mad Men” for $250,000—split evenly between Sony’s music-publishing arm and record company EMI Music.

SOURCE: Deal Journal

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