Music has enduring appeal – but some tracks are more durable than others. Round Hill Music uses a blend of experience, gut feel and financial grit to pick the winners – songs that will still be enjoyed for years to come.
The company makes money from royalties, payments made every time a song is performed, played or used in any form, from the background hum in a shopping centre to the centrepiece of a West End musical.
Nashville-based Round Hill listed on the London stock market in autumn 2020 at $1 a share. Today the stock is 78 cents (63p) on fears of the effect of high interest rates.
These fears seem overdone. Round Hill owns 51 music catalogues, which include more than 120,000 songs, group revenues are growing fast and the dividend is yielding more than 5.5 per cent.
Some market watchers consider the music industry to be inherently flaky but Round Hill chief executive Josh Gruss strives to prove the sceptics wrong.
In tune: American jazz legend Louis Armstrong (pictured). Round Hill Music makes money from royalties, payments made every time a song is performed, played or used in any form
A committed guitarist from the age of 12, Gruss stems from an illustrious financial family and was a pioneer of the music royalty sector, establishing his first fund more than a decade ago.
Round Hill owns both original songs and recordings. Whenever a Round Hill-owned track is streamed on Spotify or any other online platform, the firm receives a fee.
When CDs or records are sold, fees change hands. And royalties are also due when songs are performed, played as background music or used in films, shows, TV programmes or advertisements.
Hit songs tend to be played over and over in the first year or two. But many lose their mojo after that first flush of enthusiasm.
That is why more than 70 per cent of Round Hill’s portfolio dates back to before 2000, while only 6 per cent stems from after 2015.
What A Wonderful World, for example, was written in 1967. Made famous by Louis Armstrong, the song is now part of a global advertising campaign by French cosmetics brand Lancome, earning serious money for Round Hill along the way.
Pets at Home is using I’d Do Anything For Love (But I Won’t Do That), a 1990s hit by the rock group Meat Loaf, and Lays Crisps uses an adaptation of the 1970s classic All By Myself for its Champions League advert.
All three tracks are part of the Round Hill portfolio, pieces of music that are known and loved the world over.
This is no accident. Round Hill adopts a forensic approach, asking for extensive royalty data to assess whether songs are worth buying and if so, at what price.
There is also potential to enhance returns once tracks are on the roster and Round Hill has a team of administrators devoted to this. Sales for 2022 rose 32 per cent to $32.4 million, while the dividend is up 13 per cent to 4.88 cents.
Growth has persisted this year, with sales of at least $35 million expected, rising to almost $40 million by 2025.
Analysts have pencilled in a dividend of at least 4.5 cents for the next three years and Gruss is confident about the future, spending almost £9 million on shares last month alone, taking his family’s stake to 6.3 per cent.
Controversy has surrounded the music royalty sector so Round Hill asked two firms to value its portfolio.
Both delivered valuations of about $600 million. That equates to a net asset value per share of $1.27, implying that Round Hill shares are significantly undervalued.
Midas verdict: The music industry is vast, vibrant and expanding fast. Round Hill Music Royalty Fund is small in this £75 billion market but Gruss is a smart operator and the shares, at 78 cents (63p), offer attractive dividend income and long-term growth prospects. Buy.
- Traded on: Main marketTicker: RHM (in dollars) or RHMP (in sterling) Contact: roundhillmusicroyaltyfund.com or 01481 702 400
