The Unlikely King Of Hair Metal

A decade ago, Josh Gruss left private equity and began buying unloved 1980s rock copyrights. Now he's a top player in the white-hot music catalog market.

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For the first quarter-century of his life, Josh Gruss accumulated what might have been the perfect music business resume. He picked up guitar at age 12; by 16, he was working at a recording studio. In college, he interned at Sony, heading off to toil for Atlantic Records after graduation. Gruss somehow made time to tour with his rock band, Rubikon, along the way.

But by his mid-20s, Gruss felt pressure from his business-oriented family to get a “real job.” So the self-proclaimed hair metal enthusiast took a very un-hair metal course of action: he went to work at Bear Stearns. Gruss spent an exhausting decade in finance as the firm imploded, ultimately making the move to private equity—and soon found himself at yet another crossroads.

“So now I’m 32 and I really miss music, I’m tired of looking at a Bloomberg screen,” Gruss tells me. “I understand private equity well, and I’m just thinking of, ‘How do I get back to music? How can I actually do what I’m passionate about, but in a business sense that works for me and my risk tolerance?’”

And then, the proverbial lightbulb switched on.

“‘Wow, there’s no dedicated private equity fund for music publishing,’” Gruss remembers thinking. “And that’s when I decided to start Round Hill.”

I first profiled Gruss in a Forbes magazine piece in 2014, about a year after his launch. To that point, Round Hill had spent some $50 million buying publishing catalogs and controlled some 8,000 copyrights, including songs performed by rockers from the Rolling Stones to Aerosmith (and six by the Beatles).

“Publishing is a great asset,” billionaire Ron Burkle told me at the time. “People obviously went through a moment in time when they thought these assets weren’t going to be worth very much because everybody was going to get it for free.”

Music publishing had long been an unsexy corner of a glamorous business, a complex asset with little upside. But Gruss saw the rise of streaming as a boon to the sector, which suddenly offered massive growth potential in addition to steady returns.

“Ten years ago, the outlook for growth was: there was no growth,” says Gruss. “There were lots of forces out there trying to push down the value of copyright … dozens, if not hundreds, of illegal sites that people were pirating music from. That’s when people thought the music industry was over. So that was a dicey time to be starting a music royalty fund.”

Gruss, who grew up in the 1980s with hair metal posters on his bedroom walls, realized that his favorite musical genre was drastically undervalued even though it still got plenty of airtime (and its own SiriusXM station). So he started out by approaching his idols: bands like Tesla, who turned out to be more willing to sell chunks of their catalogs than arena rockers.

He also brought an unusual sensibility to the business. Whereas in the past, publishing catalogs were mostly purchased by wealthy individuals and entertainment conglomerates, Gruss believed the category could become appealing to institutional investors. He structured Round Hill like a private equity firm, with management fees around 2% of assets and 20% of profits.

The model turned out to be very appealing. Gruss raised $200 million for his first fund, and took out some loans to bring his war chest to a quarter billion dollars. He doubled that total with another fund in 2016. As the publishing space took off three years later, he raised another $291 million.

The infusions allowed Gruss to pour more cash into the copyrights of bands like Ratt, Warrant, Vixen, Slaughter and White Lion. And whereas the blue-chip rock catalogs of Bob Dylan and Stevie Nicks have fetched centimillion-dollar sums of late, hair metal catalogs can be had for as little as the mid-six figures. Gruss estimates that the tiny subgenre represents an outsized 5-10% of Round Hill’s assets.

“For me, growing up in the ‘80s, classic rock was Aerosmith, Led Zeppelin,” says Gruss. “But this hair metal stuff is also classic rock … at the same time, it’s kind of overlooked.”

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Catalogs have gotten increasingly expensive along the way, proving Gruss had the right idea. Whereas Michael Jackson scooped up the Beatles’ ATV catalog in 1985 for $47.5 million—roughly 5-10 times the amount of income it generated annually—the standard earnings multiple had increased to 8-11x by the time of Round Hill’s launch. The average surged toward 15x within a few years. Multiples have since soared into the 20-30x range, thanks largely to music mogul Merck Mercuriadis and his Hipgnosis behemoth pouring some $1.7 billion into the space.

“In order to do that in a short amount of time, you can’t be too picky on what you’re buying and what you’re paying for it,” says Gruss. “If you are willing to pay a lot more than the next guy, you’re going to win all the deals. And so that’s how he's acquired 130 catalogs over three years, whereas Round Hill’s acquired the same amount over 10 years.”

For Gruss, the phrase “We Are All Musicians” resonated even when he was immersed in a stressful Wall Street gig. Now, it seems even more relevant as he helps define the market for intellectual property. And he’s still bullish on creators of all stripes.

“Everyone’s on their phones consuming content,” he tells me. Intellectual property “is probably valued higher than it’s ever been before, and that’s a good thing. It’s the whole sort of framework of American capitalism … you work hard and create something that you should get paid [for].”

These days, Gruss is bringing things full circle: he plans to get back on the road later this year. Pandemic permitting, Rubikon is scheduled to play a handful of gigs Europe in December—with perhaps a little less hair, and just as much metal.

“That was always the dream of the band,” says Gruss. “I’m 47 years old, and my rock star dreams are coming true.”

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