The Sanctuary Group PLC History

Address:

Sanctuary House
45-53 Sinclair Road
London W14 0NS
United Kingdom

Telephone: 44 (0)20 7602 6351
Fax: 44 (0)20 7603 5941

Public Company
Incorporated: 1976 as Smallwood-Taylor Enterprises
Employees: 600
Sales: £151.7 million (2003)
Stock Exchanges: London
Ticker Symbol: SGP
NAIC: 512210 Record Production; 711410 Agents and Managers for Artists, Athletes, Entertainers, and Other Public Figures; 512240 Sound Recording Studios; 512110 Motion Picture and Video Production

Company Perspectives:

Sanctuary is a diversified international music group specialising in the ownership and commercial exploitation of Intellectual Property Rights (IPRs). We are committed to continued growth and to taking advantage of genuine opportunities globally for enhancing shareholder value and to developing long-term careers for artists. It is a place where employees have a shared passion.

Key Dates:

1969:: Rod Smallwood and Andy Taylor meet at college and organize concerts.
1976:: Smallwood-Taylor Enterprises is founded.
1979:: The company begins working with Iron Maiden.

1980s:Iron Maiden becomes the top U.K. heavy metal band; a U.S. unit is launched.
1997:: The company goes public on the London Stock Exchange.
1998:: The Ted D Bear studio and database companies are acquired.
2000:: The Castle and CMC International labels are bought, doubling the company's revenues.
2001:: Trojan and Modern Music Records are acquired.
2003:: Mathew Knowles's Music World Entertainment is purchased; a distribution agreement is signed with BMG; the Cloud 9 television unit is sold.
2004:: The Erving Wonder, MJB, and Tony Davis management companies are added to the Urban unit.

Company History:

The Sanctuary Group PLC is the largest independent music company in the world, with rights to more than 150,000 recordings, and is also a leading artists management agency, with nearly 100 acts under contract, including Beyonce, Destiny's Child, The Who, Nelly, Iron Maiden, and Guns 'N' Roses. The company owns a number of record labels as well, including Sanctuary, Castle, Metal-Is, and Trojan. The Sanctuary Group offers a "360 degree" service approach, which includes management, recording studios, record labels, merchandising, financial advice, travel arrangements, and more. Founders Andy Taylor (executive chairman) and Rod Smallwood (head of artist services) continue to run the company and own stakes in it. Sanctuary has offices in London, Berlin, New York, Los Angeles, and Houston.

Beginnings

The roots of The Sanctuary Group can be traced to 1969, when Andy Taylor and Rod Smallwood met at Cambridge University's Trinity College. Natural science student Taylor had as a teenager organized dances in his hometown of Newcastle, and engineering and structural architecture student Smallwood was an avid music lover. The two, born just days apart in February 1950, hit it off immediately, and soon began helping to organize the college's May Balls, booking acts that ranged from Dadaist rockers The Bonzo Dog Band to the Royal Philharmonic Orchestra. With another student, they went on to form TWS (Taylor Wallace Smallwood), which organized events and provided catering services, though their partner left after a year.

After college Taylor and Smallwood continued to work together in the music business. Seeking to develop his skills in the financial end, Taylor began training with Robson Rhodes in London, an accountancy firm. He was eventually made a partner, and then took a job as financial director of Perstorp, a Swedish multinational firm with a division in the United Kingdom.

Smallwood, meanwhile, was working for musical agency MAM, which handled such acts as The Kinks, Judas Priest, and Golden Earring. After a year and a half, he left to become a junior partner at a management company that represented Steve Harley and Cockney Rebel. With Taylor, he continued to take on outside projects, including catering the Reading Festival. Their business, which was run out of the two-bedroom apartment they shared in London, was incorporated in 1976 as Smallwood-Taylor Enterprises, and they began selling shares in it a year later. By this time they were handling a range of projects including booking of concerts, catering, and running a mobile discotheque.

Discovery of Iron Maiden in 1979

In early 1979 Smallwood decided to quit his agency job and go off on his own. Although not certain he wanted to continue in the music business, he heard through a rugby player friend about a musician named Steve Harris, who was in an up-and-coming heavy metal rock band called Iron Maiden. After screening a recording they had made, he negotiated a contract for them with record industry giant EMI (home to The Beatles), and signed on as their manager. Their first album, released in February 1980, debuted at number four on the British charts and went on to sell 350,000 copies worldwide.

Taylor and Smallwood soon dropped their other activities to focus exclusively on building the band, obtaining financing from a bank with which Taylor had worked in Sweden. Iron Maiden's music struck a chord with British youth, and by 1982 annual sales of its records and merchandise were worth £50 million. Smallwood and Taylor later renamed their business Sanctuary, after an Iron Maiden song. They also assembled a group of companies and accountants for each member of the band, and set up a tax-avoidance scheme that, in large part, kept the group out of the United Kingdom between 1982 and 1988.

