BMG Rights Management + EMI & the ‘Big Three’ Era… Pt. 2
EMI; another brick in the wall?
The sale of EMI Music Publishing to BMG Rights Management would be by far the largest investment for the Bertelsmann and KKR-backed venture, and would more than triple the current catalog of over 300,000 copyrights. It’s a catalog the JV has amassed in less than two years, through a series of acquisitions that include Cherry Lane Music, Adage IV, Stage Three Music, Evergreen Copyrights and Chrysalis Music, along with a handful of other international catalogs and pubcos. The speed in which BMG RM has climbed to the spot of fifth largest publisher in the world is striking, but only part of the story when looking at their catalog purchases. What’s more interesting to some insiders are the subplots and what they could signal for the future. Let’s step back and take a closer look… One of the most impressive and significant music publishing constructions in recent decades was that of Dreamworks Music Publishing, a catalog that was assembled under the guidance of veteran publisher Chuck Kaye. It included works from artists such as The Byrds, John Denver, Jimmy Eat World and Lifehouse among others, along with hit titles like “Disco Inferno” and “Take Me Home, Country Roads”. The catalog journeyed from one home to another throughout the 2000’s following the sale of the Dreamworks recorded music division to Universal Music in 2003. The catalog was first sold for $50 million to Dimensional Music Publishing in 2004, a newly created arm of JDS Capitol Management (who also owns eMusic and The Orchard), in a deal which is seen as seminal in the recent trend of venture capital investments in music publishing assets. However, Dimensional publishing’s run was short-lived, selling its assets less than three years later to First State Media Group, a new fund whose publishing entity operated as S1 Songs. Then again in under three years time, in early 2010 - after its own stint on the block almost being bought by then EMI owner Terra Firma – Chrysalis Music acquired First State Media and S1 Songs for $16.5 million, in a deal that included the Wind-Up catalog and of course the original 25,000 Dreamworks copyrights. And in November of last year, less than one year later, Chrysalis announced it was being bought by BMG RM, adding another 100,000 works to the JV’s catalog, in a deal valued at $169 million… So with a major addition like EMI’s publishing assets, what would the future hold? Particularly taking into account the consolidation happening within the ranks of the companies they’ve already acquired. On track to double their revenues by 2015, will the trend continue, with EMI (which has undergone significant cost-cutting of its own recently) as the final piece in a KKR and Bertelsmann plan to build the world’s largest publishing company and flip it? The common belief in many circles is that the industry is headed to a new era of the ‘Big Three’, and as such, none of the majors left will be able to afford leaving such valuable publishing assets outside of their control. It’s going to get interesting… Tune in tomorrow as we break a new big publishing deal currently in play.
06.29.11EMI Derby: Who Has the Inside Track… Pt. 1
Industry insiders have shared with us recently that they are putting Len Blavatnik’s Access Industries as the front-runner in the auction of EMI by Citigroup, which is expected to start in the coming weeks – and there’s plenty of good reason to bet that way. It’s been reported that Citi executives have already engaged in talks with the new Warner Music Group owner about a potential acquisition, Edgar Bronfman Jr. has long desired to merge Warner and EMI, and Citigroup chairman Dick Parsons ran Time Warner during a previous bid to merge the two companies. However, those in the know share that Warner isn’t the only suitor with ties to both Citi and EMI. More on that below… Many of the deep-pocketed bidders from the Warner Music auction are expected to enter the EMI derby, for either the recorded music unit, publishing or both, with regulatory issues as the most obvious concern for parties like Universal Music, Sony Music and now Access-owned WMG – all of them would have to shed assets in order to complete a deal. Meanwhile, private equity players would have an easier time making an acquisition, but the Terra Firma debacle may prove too cautionary for some who are interested… With all that, it’s BMG Rights Management that is on the tongues of insiders as one of the most well-positioned contenders, particularly with regard to EMI Music Publishing. The Bertelsmann and KKR-backed joint venture was deep in talks with Terra Firma to buy the publishing unit back in 2009, which would have relieved some of the debt that ultimately forced Guy Hands to turn the company over to Citigroup, and prior to that, KKR was in the running to acquire the entire EMI Music Group, before it ended up in the hands of Terra Firma… With relationships in place, and knowledge of the company before, during and after the Guy Hands era, it’s not hard to envision EMI publishing assets ending up in the already prodigious BMG Rights Management catalog, which would put the JV in position to rival Universal Music Publishing Group for the top spot in market share. This just five years after Bertelsmann sold BMG Music Publishing to Universal. But the story wouldn’t end there… Stay tuned.
