fbpx

Sherrese Clarke Soares Explains Why Content Is Queen

Share on facebook
Share on twitter
Share on linkedin
Share on email

Listen to this episode:

Powered by RedCircle

 

“Content is queen” is the mantra of this week’s Trapital’s guest, Sherrese Clarke Soares. The phrase has a double-meaning. For one, it’s the heart of her investment firm, HarbourView Equity Partners, which specializes in acquiring content across the entertainment, sports, and media sectors. But on a personal level, the phrase also represents her unique place in the industry as a rare Black and female founder. 

 

Sherrese founded HarbourView in 2021. This came on the heels of founding Tempo Music and ten-plus years at Morgan Stanley. These experiences have put Sherrese front and center with IP, understanding not only its financial incentives, but its cultural value too.

 

HarbourView is backed with up to $1 billion in investment capital from Apollo Global Management. Within months of its founding, HarbourView acquired the music catalog of Luis Fonsi and with that, the decade-defining hit “Despacito.” It was the latest splash in the booming business of catalog sales that ecliped over $5 billion in 2021 alone. 

 

What’s Sherrese’s strategy with Fonsi’s catalog plus other IP acquisitions? You’ll want to listen to the full episode to find out, plus a whole lot more. Here’s everything we covered during our interview:

 

[3:27] Why Sherrese Created Her Own Firm, HarbourView

[6:55] Why HarbourView Team Looks Different Than Any Other Investment Group

[10:31] Hip-Hop Investments Being Overlooked

[15:28] Why HarbourView Acquired Luis Fonsi’s Music Catalog

[17:21] HarbourView’s “Forever Owner” Strategy To IP

[22:47] Owning IP In web3 

[24:22] Owning IP Vs. Owning Distribution 

[28:24] Current Market Conditions Impact On Catalog Investments

[33:39] Music Industry In Better Shape Now Compared To 2008 Recession

[35:54] Building A Next-Gen Asset Management Firm

[37:25] Opportunities In Reggae & Ska

[39:11] Importance of Mentorship in Private Equity

 

Listen: Apple Podcasts | Spotify | SoundCloud | Stitcher | Overcast | Amazon | Google Podcasts | Pocket Casts | RSS

 

Host: Dan Runcie, @RuncieDan, trapital.co

 

Guests: Sherrese Clarke Soares, @sherreseclarkesoares

 

Enjoy this podcast? Rate and review the podcast here! ratethispodcast.com/trapital

 

Trapital is home for the business of hip-hop. Gain the latest insights from hip-hop’s biggest players by reading Trapital’s free weekly memo.

Transcription

 

[00:00:00] Sherrese Clarke Soares: We want to be one of the largest buyers, if not the largest buyer, of music catalogs, but we’re also investing outside of music in how do we create cross-pollination across the music that we own to other places where we may invest as well. So we think there’s lots and lots and lots of upside around owning premium content. So we are very focused on being kind of as close to the IP as possible or the IP creation or development, or actually ownership of the IP, because we think that that’s going to drive huge, huge upside. 

[00:00:27] Dan Runcie: Hey, welcome to the Trapital podcast. I’m your host and the founder of Trapital, Dan Runcie. This podcast is your place to gain insights from executives in music, media, entertainment, and more who are taking hip-hop culture to the next level. 

[00:00:54] Dan Runcie: Today’s guest is Sherrese Clarke Soares. She’s the founder and CEO of HarbourView Equity Partners, a global investment firm that’s focused on premium content across the entertainment, sports, and media sectors. You may know the name from some of the music catalog acquisitions she’s done a couple months back.

[00:01:14] Dan Runcie: The firm acquired Luis Fonsi’s catalog and got one of the biggest hits of the 21st century with Despacito. So we talked about that and we talked about Sherrese’s strategy more broadly for the firm. One of the things that has always stuck out to me about the music investment space is that you don’t see as many big deals for hip-hop, R&B, or genres outside of the US, especially considering how popular all of these are in the streaming era and likely will continue to be.

[00:01:43] Dan Runcie: So we talked about how Sherrese’s firm is focused on the wide space and how she sees us as an opportunity that others may not. And we talked more broadly about the entertainment space, what some of the investment opportunities that HarbourView is looking at outside of music and other emerging trends as they relate to the main streaming services and other technology platforms and more. Here’s my conversation with Sherrese. All right. Today we’re joined by Sherrese Clarke Soares and you’ve been a high-demand guest. So I’m glad we could finally do this. 

[00:02:16] Sherrese Clarke Soares: I’m glad we can, too. Thank you for having me. 

[00:02:19] Dan Runcie: Yeah. And I think one of the reasons people want to hear from you is because you’ve accomplished a lot in your career both Morgan Stanley and at Tempo, and now you have your own firm and it’ll be great to hear a bit about the journey and specifically that moment that you knew that you wanted to break out and launch your own company in this space. 

[00:02:39] Sherrese Clarke Soares: Yeah, absolutely. Well, super great to be here. I guess just the journey is, you know, it’s like one of those things that people talk about, it’s the overnight success, 20 years in the making.

[00:02:48] Sherrese Clarke Soares: It’s been something that I’ve wanted to do for a long time, which is to be an investor in the entertainment space, entertainment media, you know, sports, even, because of how much I believe in the power and the impact of what content does. You know, obviously, it brings stories across the world and has the ability to shape hearts and minds.

[00:03:07] Sherrese Clarke Soares: But it also brings joy, like so much of what we all know and have fond memories of, especially when it comes to music are things that are momentous and important times in our lives. And so something that’s so core to the human condition to me is nothing but a great investment opportunity. So that’s, I think, you know, that’s, I guess, one kind of critical piece of the journey.

