The Money Behind the Deals: The Raine Group

Hello, hello. A couple of quick asks: I’m still in the process of a career shift, but I’m still interested in potential consultant or freelance music business work. I’ve done a few different projects in the last couple of years so game to see what may be out there. The other ask is a good friend is looking for potential A&R work, so I'm just seeing if anything may be out there. Also, if you enjoy my work please do recommend this newsletter, and if able a subscription will help sustain this work. Now, let’s check in on the Raine Group. 


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Say hello to the Raine Group, a portmanteau of its two founders Joseph Ravitch (ex. Goldman Sachs) and Jeffery Sine (ex. UBS), the merchant bank was founded in 2009 with a star-studded cast of advisors and well-wishers. Endeavor, the massive Hollywood agency formerly known as William Morris Endeavor, got an early stake in the company. Ravitch was close friends with the hotshot agent Ariel Emanuel, who inspired the character Ari in Entourage; their board also included the likes of venture capitalist Marc Andreessen and Softbank’s own Masayoshi Son. It’d be hard to find a firm with stronger ties to some of the world’s deepest pockets for investing during the time of a global downturn. 

In many ways Raine simply followed the work that Ravitch and Sine were doing at their previous employers; where the former helped private equity firms take over MGM Studios and the latter helped with the merger of AOL and Time Warner. That’s why some of Raine’s earliest work involved helping Flash Entertainment, owned by Abu Dhabi get a piece of the Ultimate Fighting Championship, which would eventually be sold to a gaggle of private equity firms in 2016 and is now completely owned by Endeavor; so keeping everything in the family. Other deals in the early 2010s included helping Steve Ballmer, a former Microsoft CEO, buy the Los Angeles Clippers; investing in Vice helping it eventually reach a ridiculous $4 billion valuation; and Softbank’s purchase of Sprint. Basically, if a media brand (sports, entertainment, technology, you name it) wanted a large check; the boys at Raine were ready to serve. 

The company’s Rolodex wasn’t the only thing keeping the deals rolling in, as they kept close connections to many kinds of global capital. There might’ve been the big names to bolster initial press releases, but a healthy portion of the company’s $500 million raised came from sovereign wealth funds outta Singapore and Abu Dhabi. Back in 2009, the company helped the Mubadala Investment Company buy the Manchester City soccer team. This helped lay the foundation for ever ever-larger influence of oil-rich nations in both entertainment ventures, and technology as a whole. That’s all to say our plucky boys were never cash-strapped and always ready for the next deal. 

The Music Bets

One of the Raine Group’s earlier deals dates back to 2011. The company swooped in to help Mubadala Investment sit alongside a number of investors including Sony Music Publishing and even a division of the Blackstone Group (GSO Capital Partners). This foreshadowed both the increased investment of Blackstone into the music business and record labels finding extremely deep-pocket investors to help complete deals. But, if the company was going to enter more into the music industry, it needed someone with a fairly deep Rolodex and strong name recognition. Enter: Fred Davis, son of, you guessed it, legendary music executive Clive Davis. 

He joined Raine in 2014, interestingly not too long after announcing his own investment banking firm Arista Advisors. Davis, a veteran industry lawyer, just left Code Advisors where he helped Spotify raise $250 million, and at least according to the Financial Times saw them as an early client for Arista Advisors. (Earlier this year, nearly a decade later, Raine fully acquired Code Advisors in a rare pure acquisition for the company.) In that FT interview Davis mentioned that he’s less focused on start-ups versus later-stage companies, which aligns with the business he picked up at Raine. 

One of the bigger bets Raine made in the music world was raising $170 million for SoundCloud, a then-fledgling Berlin-based music streaming platform. The move involved a multi-million dollar investment from Raine into the company, alongside Temasek, a Singaporean not quite sovereign wealth fund; the installation of new leadership; and a massive 40% cut of staff and multiple office closures. A slightly quieter deal was Raine helping Amuse, a Swedish music distributor, raise $15.5 million back in 2018; the strength of the company could be questioned as it posted multi-million dollar losses for years. Then speaking of distribution Davis was able to help sell CD Baby’s owner, AVL, to Downtown Music for $200 million. And, in keeping in the family, David helped L.A. Reid’s Hitco Entertainment raise $75 million, after the executive left Sony Music, under accusations of sexual harassment. Reid founded Arista Records back in the late 80s with the support of Clive Davis, so no surprise his son helped out the old business partner. 