In 1983 the firm again began taking on other acts. In addition to management, Sanctuary offered related services including financial advice, merchandising, and travel planning. This diversity was a key element in Smallwood and Taylor's success, as was their professionalism, which set the firm apart in the often flaky, fly-by-night music promotion world of that time.

In the 1980s Sanctuary branched out to the United States, but the firm had problems with the British executives it sent there, who did not acclimate well to the more cutthroat American music promotion business. After being sidetracked by a legal dispute with the band Poison, the firm hired more American-born staff for its U.S. unit, and matters there improved. Smallwood himself was now living in Los Angeles, in a home that had been built by 1930s Hollywood star James Cagney, though he spent much of the year on the road. By this time Sanctuary was managing a number of different acts, including Metallica, Blur, and Wet Wet Wet. New Sanctuary units formed during this period included Platinum Travel International, Focus Business Management, and concert booking agency Helter Skelter.

Focus on Intellectual Property Rights in the 1990s

In the 1990s Sanctuary began to work on establishing a portfolio of intellectual property rights, which would grow to include recordings, television programs, and books. Baronsmead Venture Capital and ABN Amro provided the initial financing for this expansion. The company also started a television division that formed a partnership with CLT/Utd. of Luxembourg, which owned stakes in many European broadcasters. With funding from CLT/Utd., programs would be made by a production company, Cloud 9, that was created as a joint venture with Ray Thompson, one-time head of BBC drama series development. Productions were typically aimed at children, and included a series based on the novel The Swiss Family Robinson, another based on the books of Enid Blyton, and a "teenage soap opera" called The Tribe.

In 1996 Sanctuary Records was formed to release recordings by acts the company managed, some of which, past their hit-making days, felt they were being ignored by the major labels. Sanctuary later bought smaller labels Air Raid and Mayan to serve its younger acts.

In December 1996 a 40 percent stake in Sanctuary's records, publishing, and studio group (known as Sanctuary Music Productions) was offered on London's Alternative Investment Market. The success of this sale led to a full listing of the entire Sanctuary Group a year later on the London Stock Exchange, which was followed by a complete reorganization of the company from four divisions to three: music, television, and facilities.

After the sale, Taylor and Smallwood each owned 20 percent of the firm. Taylor was named CEO, and Smallwood continued as head of music management. Forty percent of revenues was derived from music, with an equal amount earned from television. For its most recent year, Sanctuary had sales of £18 million.

In August 1998 the firm acquired a holding company, Ted D Bear, for a reported £2.1 million. It consisted of three businesses, including Chop Em Out, a mastering, recording, and tape duplicating firm; and Probe Media, a database marketing company. They were combined with existing Sanctuary operations to form a new production division. During 1998 the company also signed a number of acts, including the Pet Shop Boys, Lodger, and Marillion, and in early 1999 it acquired classical record label ASV.

In the summer of 2000 Sanctuary signed an agreement with Bug Music, Ltd. to administer the firm's music publishing interests worldwide. The year 2000 also saw the repositioning of the Probe Media business into a "New Media" division within the company, which would handle creation of band web sites and other multimedia offerings. Former Pearson New Entertainment CEO Nick Alexander was hired to run it.

Doubling Revenues with Acquisition of Castle and CMC in 2000

In 2000 Sanctuary acquired record labels Castle Music and U.S.-based CMC International, which were merged into Sanctuary Records. CMC had released albums by Sanctuary artists Iron Maiden and W.A.S.P. in the past, along with other "classic rock" acts including Lynyrd Skynyrd and Styx, and was distributed by industry major BMG. Castle had a large back-catalog that included classic older albums by a number of major heavy metal acts, including Iron Maiden, Black Sabbath, Motorhead, Uriah Heep, and Hawkwind. Heavy metal was experiencing a major upswing, with older acts that had been reduced to appearing in clubs now touring auditoriums and larger venues to strong attendance. The CMC/Castle acquisitions would nearly double Sanctuary's revenues. For the fiscal year ended September 2000, the firm reported sales of £44.1 million ($64.9 million). Profits were £4.1 million ($6 million).

In early 2001 the company reached an agreement to acquire German record label Modern Music Records GmbH, which owned imprints Noise, T&T, Dynamica, Machinery, and AGR. After the purchase its name was changed to Sanctuary Records GmbH.

In June 2001 Sanctuary bought the catalog of Trojan records, which was one of the top labels for reggae music and owned thousands of classic recordings by such artists as Bob Marley and Desmond Dekker. The deal included Trojan imprints Rialto, Mooncrest, Receiver, Indigo, and Jet, which collectively offered music ranging from blues and jazz to punk rock. The deal was valued at £10.4 million ($14.5 million).