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Bits & Pieces: EMI Exploring Options, Rick Rubin Surfaces & More…
the dude abides
EMI officially announced on Monday that it will undergo a strategic review process, along with Citigroup, to explore options that include selling the company. The list of potential bidders has been discussed for sometime, with the recent sale of Warner Music only intensifying speculation. The Los Angeles Times reported that Universal Music is planning to make a bid, while other names frequently bandied about include Access Industries (for a WMG merger), BMG Rights Management and other investment players who were in on the Warner bidding. Observers are wondering how much Citi will get for the company – as the WSJ points out, Warner was sold for eight times its 2010 earnings, with some now thinking EMI could fetch as much as 2.5 billion pounds… As Sony Music prepares for the entrance of Doug Morris next month, Rick Rubin has been talking publicly for the first time in awhile, toasting the success of Adele’s 21 and making it clear he’s always been a ‘creative’ guy and the “voice of reason and positive creativity” – leaving the ‘business’ side of things to the “people at the label.” Where and how the Columbia Records co-chairman will fit into the new Sony regime is unclear, though his comments seem to come at an opportune time… CEO of Hip-Hop Since 1978 management firm, Gee Roberson, has been named chairman of Geffen Records, he will report to Jimmy Iovine… Elsewhere, the social streaming-music site Turntable.fm is attracting a lot of new users and getting increased attention, though some are wondering if that will also mean scrutiny from content owners, as they do not have licenses from any labels. The company maintains that it falls under the protection of the DMCA, similar to how online radio service Pandora operates without licenses… And Best Buy is reportedly preparing to launch a new service called Music Cloud in the U.S., which as the name implies will be a cloud-music service – the company already operates a similar service in the UK called My Music Anywhere; agreements with all the major labels are said to be in place.
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More Bits & Pieces: BMG sizing up Warner/Chappell deal, Spotify inks Universal Music for U.S., eMusic & HP have sights set on the Cloud & more…
BMG eyeing WMG's pubco
As Citigroup readies EMI for auction, as soon as this month according to reports, KKR-backed BMG Rights Management is already kicking the tires on Warner/Chappell Music according to the New York Post. While a number of suitors are expected to submit bids for all or part of EMI when the music group is taken to auction, if Len Blavatnik’s Access Industries comes out on top again, most expect that regulatory obstacles would see Warner Music’s pubco being sold, though some observers have Citi more likely to favor other interested parties due to fear of such regulatory scrutiny… A Digital Music News story this week revealed that digital music retailer eMusic has had little to no subscriber growth since 2007, even with the addition of catalogs from major labels. The service however, can point to an increase in revenue from its current subscribers, who are opting for higher-paying levels of membership. Also apparently on the horizon for eMusic is a cloud-based service – with CEO Adam Klein telling Billboard that they hope to launch it by the fourth quarter of this year… How many more companies will join those already in the cloud like Apple, Amazon and Google? Apparently Hewlett Packard is in the early stage of discussions with content owners, including major labels, for a service similar to iCloud, offering music, movies and TV shows… Meanwhile, MediaMemo reported today that Universal Music Group has signed on with Spotify in America, and while a deal with Warner Music Group is yet to be reached, sources have the two sides close to a deal as well… Elsewhere, Irving Azoff and Liberty Media boss John Malone are said to be considering taking Live Nation private, in an effort to restructure the company… And while News Corp.’s prospect of completely unloading MySpace don’t look good, according to a new report, the frontrunner among those in talks for a strategic partnership that would leave News Corp. with partial ownership, is an investment group which includes Activision Chairman and CEO Bobby Kotick.
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More Bits & Pieces: Blavatnik’s Inside Track at EMI, Bronfman Testifies in Lime Wire Trial & more…
Bidding over before it starts?
An official auction of EMI by owner Citigroup has yet to begin, but a piece in the NY Post hints that the bidding might be over before it starts. Citing unnamed sources, the story indicates that recent Warner Music Group winner Len Blavatnik has already been holding meetings with Citi about a possible EMI deal, which would see it combined with Warners, adding that they see Blavatnik’s Access Industries as the suitor with the deepest pockets. Though there are plenty of other well-funded potential bidders who would likely make a run, including KKR-backed BMG Rights Management, the Gores brothers whose bid for WMG failed, and a number of other private-equity players… Meanwhile, Edgar Bronfman Jr. took the stand in the trial to determine damages owed to record companies by Lime Wire yesterday, in an attempt to add credence to the claim of industry “devastation” caused by Mark Gorton’s P2P service. Appearing as the ‘face’ of an industry that has suffered at the hands of Lime Wire, Gorton’s attorney’s were quick to paint Bronfman’s as one that has not suffered much by the industry downturn – pointing to layoffs under his watch, while his salaries and bonuses have totaled in the millions for the past five years. They also read from a transcript of a 2007 speech from Bronfman, which included the line, “By standing still or moving at a glacial pace, we inadvertently went to war with consumers by denying them what they wanted and could otherwise find, and as a result, of course, consumers won.” More coverage on CNET… And the general concesus of those who have been invited to the private beta of Google’s new Music Beta, seems to be that while the features are neat, it could be so much better. What can they do to make it better? Secure agreements with the major record companies of course. The main points of contention between Google and the labels that are being reported, include disagreements over money (upfront advances to labels), piracy (labels trying to use a deal to leverage changes in the search engine’s results relating to piracy sites), and a lack of vision on Google’s part for what they wanted the service to be, combined with the fear by labels of upsetting the Apple cart, by getting in bed with a competitor. For all the talk of needing someone to step up and create a meaningful iTunes competitor, it looks as though Steve Jobs will have the upper hand with labels once again… And in related gossip, there have been rumors of a Lady Gaga tie-in with the public launch of Google Music, including a claim on Fast Company that the singer was recently shooting a commercial for Google in New York, for a promotion that would coincide with the release of her new album later this month. Such predictions might seem highly dubious, considering Universal Music is said to have been one of the main holdouts on a Google deal, however her manager is no stranger to Silicon Valley and gaming company Zynga just announced a major partnership with Gaga this week.