[00:03:27] Sherrese Clarke Soares: As it relates to starting HarbourView HarbourView. I started in January, 2021 after resigning from my post as CEO of Tempo Music, which was a platform that I founded out of work I was doing at Morgan Stanley. There’s so many things, you know, as I was putting together that platform, when I was at Morgan Stanley, I got multiple offers from different investors.

[00:03:46] Sherrese Clarke Soares: We ultimately chose to work with Providence Equity Partners because of their intimate knowledge of the media space. But one of the things, I guess for me was I was, it was my first deal in terms of becoming an investor and finally getting to do what I wanted to do. So I didn’t really, you know, in hindsight, negotiate the best deal for myself as it relates to, you know, economics for something that I was building with my own two hands.

[00:04:11] Sherrese Clarke Soares: And it basically started from a blank sheet of paper in 2015 when I was pregnant with my son, actually. And so I really finally had this moment and this aha moment of, one, there’s an opportunity, people are looking for people who, who are like me and have the track record that I have to back me and I was getting a lot of actually reverse inquiry when I was at Tempo for investors to back what I had built a lot of unsolicited inbounds.

[00:04:39] Sherrese Clarke Soares: And that was largely because I had spent so much time trying to curate investors to really support what it was that I was looking to build. And so that started to give me some confidence that, you know, that there was really an appetite for the firm and the vision that I was looking to build. And so I resigned in December of 2020 with, you know, the idea that I really was going to build a firm that was bigger than music.

[00:05:05] Sherrese Clarke Soares: Tempo was also only designed to be a music rights acquisition platform. And I really wanted to do music ’cause I love it, but also do things outside of music as well. So I launched HarbourView and went about the business of finding the right partner for us. We knew we wanted to partner with a large scale asset manager to really turbo charge and accelerate our growth.

[00:05:25] Sherrese Clarke Soares: And so we did that in October of 2021, where we launched a billion-dollar partnership with Apollo, but importantly, we are independent. We’re an independent firm and we’re able to retain that independent and that discretion over how we invest, how we think about building out the firm, which is great. And so was able to do that in October, launched officially in October in terms of our capital partnership and have been out, telling our story to the world and really looking at building a coalition that believes in our vision, which is in identifying opportunities that other people have a hard time seeing because they kind of only invest from their own, from their native walks. Whereas we, by virtue of being a diverse team, we believe in the power of thinking about things differently.

[00:06:08] Sherrese Clarke Soares: And so, so that’s what we’ve been up to. It’s really exciting. I’m joined by exceptional humans that have joined me on this journey. We’re all really aligned to the vision and the mission with all of my team, including my assistant, really participating in the equity upside of the business, where 13 full-time professionals, soon to be a 14th.

[00:06:26] Sherrese Clarke Soares: And, you know, we’ve been pretty busy since October. We’ve made a number of investments, some of which we’ve announced, some of which we are about to announce. And so, continue to look forward to that. And we’re, you know, pretty active in the market while also starting to think about investment opportunities outside of music, which we’re really, which we’re really, really jazzed about.

[00:06:42] Dan Runcie: Could you talk a bit more about the opportunities specifically for your diverse team and the opportunities that investors saw in you that you feel that the market wasn’t focusing on? 

[00:06:55] Sherrese Clarke Soares: Yeah. So I would say, like, one of the things that’s critical to us is obviously, you know, we are who we are. And so, you know, when you look at us as an investment team, we very naturally look different than any other investment team that you will see.

[00:07:07] Sherrese Clarke Soares: Like, the collage of who we are as a team is always like my proudest moment of a page when I’m showing into anyone in the world and telling our story, because we are really sort of, you know, I know you’re Jamaican, too, by heritage. And so, you know, as, as you know, we have a statement “Out of many, one people,” and so it really does kind of resonate with that.

[00:07:26] Sherrese Clarke Soares: And so from that perspective, that was really resonating with how we talked to investors, including Apollo, which was great. They saw that in us immediately, but also how we think about the world. We think differently. And we think our difference is our strength. And so what that means is that we have approached the opportunities based with a very data-focused mindset.

[00:07:45] Sherrese Clarke Soares: And that data-focused mindset actually leads to the truth, which the truth is that we own a lot of things that are in the Latin space, and the hip-hop space, and R&B space, which we’re all really proud of because we also are showing very quantitatively and, with data, that that’s where the real growth and the real opportunity is in our perspective.

[00:08:04] Sherrese Clarke Soares: And so we tend to try to, again, lead with this idea that the world is round and not flat. And what we mean by that is a lot of investors tend to do the same playbook over and over again, or a template that, you know, many other people do. We’re very focused on building a pathway that allows us to not take anything for granted to not come into a situation with preconceived notions, to really try to identify what we think our value add is to an opportunity set, whether it’s in music or otherwise and how we really can envision the future.

[00:08:40] Sherrese Clarke Soares: And that really, I think, has been resonating with investors, with our partners because it is a differentiated approach to how other people are thinking about it. In the music space, obviously, there’s a lot of great firms, many of whom we admire who have done really fantastic things, but we just differentiate our strategy from that.

[00:08:57] Sherrese Clarke Soares: We are not aiming to be a music operator, a music label, or a publishing business, or otherwise. We are really aiming to be a really strategic partner from an economic perspective and financial perspective to the overall ecosystem. So that really allows us to think creatively and to do really creative things and really be respectful of the fact that, you know, the creative ecosystem itself has gone through its own journey, has offers and brings a lot to the table. But in a similar vein, we as seasoned investors bring a lot to the table, too. And so we’re able to engage in the way that’s differentiated from others that are kind of purely looking at it from an operating perspective. 