The year also saw development of a joint venture with Rough Trade Records to develop new acts, and the acquisition of merchandising company Bravado International Group and music management firms MM&M and Big FD. For 2001 sales rose more than 86 percent, to £82.3 million ($119 million), while profits increased to £17.7 million ($22.7 million). Records made up more than half this figure (£52 million/$75.3 million), with television/movies second (£13.8 million/$20 million), artist services third (£12.1 million/$17.5 million), and group services contributing £4.3 million ($6.3 million). At this time the firm was seeking to raise an additional £20.5 million ($28.7 million) through an issue of 27 million new shares of stock.

In 2002 the firm bought publishing company Air-Edel for £1.2 million, and the following year Sanctuary partnered with U.K. financial firm Gerrard to create Gerrard/Sanctuary Wealth Management Service, which offered investment management, banking, financial planning, and insurance services. Along with musicians, the unit hoped to attract sports stars, actors, and other performers. In May the firm reached an agreement for industry giant BMG to distribute its audio and video recordings worldwide, and later in the year Sanctuary sold the Cloud 9 television production unit back to partner Ray Thompson. The Sanctuary Visual Entertainment division would continue to produce music-related documentaries and advertising and to issue DVDs and videos. Sanctuary Group was now reorganized into three units: Recorded Product (both audio and video), Artist Services (management and other services), and Group Services (recording studios and corporate support).

Purchase of MWE in 2003

In September 2003 Sanctuary bought Music World Entertainment (MWE), owned by Mathew Knowles, for a reported £6.1 million. The management company's clients included Knowles's daughter Beyonce and her mega-platinum group Destiny's Child, along with other artists in the R&B, hip-hop, and gospel genres. The company subsequently launched a new division called Sanctuary Urban, headed by Knowles, to expand its offerings in these areas. The new unit, which had offices in New York and Houston, also would include a publishing operation and a record label.

In the fall of 2003 Sanctuary raised £20 million from Merrill Lynch and Highbridge International to make acquisitions and pay down debt. Shortly thereafter, the firm acquired Creole Records, another reggae label, and early 2004 saw a deal signed for Sanctuary Music Publishing to administer a Nashville company called Ten Ten Music's catalog in the United Kingdom. In April, merchandising and visual rights company World Online Merchandising was acquired and folded into the Bravado operation.

In the spring of 2004 Taylor, Smallwood, and several of the firm's directors sold blocks of shares in the company to allow large institutional investors to buy into it. The move was made to widen Sanctuary's shareholder base in preparation for seeking more funds to make large acquisitions. The firm was now hoping to buy publishing catalogs and record companies in the United States, where it earned 40 percent of its revenues, with country music a primary target.

In the summer, Sanctuary's profitable Urban division bought Erving Wonder, a Philadelphia-based artist management firm, and took over Mary J. Blige's company, MJB Management. The Urban unit's record label also was preparing to release new albums by The O'Jays and Earth, Wind & Fire. In the fall, the firm bought Tony Davis Management, Inc., which managed hip-hop artist Nelly, among others, and signed a distribution deal with Drive-Thru Records, which specialized in independent rock/punk bands including Dashboard Confessional and New Found Glory.

In late 2004 the company appointed Sanctuary US CEO Merck Mercuriadis, age 41, to the position of CEO of The Sanctuary Group. Andy Taylor remained executive chairman, in charge of commercial and financial strategy, while Rod Smallwood remained head of Artist Services.

In nearly 30 years, The Sanctuary Group PLC had grown into one of the largest and most diverse music businesses in the world. With its roster of hit-making artists, its huge intellectual property rights collection, its record labels, and its integrated services approach, the firm had carved out a unique niche for itself within the industry.

Principal Subsidiaries: Sanctuary Artist Services Ltd.; Sanctuary Artist Management Ltd.; Focus Business Management Ltd.; Helter Skelter Agency Ltd.; Platinum Travel International Ltd.; Sanctuary Publishing Ltd.; Sanctuary Studios Ltd.; Sanctuary Music Publishing Ltd.; Sanctuary Visual Entertainment Ltd.; Sanctuary Records Group Ltd.; Sanctuary Copyrights Ltd.; Sanctuary Records GmbH (Germany); Trinifold Management Ltd.; Bravado International Group Ltd.; Sanctuary Group Inc. (U.S.A.); Sanctuary Artist Management Inc. (U.S.A.); Sanctuary Records Group Inc. (U.S.A.); Bravado International Group Inc. (U.S.A.); MW Entertainment Productions and Management Inc. (U.S.A.).

Principal Competitors: Universal Music Group; Sony BMG Music Entertainment; Warner Music Group; Eagle Rock Entertainment Ltd.; Snapper Music; Creative Artists Agency, Inc.; William Morris Agency, Inc.; International Creative Management, Inc.

The Sanctuary Group PLC History

Company Perspectives:

Key Dates:

Company History:

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