Over the holidays, the Cutting Edge Group, a company in London that provides and invests in music for the screen, and its partner Wood Creek Capital Management acquired a well-known purveyor of soundtracks: the Varèse Sarabande record label.
The acquisition was disclosed in interviews last week with executives involved in the transaction. They declined to discuss the terms of the deal, but described it as an initial step in using about $100 million in funds that will extend the reach of Cutting Edge, beginning with the purchase and expansion of Varése Sarabande, which will quickly increase its output by half to at least 60 soundtracks a year.
The financing will come from Wood Creek, which is based in Connecticut, and from two additional backers, Octopus Investments and Aberdeen Asset Management, which are based in Britain and are otherwise involved with Cutting Edge.
“When you deploy $100 million in this space, that’s an awful lot of money,” said Philip Moross, the chief executive of Cutting Edge.
Mr. Moross, who spoke by telephone on Thursday, referred to a movie music business in which the budgets for film scores have dwindled, as inexpensive or stolen downloads knocked the bottom out of soundtrack sales.
The music for “The Bodyguard” from 1992, which starred Whitney Houston and Kevin Costner, sold about 12 million albums in the United States, for instance; but more recent hits, like the “Twilight” soundtrack, have sold a fraction of that number.
Cutting Edge has grown by spreading its portfolio to include the management of music rights, the representation of composers, and upfront investment in the music for many films. By spending a relatively modest sum for rights to the music of films like “The King’s Speech” while they are still in production, for example, Cutting Edge helps to underwrite a stronger soundtrack. It can then recoup its money through aggressive sales of the music to advertisers and others.
Varése Sarabande, which released its first album in 1978, was founded in Los Angeles by the entrepreneur Chris Kuchler and others, and did well by specializing in what larger competitors had left behind. (The label’s unusual name, born of a merger between the predecessor Varése International with Sarabande Records, combines the name of the composer Edgard Varése with the term for a Spanish dance.)
Its recent soundtracks include music from “The Bourne Legacy,” “The Help,” and the second season of HBO’s “Game of Thrones” The company has focused largely on scores, rather than on song compilations that require the acquisition of expensive rights.
Varése Sarabande releases about 40 soundtracks a year. But that number will quickly grow to 60 or more, said Darren Blumenthal, a Los Angeles investment adviser who introduced Mr. Moross to Mr. Kuchler, and will now become chief executive of Varése Sarabande.
Mr. Kuchler, who was the principal owner of Varése Sarabande, will stay with the label at least through a transition period of several months, and Robert Townson, its managing director, is expected to remain in place. “Being together is better for both of us,” Mr. Kuchler said in an e-mail on Saturday. “They needed us to round out our operation, and we needed them because things have been getting difficult in our niche area of the music industry.”
Mr. Blumenthal, who spoke jointly with Mr. Moross on Thursday, said the decision to sell came slowly for Mr. Kuchler, who turned down a parade of potential buyers over the last five years.
Mr. Moross, said Mr. Blumenthal, began negotiating with Mr. Kuchler about two years ago. And the deal finally closed in late December, as entrepreneurs across the United States were busy selling assets in advance of an anticipated increase in federal taxes.
Mr. Kuchler turned away most potential buyers, Mr. Blumenthal said, because they were “financial, versus strategic.”
The strategic advantage in joining with Cutting Edge, he said, includes an expectation that all or most of the five dozen films with which Cutting Edge is involved annually will now release a score via Varése Sarabande.
Thus, “Side Effects,” which was directed by Steven Soderbergh and is set for release on Feb. 8 by Open Road Films, was made with input from Cutting Edge, which invested in the music, helped find the music supervisor, and will now release its score, by Thomas Newman, on Varése Sarabande.
Mr. Moross and Mr. Blumenthal also talk of expanding Varése Sarabande’s existing events business, which has regularly staged concerts at festivals and elsewhere in recent years.
That could mean having film scores conducted by their composers at the Hollywood Bowl, for instance, then selling recordings of the performance, Mr. Moross said.
It is just one way, he added, of getting more value from scores. “These are highly undervalued properties,” he said.
Article source: http://www.nytimes.com/2013/01/07/business/media/cutting-edge-group-buys-varese-sarabande.html?partner=rss&emc=rss
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