[00:09:35] Sherrese Clarke Soares: We’re looking at it from, like, okay, how can we join forces together and really drive upside for both sides of the equation? So we, we typically try to, in anything that we do, any investment that we make, structure how everybody benefits on a go-forward basis together. 

[00:09:49] Dan Runcie: I’m very glad you’re focused on this piece because one thing that I’ve always scratched my head at is I’ve talked to other people who are investors in this space.

[00:09:58] Dan Runcie: And I would always hear from them specifically about hip-hop music that, oh, well, it isn’t mature enough. And they don’t feel like it’s proven or they feel like it’s too disposable or they feel like sampling is a challenge. But if you look at streaming data, which a lot of this has been influenced by, especially with the current wave of acquisitions.

[00:10:18] Dan Runcie: It’s hip-hop, it’s Latin music where we think about the genres that have shown the power and the potential, especially on a worldwide perspective. I’m like, you can’t overlook this forever. So, you know, in many ways it’s their loss.

[00:10:31] Sherrese Clarke Soares: Well, mostly, yeah, you know, people do what they’re very comfortable with. So it’s like things that they know, see, and hear, which, you know, I get it. And I’m okay with, I guess, to a point. You know, I’m excited about everything in the classic rock space, as much as anybody else. Like, I’m a huge, I’m a huge fan of all of it, like, grew up on all of it, enjoyed it, listened to it, but I’m also a child that was raised in the hip-hop era.

[00:10:53] Sherrese Clarke Soares: Like hip-hop is going to be 50 years old next year. Like, that’s not an immature thing. You know, I don’t think we’re calling 50-year-old people children, in which case, there is a lot that underlines it. And so it’s all about how you sift through the data, how you look at what your, what you think is driving and where you think things are going to go, which gives us a point of view that we think again, is differentiated.

[00:11:14] Sherrese Clarke Soares: We have a lot of things in our portfolio that we believe to be really strong for the culture, really strong from a legacy perspective. And we think has really extraordinary growth potential for a variety of different reasons. And so we don’t believe that view. And again, we don’t have any preconceived notions about what’s going to work and what isn’t going to work.

[00:11:35] Sherrese Clarke Soares: We really try to be genre-agnostic. So, you know, we own a little bit of everything. Like, we’re closing this week, a couple of things in the country market, which we’re really excited about. We’ve closed things in the rock market, which we’re really excited about, but we are never going to ignore genres such as hip-hop, R&B, et cetera.

[00:11:52] Sherrese Clarke Soares: Latin are places where it may be a very local experience. Like, one of the artists in our catalog is Eslabon Armando. And last week, he crossed a billion streams and was on the cover of Billboard. And he is a Mexican, local Mexican artist, and one of the best in the game, but not very well known here in the US market or in the, you know, pop, you know, the, the pop market, if you will.

[00:12:16] Sherrese Clarke Soares: And so just giving a sense for there is a lot to local music, and so I’m sure you can, you know, commiserate, like growing up, what did you listen to on Saturday and Sunday morning in your house? It was not necessarily, like, you know, what was playing on the radio. It was what your mom and dad grew up to.

[00:12:34] Sherrese Clarke Soares: Those rhythmic sounds of soca or reggae or local, which is very local music, but there are billions of people like us around the world that connect with a very differentiated experience. And so we’re really bullish on things like that because we know that just, we just know that intrinsically based on who we are, that this is popular music.

[00:12:54] Sherrese Clarke Soares: And we also know intrinsically that, you know, technology is bringing broadband globally to a lot of places where it hasn’t existed before. So you intersect those two things and you see growth. And we again drive through data to come to these conclusions, which again, leads us with what I think is the best outcome, a data-driven, you know, evidential support and not just an empathetic one, that this is all real.

[00:13:19] Sherrese Clarke Soares: And we have known it for a long time in technology has democratized it, such that we can see it evidenced in a real way. 

[00:13:27] Dan Runcie: You mentioned the data-driven approach a few times. Is there anything that the data is telling you that you see as a huge opportunity coming up soon that you think that others may be overlooking or not thinking about as much?

[00:13:39] Sherrese Clarke Soares: Yeah, 100%. I don’t share that though, because then everybody starts, the next thing, you know, people start chasing down my sources. Yeah, no, 100%. That’s I think how we, that’s how we’re differentiated. That’s how we find differentiated opportunities. And, you know, we think about that every single day. So we are constantly building our own proprietary data system that we love.

[00:14:05] Sherrese Clarke Soares: And we don’t think that anybody else has anything nearly matched to it. I started to build one at my previous platform, but didn’t have the resources candidly to actually do it. And now that I do have the resources, we’ve built it out full sum in a way that we can analyze things from back, you know, backwards and forwards, including historical information all the way through to, you know, tapping into what’s happening in real-time platforms, such as, you know, Spotify, TikTok, YouTube, et cetera.

[00:14:35] Sherrese Clarke Soares: So it gives us a lot of really great insight, which again, I think just makes us approach this a little bit differently than even my predecessor. So, yeah, so it allows us to see a lot of stuff. And again, if I told you what I was seeing, then everybody would just try to go copycat it. What they probably can’t copycat is how we’ve been able to build a really great platform around data analytics that we just continue to invest in.