Before getting into additional deals, there was a 2019 Billboard profile of Fred Davis that for years struck a chord with me. Towards the end it quotes a number of trends he sees and a few of them, especially in 2023, feel prescient. He saw that variable subscription prices would arrive (no longer trapped at $9.99); China music would be a major force in the industry; he specifically cited TikTok’s short-form video being important; and last he was bullish on crowd-funding and microtransactions. Many of these trends are basically copying and pasting from the trajectory of the video game industry since the financial crisis in aggressive nickel-and-diming fans with a global view. Yet, I found the clarity of vision within these points notable considering past and future moves Davis and Raine would make. 

The Raine Group helped advise SiriusXM’s $75 million dollar investment into SoundCloud in early 2020. They quietly helped fund Firebird Music Holdings. The relatively under-the-radar company picked up a small stake in Red Light Management and a larger one in Transgressive Records, in what looks to build some kind of music management conglomerate. (One could imagine Raine’s forefather, Endeavor, as a potential model.) 

Yet, there are three deals that likely caught one’s attention this year. Raine helped advise in HYBE America’s purchase of Quality Control; guided Francisco Partners’ gobbling up of Kobalt; and helped Gamma, led by Larry Jackson; raise a billion dollars. I already raised my eyebrow at gamma when talking about Eldridge but again it’s hard to see what exactly is the vision for this company. In fact, when looking at Raine’s music moves as a whole it’s hard to really see any unifying vision beyond a drive for advisory fees. That’s why when speaking to Billboard, Davis and Joe Puthenveetil were forthright in getting money from basically any country that’s willing to take on their pitch. It’s much easier to ignore degraded market conditions when one is willing and able to amass capital from countries ready to further whitewash their image. 

What’s become notable to me in following this space over the last few years, but the last 18 months, in particular, is just the pivots undergone for companies that previously were thriving in a low-interest rate environment of high capital raises and mergers and acquisitions. Outside of music, Raine’s made a ton of deals in the professional sports world by basically trying to see how many European soccer teams they can hand to Middle Eastern oil states; a similar pattern is playing out in golf with the Liv Tour, which prior to its announcement of merging with the PGA was a masterclass in attempted sports-washing. (Raine was also called up to help OnlyFans IPO.)  The scattershot nature of the company’s music deals makes it harder to find a definitive narrative. 

Last week, I completed the book The Boom and the Bubble by author Robert Brenner, which gives an account of the struggles of the American economy since the 70s. Another day I’d love to weave insights from that book into the music industry but it helped open my own eyes to see a much clearer line between the 90s tech boom and the last fifteen years of intense investment into technology but also entertainment. So, part of what captured my interest in Raine and Eldridge is them being vehicles for this contemporary era of easy money flowing from either oil-rich nations or the inflated success of previous technology bubbles. The only way these financial firms can really make money is by trading on the names of other famous people by collecting fees on capital raises, but also need to try out the investing game. That may explain why many of these companies haven’t found amazing success, yet everyone writing the checks gets richer. Funny how that works. 

Unheard Labor 

The SAG-AFTRA strike appears to have hit a snag with talks breaking down last week, as much of Hollywood still remains shut down, even as the Writers Guild approved its former tentative agreement. Amazon completely shut down Amp, its radio app, which isn’t too shocking as the company laid off 50% of its staff upon initial launch. Hopefully, folks find new work but also this was a pretty flat-out terrible product idea, so no reason to mourn its loss. 

In predictably sad news, Songtradr laid off 50% of Bandcamp’s staff earlier this week. This comes after the company’s union placed a set of demands forward to Songtradr, as the new owners were eyeing potential cuts. Hopefully, the company can continue to function but it’s hard to feel good about its prospects going forward. Again Songtrder’s raised over $100 million in venture capital money, including a recent investment from Epic Games, building a Frankenstein B2B music company. Whatever future it may have, unfortunately, doesn’t at all feel aligned to a better one for Bandcamp. 

Government Tunes 

The Federal Trade Commission is looking to get rid of junk fees and force companies to list out all charges on an item and face a fine if found not following this procedure. This could be much-welcomed news for concertgoers who are seeing prices go up and these feeds only further compound the issue. 

A Note of Financialization 

A little note about this section, going forward I’m going to try and include info on the latest fundraising round for companies when mentioning their purchases. I’d like to do this because it's been four months since a company publicly announced raising capital for catalog acquisition, and in light of the recent Concord / Round Hill deal, and the looming investor decision around Hipgnosis makes me think this market may be headed into a different phase. I hedged my criticism of the space when writing earlier this year but it’s becoming clearer this bubble may be finally deflating. 

