Stephen Swid, the entrepreneur, businessman, music investor/executive who put SESAC on the map, died Oct. 6, at his home in New York City. He was 78.
Swid’s death was due to complications from frontotemporal degeneration, according to The New York Times.
“We mourn the passing of Stephen Swid, SESAC’s former Chairman & CEO, who passed away on Sunday following an extended illness,” current SESAC chairman/CEO John Josephson said in a statement on SESAC’s LinkedIn page.
“Stephen led the 1992 acquisition of SESAC from the founding Prager family along with Freddie Gershon, Ira Smith and Allen & Company Inc. Over the ensuing 20 years that he served as CEO, until his retirement in 2013, Stephen was a key driver of the dramatic growth that the company experienced following the 1995 affiliations of Bob Dylan and Neil Diamond, the establishment of SESAC’s general licensing capabilities, and the formation of SESAC’s film and television business. Swid was an accomplished entrepreneur and executive with a distinguished career before the acquisition of SESAC in 1992.”
Swid was born in the Bronx and began his career as a Wall Street analyst and then money manager, soon evolving into a an investor who bet on his own business acumen, acquiring and running companies. Before coming to the music industry, Swid and a partner bought General Felt Industries, Knoll International, and the 21 Club in Manhattan, according to the Times reports.
By 1986, Swid was looking for a new deal and new partners, and he hit a home run when he teamed up with two executives who would emerge as giants of the music industry: Martin Bandier, a former Swid college buddy, and Bandier’s partner, Charles Koppelman. Together they bought CBS Songs for $125 million. At the time, Billboard described it as a record sum for a music publishing asset — “the highest in history” — and some sources suggested the buyers had overpaid. With that investment, Swid and his partners, Bandier and Koppelman, formed SBK Entertainment, which consisted music publishing and record label operations.
In just three years, Swid and his partners proved their critics wrong, selling the entire SBK publishing catalog company for $295 million in 1989 to EMI. They were able to achieve a more than two-fold return on their investment because Swid, Bandier and Koppelman grew SBK’s net publisher share from $23 million in 1986 to $37 million in 1988, according to a then-story in The New York Times.
Leaving Bandier and Koppleman behind to continue carving out their legends in the music industry, Swid next turned his attention to publishing, simultaneously serving as chairman/CEO from 1990-1995 of Westview Press, a textbook publisher, while also holding the same position for Spin magazine from 1989-1997.
During that run, Swid returned to the music industry in grand style with two new partners, Freddie Gershon and Ira Smith, buying SESAC for $15 million, according to SESAC internal documents obtained by Billboard some years back. If Swid and his partners hit a home run in buying and flipping SBK, the SESAC deal proved to be a a grand slam.
When Swid and his partners bought the performance rights organization, it was a backwater player specializing in smaller genres like gospel/christian, jazz and European composers, with less than $2 million in earnings before interest, taxes, depreciation, and amortization (EBITDA) on less than $10 million in annual revenue. By the end of 2012, they had grown the company to achieving about $53 million in EBITDA on annual revenues of $167 million, according to the SESAC internal document.
In 2010, Swid and partners sold 36% of SESAC to Och-Ziff in a deal that valued the company at $410 million. Then, in the opening days of 2013, Swid and his partners sold 75% of the company to Rizvi Traverse for $591 million in a deal that valued the company at $788 million. That deal took out Och-Ziff, leaving Swid and partners with a 25% stake in SESAC. Sometime by the end of 2016, Rizvi Traverse had bought out Swid and partners to wholly own SESAC, which in turn would they sold to a Blackstone equity fund for $1.125 billion in the early days of 2017.
In their tenure as stewards of SESAC, Swid and his partners were also at the forefront of music industry financing. After Bowie bonds were launched in the late 1990s, SESAC did its first securitization in 1999 for $29 million with the help of former partner Koppleman’s firm C.A.K. Universal Credit Corp. in what was the first of three securitized debt offerings it would do over the next 11 years.
Billboard estimates that during the 25 years, Swid and his partners had a stake in SESAC from its initial investment to selling the last 25% they owned, the partners made about $750 million from the $15 million they invested in buying SESAC in 1992, assuming that an estimated $303 million in EBITDA generated by the company from 1992 to 2012 was used along the way to pay off whatever debt they had loaded onto the company during their ownership. (Billboard’s EBITDA calculation is based on data presented in the company’s internal document and debt analyst reports.)
Moreover, when the investment payout from SESAC is coupled with the SBK deal, Swid and his various partners made about $1 billion from their music industry investments, Billboard further estimates.