[00:14:55] Sherrese Clarke Soares: But that’s who we are as a DNA, right? Like other people kind of use their DNA, the lead, their platforms, and they have great success in different ways, but our DNA is really around leading around that stuff. And so we’re excited about that. 

[00:15:07] Dan Runcie: I hear you on that. And yeah, definitely don’t want to give away any of the trade secrets, but let’s talk about one of the deals we can talk about, which is the Luis Fonsi catalog, which your company had acquired. With that, you got one of the biggest hits of the 21st century with Despacito. What did it take to make that deal happen? 

[00:15:28] Sherrese Clarke Soares: Yeah, I think what it takes is a couple of things. The first is obviously again, leading with data, having a sense for the marketplace. Again, going back to like a local language, Spanish language song. It’s going to resonate with a lot of people. They may not be people that you individually know, but it resonates with a lot of people.

[00:15:48] Sherrese Clarke Soares: So from a thesis perspective, completely right on point. And secondly, like just spending time with Luis and the team, Angie and Denny and others, you know, we really connected on what we want, what at least what I personally want HarbourView to be, and how impactful I want it to be for the entertainment business overall, but particularly for recognizing the impact, the cultural impact that we, and I say, we like broadly people of color have in the world.

[00:16:17] Sherrese Clarke Soares: And again, we buy everything, but it’s important to me for that to be a level playing field. So I think it was really just spending time with the team, working through sort of the thesis, letting them know who we were thematically as a firm, what we care about. And then that really allowed us to sort of see a really great path together.

[00:16:35] Sherrese Clarke Soares: And, you know, again, we built in partnership into that deal as we do into every deal. And that allows us to basically, he wants us to win. We want him to win, keep rooting for each other. And all the deals that we have in our portfolio, and we’ve closed close to 30 deals already so far, are all kind of very similar and kind of pick up on those very same themes of like, look, the things that we know and love are really impactful and important. And you’re seeing it drive through, drive through data. 

[00:17:03] Dan Runcie: And after you acquire a catalog like this or any of the other ones in your portfolio, what does the post-sale activity on the asset look like? I know that in this space, a lot of people have talked about whether some investors are buy and hold versus trying to maximize the asset themselves.

[00:17:21] Sherrese Clarke Soares: Yeah, absolutely. So the post-sale is, you know, look, we aim to be the forever owners of these assets and we look to provide return to our partners in various ways that we think is differentiated and one that we believe there’s nobody better than our team to actually deliver. So we think about, like, how to create liquidity events while still maintaining the ownership ultimately of the catalog itself.

[00:17:47] Sherrese Clarke Soares: And so some of that will be in portfolio strategy. And so portfolio strategy for us is like, yeah, we’re building an accumulating, a really huge library. We want to be one of the largest buyers, if not the largest buyer, of music catalogs, but we’re also investing outside of music in how do we create cross pollination across the music that we own to other places where we may invest as well. So we think there’s lots and lots and lots of upside around owning premium content. So we are very focused on being kind of as close to the IP as possible or the IP creation or development, or actually ownership of the IP, because we think that that’s going to drive huge, huge upside.

[00:18:24] Dan Runcie: And I imagine that too, that extends into the multimedia aspect too. And obviously why you don’t just want to have holded music. You’re looking at other assets too, because obviously IP and music’s there, but there’s so much potential. You’re looking at movies and TV shows and just where everything’s going with video streaming on that front.

[00:18:42] Sherrese Clarke Soares: Absolutely. But also think about this, two things. One is, again, my team is incredible, just again, an exceptional group of people, but they’re athletes, they’re not one-trick ponies. And so, you know, they really can think about things across the space. The other thing that’s also happening as we engage deeper and deeper in the music space is the same thing is true from the parties that we partner with on the catalog side.

[00:19:04] Sherrese Clarke Soares: Like, many have ideas of things that they want to do way beyond music. And sometimes people, you know, tend to hold a lot of that in a box. But if you look at, you know, culture, culture is led by music in a lot of ways. And so you can see that music is like, you know, kind of a leading indicator and that being a leading indicator helps you to really identify where to go next.

[00:19:28] Sherrese Clarke Soares: And so we think that all of these things work very symbiotically together in giving our partners and our partners on the other side is people who are looking to invest in, you know, they, you know, engage in music engagement as well because they engage in music as it relates to how you’re thinking about developing either new product on the film and television side and, or integrating it into what they’re putting together.

[00:19:51] Sherrese Clarke Soares: You know, again, there’s, you know, there’s a soundtrack. Every movie, just think about the synergies that exist across both. And so we’re very focused on really thinking holistically about the learnings that we get from really understanding the asset itself, understanding the entertainment asset itself and how we think that can apply in other spaces as well and really being very, very intentional about leveraging that knowledge across a wider pool and really creating some of that synergistic upside opportunity. 

[00:20:19] Sherrese Clarke Soares: So that’s how we think about it. And again, it’s very differentiated than others who have been solely kind of a music operator with a fund vehicle that’s attached to it or big firms that maybe only take kind of a point of view at one point in time on the relative value of the attractiveness of music.

[00:20:35] Sherrese Clarke Soares: We are residents, I like to say. We are not tourist. And means that we’re here to stay. Like, we like the neighborhood, this is our block. We know the lady down the street, we know the person up the street, people may move in and out, but we’ll be here. This is our home and this space of really kind of thinking about how all these things work together.

[00:20:55] Dan Runcie: And I’m sure it’s an exciting time on that front too, with just all the other emerging IP-related opportunities, whether it’s with metaverse in gaming or other related things. What is that piece have been like? 

