Listen to this article
Two framed certificates hang on the wall of Josh Gruss’s midtown Manhattan office, one from Columbia Business School and the other from London Business School, above a case of medals and a large number of guitars and amplifiers.
The chairman, chief executive and founder of Round Hill Music got interested in the business of music publishing – managing royalty collection for songwriters and seeking new commercial outlets for their songs – as a member of a hard rock band called Rubikon, which earned comparisons with Incubus and Rob Zombie.
It was not until after jobs at Sony Music and Atlantic Records, in investment banking at Bear Stearns, six years in the US Coast Guard after the September 11 attacks and a decade as a partner in his family’s hedge fund that he decided to go to business school to work out how to turn his passion for music into a business.
“Business school has this way of directing you into what you really want to be doing in life,” he says. “Combining music and business is really what music publishing is.” Gruss knew friends who had been to both Columbia and LBS, and was drawn to a joint EMBA programme offered by the two schools because of a desire to add an international dimension to his studies. After a year in France during high school, he says, “I had always had this fascination with things international, and here you can get two MBAs for the price of one.”
The 20-month programme includes lectures, work in four-person study groups and assignments. Students spend alternating weeks in each city and time in one other country – in Gruss’s case, Brazil. Gruss felt confident on most of the financial topics covered by the course, “but there were things I learned there I would never have learned at a hedge fund; things like leadership and how to build a culture in a company”.
His fellow students ranged from an air force pilot to the manager of a Heineken brewery in Siberia. “For a lot of these guys, the MBA was something to do with going up the next rung of the ladder; but a lot of people had realised they weren’t doing something they wanted to do.”
In Gruss’s case, it became apparent that what he wanted to do was music. Rubikon had “got pretty close to getting signed”. But as the five band members accumulated 13 children between them, the gigs and practice sessions had tailed off. Gruss went into investment banking at the age of 24, feeling family pressure to get some financial knowledge under his belt. However, at business school, “something just clicked”.
He got Rubikon back together, found himself increasingly motivated by everything to do with the band, and realised that he wanted to try combining music and business. Coming from a “very conservative” family hedge fund, publishing seemed to offer the most risk-averse way of doing both, given the predictability with which royalties come in for well-established songs.
Gruss thought that investors would like the fact that music publishing revenues from sources as diverse as European restaurants and Canadian video games were unrelated to stock market swings, and saw a gap for a boutique-size music publisher that could attract songwriters with the promise of a hands-on service. “Songwriters are very emotional about their songs,” he says. “They do worry about whether their babies are going to get lost in the shuffle.”
Using an educational analogy, he says: “Our student/teacher ratio – the students being our songs and the teachers [being] employees – is a lot lower than others.” It has about 6,000 songs and 14 people, though Gruss says the team is large enough to absorb larger acquisitions. “We have enough people to handle a lot more than we have now,” he says.
Gruss graduated in 2010 and launched Round Hill later that year, soon acquiring Chris Kenner’s “Land of 1,000 Dances” – a hit for Wilson Pickett in 1966 – and American Songbook classics such as Marks & Simons’ “All of Me”. Covered by many other artists and used in several films, “Land of 1,000 Dances” alone generates about $200,000 a year, Gruss estimates.
Round Hill launched at a fortuitous time, he says: “It was right after the financial crisis and so many different major [publishing houses] had overpaid and over-leveraged and become distressed.”
But the company only really put itself on the map in January 2012 with the purchase of six early Beatles songs, including “She Loves You” and “I Saw Her Standing There”. (Richard Rowe, a Round Hill Music partner and former president of Sony/ATV, is the son of the former Decca Records A&R man who signed the Rolling Stones but turned down The Beatles in 1962.)
The catalogue had not been marketed aggressively, but within two weeks of completing the deal, Round Hill had signed a $250,000 licence for “From Me To You” to be used in a Canadian communications company’s advertising. Soon after, it arranged for a band to cover “I Want To Be Your Man” for the soundtrack of True Blood, the HBO vampire drama.
With songs performed by Bruno Mars and American Authors, 85 per cent of them written more than a decade ago, Round Hill has established itself as a small but interesting competitor in an industry led by the likes of Sony ATV, Universal Music Publishing and Warner Chappell. Its “net publisher’s share”, the industry measure of the royalties a publisher gets to keep after paying songwriters, has climbed to about $5m a year.
. . .
A few business school contacts have helped Round Hill’s business, Gruss says, pointing to Ricardo Fernandez Zambak, a Geffen Records manager. “I’ve taken some of our songwriters’ songs and thrown them his way,” he says. Gruss, who is married to Shoshanna Lonstein Gruss, a fashion designer, has also used his EMBA training to add a second leg to Round Hill Music.
Unusually, it includes a private equity fund dedicated to investing in music royalties. Gruss had taken “an amazing class” in Dubai with Laura Resnikoff, the founding director of Columbia Business School’s private equity programme, “which helped me understand how to structure our firm”. Prof Resnikoff is now an adviser to Round Hill Music Royalty Partners. Gruss says the branding classes he took in London informed his decision to give his private equity arm’s marketing materials a much more sober look than the gaudy pink logo of the main publishing business.
“We have two separate websites, and when we go to investors, I don’t show them the pitch book that’s bright pink,” he says. “When you deal with a songwriter you want one set of branding and when you deal with an investor you want another.”
Music memorabilia are scattered all around the Round Hill offices. Coasters on the boardroom table feature sheet music for songs such as “Oh Sherrie” and “Just The Way You Are”, and a vinyl Rocky IV soundtrack album is propped on the windowsill. “That is one from when I was a kid,” Gruss says. His team has taken “Living in America”, the James Brown track on the soundtrack, and licensed it for a July 4 advert for Macy’s department stores, and also commissioned a country and western version “for the Nascars of the world”.
The musical decorations have a purpose, Gruss says, making sure the offices do not look so corporate that they scare off the talent. When members of Tesla, a 1980s hard rock band, came in, he recalls: “They were so apprehensive about being in the financial area of New York City. As soon as I brought them into my office and I picked up a guitar with them and started jamming, a little bit of the apprehension went away.”
Gruss has also signed up Rubikon. After two of its songs were played on college radio, he says, “the royalties for the last quarter were $19, split between five of us”.