4 january 2022

The Ambitions of Pythagoras Music Fund

In just one year, investment fund Pythagoras Music Fund (PMF) has made great strides, with the acquisition of Nanada Music and Red Bullet as the provisional highlight. We speak with Hein van der Ree and John Ewbank, two of the four managing partners of Pythagoras, about the rapid growth and ambitions of the fund.

“We had been tossing around the idea of doing something with the acquisition of music rights for some time,” says John Ewbank, one of the founders of Pythagoras Music Fund. “And early 2021 was the perfect time to bring our plans to a reality, especially given the stable and still rising market for music streaming services.”


The establishment of PMF fits into a larger, global trend. Music rights are viewed more and more as a lucrative alternative to traditional investments, which barely yield any returns due to the low interest rates. “The big funds are in America and the UK, focusing on the big names,” says Hein van der Ree. “Think of the deals with artists like Bob Dylan, Neil Young, Paul Simon and Fleetwood Mac, with deals worth hundreds of millions of dollars. In America, a lively trade has developed in the author’s share and we see this happening more and more in Europe as well, although it is still somewhat unconventional here. In America, authors’ membership contracts with copyright organisations such as ASCAP and BMI are non-exclusive, whereas in Europe they are exclusive. Deals are therefore easier to make in America. We are now looking at how best to implement this in a number of European countries.


“Copyright organisations have been traditionally tasked with protecting the authors’ part of copyright,” explains Ewbank. “In the Netherlands, this involves two-thirds of the copyright which was therefore not tradable. The last part, which belonged to the music publisher, was. Authors today, however, are perfectly capable of making their own decisions about what to do with their rights, and so in America and England authors have for some time now been cooperating in the sale of their rights.

Authors today, however, are perfectly capable of deciding for themselves what they want to do with their rights

Ewbank continues: “For elderly authors, it may be a consideration to sell (part of) their rights, in order not to saddle their heirs with a tangle of administration later on. A younger author might decide to sell all or part of his rights in order to invest in a different field. In real estate or tech, for example. While people from other sectors see music rights as a nice diversification in their investment portfolio. Because nobody cancels his streaming account in a crisis like we are experiencing now, music has become an understandable, predictable and stable investment, which is still growing. It is therefore perfectly logical that large parties seize their chance and that investors seek contact with parties like us.”


Van der Ree: “In the eighties and nineties, the music industry mainly had a ‘sex, drugs & rock ‘n’ roll’ image, which made banks, investors and pension funds reluctant to invest. In recent years, the music industry has become much more transparent. You can now easily see how often a track has been streamed. This has helped tremendously in attracting the attention of, for example, institutional investors. Moreover, money is now being earned in countries where the local management organisations are not very reliable. A large part of the revenue now goes directly from the consumer to the DSPs and then to, in our case, Buma/Stemra or SACEM, where our rights are administered. That is a much better business model. Nevertheless, the role of the copyright organisations remains essential in the collection and administration of copyright and music publishing rights.”


In September, PMF announced that it had acquired 100% of the shares in Nanada Music and Red Bullet from owner and founder Willem van Kooten. This catalogue contains the master and publishing rights to world hits such as Venus (Shocking Blue) and Hocus Pocus (Focus). Furthermore, a large part of the master rights of Golden Earring, including Radar Love, are part of the Red Bullet catalogue. The entire catalogue contains over 30,000 copyrights and 6,500 master recordings from major Dutch artists such as BZN, Earth & Fire and Sandy Coast.


Van der Ree: “Willem van Kooten was at the forefront of the Dutch music business. We have known each other for a long time and the timing was perfect. We had set up our fund, investors were on board and we had their commitment to make acquisitions. Willem wanted to sell Nanada and Red Bullet to music lovers, not to some anonymous investment fund. Willem trusts us to treat his legacy with respect. We are extremely proud of this acquisition, which is a great foundation for the further growth of Pythagoras. Willem van Kooten will remain involved; he will join the board as non-executive director.”


PMF aims for an invested capital of 100 million euros and focuses primarily on high net worth individuals and institutional investors. The four founders expect an annual return of 6% to 9%. “100 million euros may be a lot of money, but in the global publishing arena we are of course a small fund,” says Ewbank. “You could best describe us as a ‘boutique fund’. The big funds tend to look at the Anglo-American market, but there are also ‘Bob Dylans’ in France, Germany and the Netherlands. The Spanish-language segment is also a major growth market. in South America, the streaming market is still in its early stages.”

“Quality is everything,” Van der Ree concludes. “The acquisition of Red Bullet / Nanada is top quality and we want to continue investing at that level. How do I see the future? We will continue to invest and build. Furthermore, I think there is still a lot to gain in the field of (online) rights administration. There is still a lot of ‘pollution’ in this data. If you mix the metadata, money becomes available for authors and artists.”


John Ewbank is mainly known as a songwriter and producer for major Dutch artists such as Marco Borsato, Gordon, Van Velzen and Trijntje Oosterhuis. Michiel Boere was an investment adviser at the Swiss branch of investment bank Van Lanschot Kempen until the end of 2020. Hein van der Ree worked for a large number of international record labels and music publishers and was CEO of Buma/Stemra until 2016. Rob Hendriks has built up experience and expertise in the private equity and M&A business as a partner/lawyer and tax advisor at several (international) law firms. John Brands has had his own music publishing business for 20 years and was amongst others managing director of music publisher Strengholt and of Universal Music Publishing Europe.

Source: Entertainment Business – Arnold le Fèbre