[00:21:08] Sherrese Clarke Soares: Yeah, listen, I mean, I think it’s really interesting. I think we’re at early innings, you know, as my dear friend Morgan DeBaun, who’s a CEO and founder of Blavity, likes to say, we’re sort of in the MySpace era of Web 3.0, right? So like we all had a MySpace account and we all thought that was going to be it for social media. But truthfully, obviously we’re looking at Facebook, and Instagram, and TikTok, and other things as sort of like what became the mature execution businesses of what social media is. I think Web 3.0 and the metaverse and all that is probably in the same place.

[00:21:36] Sherrese Clarke Soares: So super excited about the potential, but we’re still really early on what it will look like over time. But I think it’s going to be huge for anybody who owns premium IP because that’s, you know, again, how do we all decide how we’re going to engage? We’re going to engage because they’re going to be sort of the ability to engage with anchoring around IP that we all kind of know love and care about.

[00:21:57] Sherrese Clarke Soares: So I think it’s going to be a really interesting time and an exciting time, exciting time as it relates to sort of the next frontier for a digital distribution. I mean, I’d like to tell people like, it’s 2022. In 2012, which was 10 years ago, we weren’t talking about streaming, we were talking about downloads and maybe sort of this disruptive technology where people were, obviously, at that point, pirating music. But we weren’t talking about, you know, streaming leading how we consume both video and audio content.

[00:22:25] Sherrese Clarke Soares: And 10 years from now, I think, streaming will be, is still a big part of the business model, but we’ve been talking about something else, too, and we don’t know exactly what that is. But what we do know and if we look at over decades, not just the last 10 years, multiple decades, is that as distribution platforms pull up IPs at the center of it and really drives how those distribution platforms, you know, gain eyeballs, right?

[00:22:47] Sherrese Clarke Soares: Like, I don’t know if you remember back in the day when you were all growing up and, you know, if you had Comcast or, you know, I don’t remember all the cable services anymore, AT&T. Every once in a while, there’d be a dispute between ESPN and AT&T and the screen would go black and you couldn’t get your sports content.

[00:23:03] Sherrese Clarke Soares: And who won over time, you know, the content owners, ESPNs and others, who were providing this kind of premium content to allow us all to pay a hundred dollars a month or $200 a month or whatever it is that we pay for cable to exist, you know, really kind of what we’re able to command rates and outcomes. And so if you think about that as sort of, again, even a leading indicator around the power of content, this is sort of what we believe in intrinsically. And we believe that that’s going to be applied in a Web 3.0 and the metaverse world as well. 

[00:23:34] Dan Runcie: That’s a great point. And I mean, I couldn’t agree more that, I think about a question I posed to a few people a few months back. It was on whether they would rather own universal music group stock or Spotify stock.

[00:23:47] Dan Runcie: And the answers were pretty split. And I think I was a bit surprised and I was like, you wouldn’t want to have the underlying asset that is having all of these other distribution deals with all of these other growing platforms as they are, you would rather take the bet on the one. And of course, you know, there’s a case to be made on the other side, too.

[00:24:03] Dan Runcie: But to your point about ESPN and the cable services, the underlying content does end up being the one that triumphs. 

[00:24:10] Sherrese Clarke Soares: Yeah, I think that’s right. And I mean, listen, like Spotify positively changed the way that the business model and was like the leader and so kudos to Dan Ek and everything that he’s built.

[00:24:22] Sherrese Clarke Soares: And so I think there is something to being kind of at the forefront of changing a distribution model because there’s obviously a lot of room, and it’s hard for people to catch up as we are seeing, and obviously why they in so much share. But just to be kind of a generic distribution provider, that’s less interesting to me personally, because you get squeezed on both sides.

[00:24:41] Sherrese Clarke Soares: You got to pay for the content and then you got to, you got to compete on price with your subscriber base. And so that’s just to squeeze into the middle. That’s just pure math. But when you see like platforms like, and we know Netflix is going through its adjustment period now, but when you see platforms like Netflix and Spotify, what ends up happening with them because they lead.

[00:24:58] Sherrese Clarke Soares: And they’re so far ahead as it relates to redefining the category, that’s why they end up capturing a lot of value. So I hear the debate and understand the debate philosophically, but if you’re just asking me, like, would I rather own IP versus would I rather own distribution, it’s IP for me all day. Now, if somebody was going to redefine what distribution looks like, then, and in a way that we think is going to be a category killer, that may be a great place to invest because as we’ve seen, you know, distribution models that, that lead the category and disrupt actually win, for at least an extended period of time.

[00:25:32] Dan Runcie: Yeah, it’s a great point at Spotify, too. I feel like they did change the space in what they’ve been able to do, and even how they’ve continued to diversify their own income streams. I think they’ve shown it had the proof points, you know, of what works. And I think similar to Netflix, to some extent, you know, they’re changing a few things just given with the way things are, but.

[00:25:52] Dan Runcie: I feel like it’s an age old thing. I think one other aspect, I think about, too, just given you mentioned 2012 versus 2022, here we are now. And what the next decade will look like. I look at an app like TikTok where it wasn’t a few years ago, where not that many people were talking about it, except for, you know, the early users.

[00:26:10] Dan Runcie: And now it has a billion monthly active users. Fastest app to get there. That just means that that timeframe of getting to a billion monthly active users for the next thing is likely going to be even shorter than it was for TikTok. 

[00:26:23] Sherrese Clarke Soares: That’s right. And by the way, and now TikTok is super influential on music that we all listen to, on advertising, on how people get exposed to different things.