BMG picked up the global rights of Dope Lemon from the artist Angus Stone. (BMG and KKR announced raising $1 billion back in April 2021.) Reservoir Media picked up the over thousand song catalog of Rudy Perez. (The company went public via SPAC back in 2021, and hasn’t sniffed its initial opening stock price of $10 in over eighteen months.) Multimedia Music, an amazing name, picked up the catalog of the composer Christopher Lennertz. (MM raised $100 million earlier this March.) Raleigh Music got the rights of Alan Jay Lerner, a mid-20th century songwriter, often for film productions. (I’ve never seen any reporting on if Raleigh received outside investment for their deals.) O the $200 million Special Purpose Acquisition Company by former UMG and WMG executive Edgar Bronfman Jr. shutdown after not finding a target. Considering the poor performance of Deezer, Anghami, and Reservoir Media, maybe its good shareholders got their money back rather than commit to a poorly built company. 

Oana Ruxandra, Chief Digital Officer at Warner Music Group, to Exit Company - Music Business Worldwide 

Remember how over the past couple of years WMG couldn’t help but attach itself to every Web3 and metaverse project from Dapper Labs to Roblox. A record label operating like Softbank! The only issue is that in the last couple of years it hasn’t paid off to be Softbank. Unfortunately, that appears to be what Oana Ruxandra was contributing to the company was investing in half-baked branding exercises, and many products that could be sued by the SEC. Never forget Genies

The Mounting Horror of Music’s Frankenstream Services - Music Business Worldwide 

Eamonn Forde in quick time summarizes the half-dozen or so 180s Spotify’s done over the last decade trying to spin up a new narrative around the company. He notes just how spectacularly unsuccessful most of these efforts have been and that new bets on audiobooks or “artificial intelligence” appear to be built on the same shaky foundation. Audiobooks may be a nice niche product, with thankfully less investment than podcasts, but I don’t expect much from it for the company and its “AI” efforts appear almost pathetically lazy. Hope those product teams are ready for that inevitable 2024 pivot. 

Spotify Adds Listening Restrictions for Its Free Users in India - Music Ally 

Reportedly Spotify is now the biggest streaming platform in India. Now remember Gaana, JioSaavn, and even TikTok’s Resso all went premium only, since running a free version of the platform is basically setting money on fire; while the premium music streaming business in India is only the equivalent of placing bills into a shredder. (Also Gaana and JioSaavn already reduced their annual subscription by 75%, so clearly folks across this market are trying anything to make it work.) So, if Spotify is beginning to limit its free offering, the company may be finally admitting it isn’t worth losing money in India to attract minor revenue gains. 

What is the Future of the DAW? - DJ Mag 

That innovation of digital audio workstations (DAW) is said to end once people figure out all the best ways to reproduce old sounds is kind of amazing. That’s just to say this article is smart to identify a new market for more easy-use DAWs but I’d bet these new Covid-era start-ups will struggle over time against the established players. If not for the recent surge of investor investment, this feels like something that could be a stable part of the music industry. Yet, such investments and consolidation may not let that be. Also, the artificial intelligence efforts here again misunderstand what keeps people making music for a lifetime, which would feel important for what’s like a subscription product. 

Hipgnosis shareholders object to $440mn rights deal / Hipgnosis: Continuation Vote Should Be Turned into Protest - The Financial Times (Subscription) 

The music appears to be stopping for Merck Mercuriadis’ song asset party. On Monday, his company revealed that it couldn’t pay a shareholder dividend, because their “independent valuer” mispriced their catalog by over $10 million. Now, let’s not ignore the fact this is hilarious. Hypnosis over the last five years has raised well over a billion dollars while preaching the value of song as an “alternative asset class”. One might think that getting basic accounting done during an era of historically high-interest rates would be important. Again, h i l a r i o u s. Prior to this news, shareholders were primed to vote no on Mercuriadis selling part of their catalog to his other music fund. Tune in next issue to see how this all shakes out.

Blackstone’s Billion-Dollar Bet on Hollywood, Reese Witherspoon Falls Short - Bloomberg

A fairly humorous story about Blackstone giving a billion dollars to a couple of former Hollywood executives, who knew exactly how not to invest it. I’m sure the music industry’s never experienced anything like that before.