But Swid was much more than a successful entrepreneur and savvy investor that made money for he and his partners from their SESAC investment. Not only did he, Gershon and Smith make SESAC a force to be reckoned with in the music industry, they transformed the company into a feisty competitor capable of giving conniptions to ASCAP and BMI in the first decade they owned SESAC, according to Billboard stories from back then.
The first move that made clear to the industry that SESAC was no longer a tertiary industry player was when it lured a both Bob Dylan and Neil Diamond away from ASCAP in deals made in early 1995. Those signings, announced at the same time and each for a six-year term, gave SESAC instant credibility. While Billboard initially estimated back then that SESAC had paid an advance of about $5 million to land the two superstar songwriters, Swid later told this publication that the upfront money was about half that, which means $2.5 million.
But even that advance amounted to a big investment gamble at the time. After all, SESAC only had $2 million in EBITDA in 1994 when it signed the two, meaning that it paid out more than in would make in a single year from all of its writers. Yet Diamond and Dylan songs were still essential to radio programmers then and more than serving notice that SESAC was on the march to become an industry power, it helped it to “attract” other hit writers that then in turn SESAC could leverage to demand higher royalties, Billboard noted in 1995. “The real problem we faced was that nobody wanted to be first,” Swid told Billboard.
After signing Dylan and Diamond, ASCAP and BMI started taking SESAC seriously and began denigrating the company, charging that Swid and his partners planned to flip SESAC like he had earlier with SBK. But Swid pushed back, emphatically denying that and telling Billboard, “We’re going to build this society; we’re not going to sell it … We’re going to become a major player and ASCAP and BMI will do everything they can to stop us.”
After that deal, Swid and partners embarked on a profitable strategy that allowed them to take advantage of strategies that their competitors — ASCAP and BMI — couldn’t do because they were hobbled by their consent decrees they had signed with the U.S. Dept. of Justice. For one, they had the luxury of only allowing invited songwriters to join SESAC, which meant could build a select roster of hit and/or established songwriters that music licensers would need in order to play all hits out at any given time.
Furthermore, because SESAC didn’t have to go to rate court like its competitors and was able to operate in a free and open market, it could demand and get a higher pro-rata royalty rate for performance licensing than its market share would normally imply. That meant that the company could pay as good as, if not better than, competitive rates to songwriters, while also making healthy profits for itself. That approach was duplicated nearly three decades later when Global Music Rights would adapt that strategy to an even more specialized degree.
Beyond those moves that approach, Swid and his partners grew SESAC into other areas beyond further than mainstream pop and rock music that the Diamond and Dylan deals signified, first chasing the latin genres way ahead of its ascendency to the fore; and then expanding into composers writing television music. And Swid pushed SESAC to be on the front of technology, using music fingerprinting to allow computers to more accurately recognize radio song plays, thus expanding the amount of music monitored and insuring more accurate payments to many more songwriters, according to past Billboard articles.
Back in 2000, Swid told Billboard he was able to grow SESAC because “we signed some well-known artists and writers and we fulfilled our promise and word to everyone we have dealt with. You do that over the course of eight years and people take note.”
In an earlier interview, Swid told Billboard, “If I were told two years ago that in 1995 we’d sign Dylan and Diamond as SESAC members, I’d have said that person was nuts. Since 1940 when BMI was formed, no major writer moved to SESAC. We’ve finally broken down a barrier that has lasted for 54 years. It now shows that we’re a real alternative, and I believe we’ll at least be able to start a dialog with other” hit songwriters.
And that soon proved to be the case. In subsequent years right up to today, the company’s roster has included, R.E.M., Adele, Rush, Ric Ocasek of the Cars, Rick Nielsen of Cheap Trick, David Crosby, Green Day, Zac Brown, Kenny Rogers, Lady Antebellum and Rosanne Cash among others.
Its interesting to note in assessing Swid’s career with SESAC, he and his partners bought the company at a time in 1992 when a new technology (CDs) was finally impacting the industry’s economic business model; and sold a majority interest in 2013 at a time when a new technology (streaming) was once again about to change the industry’s economic business model.
“In the years that we were in business together at SBK, the accomplishments that we made, like the purchase and sale of CBS Songs, were incredible,” Bandier recalls in a statement to Billboard. “Stephen was a wonderful partner and an old friend who quickly took to the music business and who went on to have great success after that at SESAC.”
Swid is also survived by his wife, Nan, a founder of Swid Powell Designs, which focuses on housewares; two daughters, Robin Swid and Jill Rosen; eight grandchildren; and a sister, Carole Eisner, according to The New York Times.