[00:26:32] Sherrese Clarke Soares: And so, you know, the speed with which, to your point, getting to a billion active monthly users, you know, technology has really allowed to persist is incredible. And so I only think that’ll get faster and faster and, you know, again, content, again, back to TikTok, like, you know, it’s popularity was indexed off the back of music.

[00:26:52] Sherrese Clarke Soares: And so there’s no denying that again, back to like, Seeing what’s going to be the next thing. What’s the next distribution model, what’s the next use case will continue to proliferate. We’ve got inklings of things that exist now, whether it’s out of home exercise or, you know, whether it’s other social media platforms or whether it’s gaming.

[00:27:11] Sherrese Clarke Soares: So we’ve inklings of that, but it’s all still really small in the grand scheme of the revenue pie. But to, you know, as we’ve discussed and to your point, like the speed with which technology is changing and moving forward, the next next thing may be on the horizon in the next two, three years, or maybe something that, again, we’re not even talking about now in the way that we weren’t really talking about TikTok in 2018 or 19. And so yes, technology will move quickly and the way to engage will continue to expand the monetization opportunities. 

[00:27:42] Dan Runcie: Right. Yeah. The big opportunities there, especially on the longer term, but I’m wondering on the short term though, I’ve heard a few people talking about just where things are with the market.

[00:27:52] Dan Runcie: We’re recording this now June, 2022, and the overall market may not be quite as fraught as it was say, let’s say October, November 2021, but there’s still deals that we’re seeing happening, especially on the investing side. And I’m hearing rumors about this Pink Floyd catalog getting nearly half a billion dollars potentially, but what’s your take right now on where things are and whether or not the current market conditions will impact anything that we’ve seen on the catalog investment side? 

[00:28:24] Sherrese Clarke Soares: Yeah, I think, listen, I think, you know, as interest rates rise and as relative value to other risk asset classes change, you may see people who are tourists, from an investor perspective, leave the space because they may say, okay, instead of investing in music, I’m going to invest in this other thing, which will decrease buyer demand and may put some weakness into the market.

[00:28:50] Sherrese Clarke Soares: You know, so I think that being said, you know, people should expect that that may happen in the next few, next few years, or the next, you know, 12 to 18 months is probably a better time frame. But I would say that as it relates to the overall environment, whether it’s inflation, supply chain, things of that nature, depending on how a business is positioned and the way that we buy we’re positioned really well as a really great hedge to all of that.

[00:29:17] Sherrese Clarke Soares: We don’t really have the same exposure to that volatility. The price point, particularly in music from a consumer perspective is actually a really great value. And so we don’t see a lot of churn expected. The way that consumers consume music is actually, you know, very accessible, even relative to video content, right?

[00:29:37] Sherrese Clarke Soares: Because video content, you buy into platform, A, B, or C for the exclusive content they have on those respective platforms. Whereas in music, like you can pretty much listen to anything you want across all the platforms pretty homogenously. So that I think is, you know, proves to be a really great asset class, especially in this period of uncertainty, especially with the public equity markets being as volatile as it is.

[00:30:01] Sherrese Clarke Soares: And, you know, people having, you know, a hard time getting a sense for where real value is with tech, valuations being as volatile as they are, because their indexed to the overall equity markets, public equity markets, et cetera, like things like what we do as illiquid, but also, you know, non-correlated for sure, but certainly also countercyclical really actually create a really great investment opportunity for people who are looking to reduce volatility or especially market volatility in their portfolio.

[00:30:31] Sherrese Clarke Soares: So like, nothing’s really changed for us in the last. You know, six to nine months since, for the portfolios that we own. Everything’s continuing to come in as expected. We don’t really see any, like, real top line impact. Whereas other businesses are seeing really top real top-line impact, they have wage inflation, they have supply chain issues.

[00:30:49] Sherrese Clarke Soares: They’ve got obviously interest rates. They have overall market volatility. And so all that will create kind of near-term uncertainty for those companies and therefore for those company valuations, which we just don’t have that same type of volatility. So we’re actually really excited about, you know, the marketplace in the near term because we think we’ll have a great, you know, we’ll have, we have a lot of dry powder and, in having a lot of dry powder, we also are positioned in an opportunity where we have the opportunity to really kind of lean in. So, that’s us 

[00:31:21] Dan Runcie: Right. In a lot of ways, that was the pitch, I think, when a lot of these deals were happening, people were attracted to the non-correlated assets and here it is, right? Like, we’re seeing what’s happening elsewhere. 

[00:31:34] Sherrese Clarke Soares: Yes, exactly. Yeah, exactly. So a lot of times for entertainment, me being around the entertainment market from an investing and financing perspective for the better part of 20 years, you’re always telling people how non-correlated it is, but usually you’re kind of having this conversation and the market’s all working together and in parallel. Well, what’s been interesting about the last few years, starting with COVID is that you’ve been able to in real-time, see like, oh yeah, it really is non-correlated. Everything else is moving, you know, down into the left and we’re moving up into the right because of the way that we consume, because you’re basically, again, content in particular, but music even more special, is connected to the human condition.

[00:32:13] Sherrese Clarke Soares: We all have a favorite song. You know, you’re going to go to a birthday party or a wedding, you’re going to hear music. You’re going to go to a kid’s performance at the end of the year, you’re going to hear music. You know, we all have things that are attached to really important moments in our lives. And we use music and consume music more than we even realize.

[00:32:30] Sherrese Clarke Soares: Sometimes we consume it very, you know, proactively, but a lot of times we can consume it very subconsciously. We go into a grocery store, we go to the gym, we step into our car, listen to the radio. Like, you’re engaging with something that again, you know, is very pervasive. It’s ephemeral, and it’s everywhere, and it allows it to really kind of be resilient on a relative basis.

