Ann Chen, deputy chair of the firm’s Capital Markets & Corporate department, provides an insider perspective on the crossroads of corporate law and entertainment, particularly in the music catalog space. Below, she unpacks the rising complexity of deals driven by private equity, the growing role of joint ventures and how a multidisciplinary legal approach is key to navigating these high-value transactions.
Tell us about your practice and the types of corporate matters you handle.
My practice revolves primarily around mergers and acquisitions (M&A) and joint ventures (JVs). I advise a number of entertainment clients, including artists, production companies and studios, in collaboration with my colleagues in the firm’s Entertainment department.
Catalog sales used to sit squarely within entertainment law. What’s driving the shift toward more corporate structuring in these deals?
The value of entertainment assets, especially music, is not necessarily correlated to the general market. Also, thanks to streaming, songs generate revenue for a longer period than ever before. Over the past decade or two, private equity firms have increasingly invested in music catalogs, sometimes alongside strategic investors such as music publishers or labels looking to expand their portfolios.
Given that shift, what trends are you seeing in how these deals are being structured today?
With the entry of private equity, the sophistication and complexity of deals have increased compared with a straightforward music catalog sale. Earnouts are introduced, and sometimes put or call options become relevant—terms that can significantly impact the value proposition. These are concepts that corporate lawyers are well suited to advise on.
When parties decide to form a joint venture to hold catalog assets, what kinds of legal and business considerations typically come into play?
Sometimes the parties decide to share in the profits from a music catalog in the form of a joint venture, specifically a new entity formed to hold the assets. In this scenario, the full suite of corporate considerations comes into play.
Examples include governance, which comprises issues such as board control, the right to remove a director and minority approval rights; distribution waterfall, which outlines how profits are allocated among the JV partners, particularly if they share in profits in a tiered or preferential order rather than through a simple pro rata split; and transfer restrictions on the JV partners’ ability to transfer their ownership interest, as well as corollary concepts like the right of first negotiation, the right of first refusal and the last-match right, to name a few—and also put or call options, as mentioned earlier.
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