Yesterday, three events made me realise why music has been a good investment for venture capital trusts (VCTs), but not for private-equity funds.
In the morning, I edited a column by Kevin Goldstein-Jackson, citing the fate of music label EMI. Kevin recalled his prescience in asking, back in 2007, whether EMI would be bought by a private equity firm that would “overpay, borrow too much – and cut the artist roster [and therefore sales] even further”. Terra Firma now appears to have done all three – halving EMI’s value to £2bn.
In the afternoon, I visited Ingenious Media, which manages a VCT investing in music festivals. This requires a fraction of what it costs to buy a music label – it raised £85m for all its trusts – but achieves margins of up to 30 or 40 per cent by charging people to listen to music in muddy fields, and then camp out in them.
In the evening, I attended the Brit Awards, at which thousands of people in more hospitable surroundings enthusiastically toasted popular artists by the names of Lady Gaga, Jay-Z and Dizzy Rascal. So hospitable were the organisers, and the sommeliers, that my hosts were dancing on the table by 9.30pm, and last seen heading for the bar – via the indoor dodgem cars, post ironic bingo hall, giant inflatable octopus and crazy golf course – at the after-show party.
It was then that, in the words of Best British female artist Lily Allen, “it all became clear”…