[00:32:50] Dan Runcie: Right. And I think one of the differences too, between this timeframe, and let’s say 2008, when there was the last recession, then the music industry itself, the business model and the state of the industry, just wasn’t in the best place to begin with. Even beforehand, just given where things were with CD sales, and piracy, and digital downloads still, you know, and I guess you had, you still did have road tones and things like that at the time, but it wasn’t where it is now, where yes, there has been a bit of a slide back with a lot of the stocks. However, music itself was in a strong place. So not only are you able to prove that out, there was an underlying business model here that continues to prove that people are going to listen to all of this music and consume all of this music, regardless of, you know, what may be happening outside.

[00:33:39] Sherrese Clarke Soares: Yeah, I think that’s right. I mean, I think, look, you know, at the end of the day, all businesses will go through business model adjustments. You know, the music business went through theirs. The film business just recently went through theirs. And I think it’s coming on the other side of that, where that’s why you’re seeing all the major film studios have, you know, a something plus right.

[00:33:57] Sherrese Clarke Soares: A Disney Plus you know, a Discover Plus, or what have you, and starting to move towards having a streaming model as well. So all businesses, no matter what shape or size, no matter what industry media or not will go through disruptions on how the business is consumed and will have these periods of time.

[00:34:14] Sherrese Clarke Soares: And I don’t think the entertainment business is, you know, somehow isolated from that or immune to. But what you will see over the long duration is again, back to kind of like the underlying consumption. I’d say the other point to make is like, it’s hard to look at stock prices in this current context to really kind of give you kind of a good point of view on volatility or, and, or valuation only because it’s a reference point, but we also have to remember that most of the public markets is actually managed by quantitative balancing if you will, but not necessarily active and, and active and thoughtful and you know, investing strategies. A lot of it is very passively managed. And so as there is volatility that injects itself in the overall markets themselves, you see a lot of rebalancing of portfolios that actually just bring prices down that may have nothing to do with the underlying fundamentals of the asset class itself.

[00:35:07] Sherrese Clarke Soares: So that’s just something to kind of keep in mind if you’re looking at the stocks of universal Warner or any of the other kind of music traded stocks as well. 

[00:35:14] Dan Runcie: The other big piece with this, and you mentioned this earlier, is just the distinction between the tourists and the residents here, right? These types of things end up impacting much more of the tourists who maybe, they only had one foot in and it doesn’t take much, you know, ripple for them to move, or shadow, adjust, or downscale what they were doing, where the people that were actually building. Are still in it. I mean, I’m still seeing startup deals happening.

[00:35:36] Dan Runcie: I’m still seeing rounds being closed. And I think that’s, it’s likely a signal to the people that were more so, you know, dedicated. And they’re also just showed with the investment market, saw them as you know, from an opportunity perspective. So I, I think that’s a, like you mentioned earlier, that’s a big piece of this, too.

[00:35:54] Sherrese Clarke Soares: Yeah, I think that’s what’s going to differentiate us. Like, you know, our goal for HarbourView is to build an institution not dissimilar to a lot of people who I admire in the private equity space. And you know, there’s been a lot of great work that’s been done over the last 35, 40 years building kind of private equity, asset management businesses.

[00:36:12] Sherrese Clarke Soares: And we’re hopeful to build kind of the next generation of that, and really build a scale of industrialized force in the entertainment and media space from a sector perspective. And so as we think about that, we really think about who and what we want to be and being residents of the space is a big piece of that because that’s where we can identify places where we can really dig in and support high quality management teams that we really like and want to engage with.

[00:36:35] Sherrese Clarke Soares: That’s where we can really dig in support, really having a long term view over owning these assets and really find ways to identify value when other investors, again, kind of have a relative value in their mind and have moved on to the next greatest or the next hottest thing. We want to really be focused on really kind of you know, building, obviously, we have to deliver great returns. And the only way that we can scale to being an industrialized force is having top-quartile returns. So we aim for that just as much as anybody else, but we think that there’s a really great way of doing that as being a part of the ecosystem, you know, fully entrenched in the world versus just being there to be opportunistic.

[00:37:13] Dan Runcie: That makes sense. That makes a lot of sense. And yeah, shifting gears a little bit. One thing that I know is near and dear to both of us as Jamaicans, we got to talk about what the opportunities in reggae and ska look like. 

[00:37:25] Sherrese Clarke Soares: Yeah, listen. I’m a huge, huge, huge, huge fan. Like, people often ask me, I often get the question in these interviews. Like, what are you listening to? And if I’m really honest, you know, the car ride is the Bob Marley radio station. Every day, my kids are constantly like, why do we always have to listen to Bob Marley? And then every morning the kids get up to Here Comes the Band and Machel Montano, that’s the way to kind start our high-energy day.

[00:37:50] Sherrese Clarke Soares: So we’re big fans and believers. And to the extent that there’s opportunities out there to acquire, we’re happy, happy, happy to do it. You know, one thing for about us as a firm is we try not to be a pursuer. Like, if somebody’s open to selling, we want to have every opportunity to, to take a look and to compete and to compete on the merits and put our best foot forward.

[00:38:12] Sherrese Clarke Soares: But we are not interested in making anybody feel like we’re after just being vultures or after their work. But I say all that to say like, we don’t own a lot of reggae and ska or soca today. But if anybody who is of those audiences is listening and is excited to sell, we are happy, happy, happy participants and active participants in that market, but we’re never going to, you know, go and try to, you know, force people to, to give up rights or sell rights that, that they may not be ready to.

[00:38:41] Dan Runcie: Yeah. I feel like it’s only a matter of time before we see one of those deals or, or dance hall too. I feel like we’re going to see it soon enough. 

[00:38:48] Sherrese Clarke Soares: Yes, exactly. Exactly. 

[00:38:49] Dan Runcie: Yeah. All right. Well, before we let you go, I do want to talk a bit about mentorship and apprenticeship ’cause I know that’s something you’ve talked about in past interviews as well and just how important it is specifically in private equity and in finance and I want to hear how that’s been really helpful for you and your career, and then extending that to the next generation. 

[00:39:11] Sherrese Clarke Soares: Yeah, absolutely. So we’re big believers in that. We’re taking interns this summer, I believe one from Howard and one from HBS. So we’re big believers in that. We’re a small firm, but we’re still having an intern class, which, you know, I think speaks to sort of this idea of giving people an opportunity to just come learn.

[00:39:29] Sherrese Clarke Soares: And us to learn from them and what they can bring to the table. So, yes, it is absolutely 100%. And in an apprenticeship business, I’ve learned so much from so many really great people, inclusive of all the people that I’ve worked with over the years at Morgan Stanley. You know, tons, tons of people I could give you lots, a whole long laundry list of names of people there, or even all my new partners at Apollo have been just great in, you know, rolling up their sleeves and thinking about things with me as we’ve been, you know, looking at, you know, various opportunities.

[00:40:01] Sherrese Clarke Soares: So that’s been really great. I think one of the things that we’re very focused on as well is really trying to be thoughtful about who we want to be as investors and how we want to, and how we think and we derive our own POV. So we, we try to basically take all the things that we want to take from those experiences, learning how to obviously, you know, do all the diligence and all that stuff are things that I’ve learned coming up, but having this strong conviction around what we care about, thematically, who we want to be as an investor, how we want to be seen as an investor, how we want to partner with management teams, I think has been things that we’ve sort of curated based on the experiences that we’ve had, but mentorship and apprenticeship has been huge part of my career and will never not be.

[00:40:47] Sherrese Clarke Soares: I mean, I, I have mentors today, like even to negotiate my deal that I negotiated with Apollo, I had great people like the great Stu Bergen, who’s a good friend of mine, who was a senior executive at Warner music, who really helped me to think through that. Or Robert Smith who’s obviously the CEO and founder of Vista Equity Partners, or Damien Dwin who, as a long-time friend of mine, has started multiple platforms have really been people who have been in my ear on like, okay, you could do this.

[00:41:11] Sherrese Clarke Soares: This is how you negotiate that. This is the value that you bring, make sure you stand firm or this or that. And it’s been just really great to always have those people around, but it’s also really empowering to also, you know, set a vision for what it is and who it is that we want the firm to be, and what it is we want our investing style to be, and what it is we want to be to the marketplace.

[00:41:30] Sherrese Clarke Soares: So, so it’s been great. I’ve been very fortunate over the years to basically have exposure to people who have built great businesses, who have seen lots of things, seen lots of different points of adversity, but also made way, made time to pour back into me. And so we think it’s responsible for us to pour back into others too. So we’re very, very, very focused on that. 

[00:41:53] Dan Runcie: Well said. And yeah, I think especially people hearing that you’re still reaching out to people to help close the big deals that you have given everything that you’ve accomplished is just a reminder that yes, like this doesn’t stop. Everyone that you see is learning. You know, this is a constant thing for sure. 

[00:42:09] Sherrese Clarke Soares: Yes, 100%, 100%

[00:42:11] Dan Runcie: Well, Sherrese. This is great. Thank you so much. I think people are going to definitely feel like they’ll get a closer lens as to how these deals go down and just a lot of the thought behind it, but I’m sure people will also be listening and waiting for the headlines to see the next deals to drop as well.

[00:42:27] Sherrese Clarke Soares: Yes. Yes. We’ll be coming to a neighborhood, neighborhood near you soon. 

[00:42:34] Dan Runcie: And if people do want to keep track, where can they follow HarbourView or where can they do that? 

[00:42:39] Sherrese Clarke Soares: Follow HarbourView on LinkedIn, on Instagram also, and then, you know, check out our website. Yeah. 

[00:42:46] Dan Runcie: Sounds good. Sherrese, thanks again.

[00:42:48] Sherrese Clarke Soares: Thank you so much. So great to see you. Take care. 

[00:42:51] Dan Runcie: If you enjoyed this podcast, go ahead and share with a friend, copy the link, text it to a friend posted in your group chat, post it in your slack groups, wherever you and your people talk. Spread the word. That’s how Trapital continues to grow and continues to reach the right people. And while you’re at it, if you use Apple Podcasts, go ahead, rate the podcast, give it a high rating and leave a review. Tell people why you like the podcast that helps more people discover the show. Thank you in advance. Talk to you next week.

 

Dan Runcie

Dan Runcie

Founder of Trapital

Share this episode:

Share on facebook
Share on twitter
Share on linkedin
Share on whatsapp
Share on email

Listen and follow to the Trapital Podcast:

"The stuff that Trapital puts out is fantastic. Really interesting insights into the industry, artists trends, and market trends."
Mike Weissman
Former CEO, SoundCloud
“You tell the true stories. Not just the end product, but how you get to the end product. Your point of view on it is dope.”
Steve Stoute
CEO, UnitedMasters and Translation

Subscribe to the Trapital Podcast

More from Trapital

Get updates on new Trapital episodes, upcoming guests, listener Q&As, and more.