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Bits & Pieces: Warner Closes Final Round – Will the Victor Go the EMI Spoils Too?, Radio Staff Grows at Q Prime & more…
Destined to be combined?
The final round in the Warner Music auction closed yesterday, with two primary bidders said to be vying for the company, one being Len Blavatnik’s Access Industries and the other, a coalition of brothers Tom and Alec Gores, whose respective company’s are Platinum Equity and Gores Group – both suitors reportedly tendered bids around $3billion for the entirety of WMG. Attention has begun to drift to the looming sale of EMI by owner Citigroup, and the belief de-jour is that whomever ends up nabbing Warner Music, will also be aggressive in securing EMI as well. The result would likely be a cut and paste job between the various components of the two music groups. In another twist, The Telegraph reported yesterday that KKR-backed BMG Rights Management and Universal Music Group may be teaming up in an attempt to acquire either or both EMI and Warners, having put together a plan to carve up catalogues in an effort to avoid regulatory hurdles… Elsewhere, according to FMQB, Q Prime is expanding its promotion team, with an emphasis on bolstering the undertakings of its premier management operation, with a roster including Cage the Elephant, The Black Keys, Silversun Pickups, Snow Patrol, Muse and many others. Q Prime’s Mom + Pop Records, who has releases from Sleigh Bells, Metric, Freelance Whales among others, should also benefit from the increased staff. The additions include Trina Schaefer (formerly of Island Def Jam), Erin Gellert (formerly of Epic Records), Devin Rosevear, Chris Frank (formerly of Universal Motown) and Michael Fang (formerly of Red)… Meanwhile, the news of a nearly 25 million additional user accounts being compromised in the recent PlayStation Network breach (77 million were initially reported) smacks of the Sony BMG rootkit blunder (and ensuing lawsuits), and it can’t be good news for Sony Corp. CEO Howard Stringer, whose term has recently begun to be put in question more frequently… And for an interesting read about some of what labels are said to be demanding from cloud music, or locker, services (efforts from Amazon, Apple, Google and Spotify being the most widely discussed), check out the guest post from MP3.com and MP3Tunes founder Michael Robertson on TechCrunch.
[UPDATE - Bloomberg first reported yesterday that a last minute joint-offer for Warners was submitted by Sony/ATV Music Publishing and Ronald Perelman and Guggenheim Partners LLC. A winning bidder is expected to be announced on Friday.]
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Bits & Pieces: BMG Sets Sights on WMG & EMI Publishing Assets, MySpace + Vevo & Twenty First Republic
Eyeing Warners & EMI publishing arms
Outside of the explosive announcement from Amazon this week that left a music-cloud hanging over the industry, other developments include the news of KKR-backed BMG Rights Management being back in the bidding action for Warner Music Group, after recent reports of the JV being on the outs in the sale. CEO Hartwig Masuch denied such rumors, saying “I can state that we are in the second round of bidding and are on very friendly terms with the main shareholders,” while executives at BMG RM’s other backer Bertelsmann claimed this week that the company is “ready to invest into the right business, at right price, and at the right time,” with the right business apparently being publishing, as Warner/Chappell and EMI Publishing are key in their sights. More reporting can be found at The Guardian, The Telegraph and Music Week… As News Corp. continues to look for a way to unload struggling MySpace, word that the parent company is in talks with online video hub Vevo began to surface. The accuracy of such claims continues to be debated, while a piece in the WSJ yesterday points out that the complex ownership anatomy of both companies might make a deal difficult. For now it seems an unlikely scenario… And a new partnership that links Universal Republic Records, Universal-owned Twenty First Artists and producer management firm Worlds End, forming Twenty First Republic, was announced yesterday. Primaries in the deal include Uni/Republic executives Monte and Avery Lipman, Twenty First Artists CEO Colin Lester and Sandy Roberton, CEO of Worlds End.
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Bits & Pieces: Morris Move to Sony Music Top Spot Confirmed, Warner Music Gets Bids, Thumbplay Unloaded & More…
Morris takes his talents to Sony
The big news this morning from within the big four music groups (soon to be three?), is the confirmation that outgoing Universal Music Group CEO Doug Morris will indeed take over the reigns as new chief executive at Sony Music on July 1st, as Rolf Schmidt-Holz departs at the end of this month. Sony Corp. chairman Howard Stringer will fill the role in the meantime. Morris held the role of CEO at UMG since 1995, before announcing a successor in Lucian Grainge at the beginning of last year. On the other side of the coin, RCA/Jive label chief Barry Weiss will also leave the building this week, as he takes a top spot in Grainge’s East Coast Universal label operation… Bloomberg reported this week that Warner Music Group, which recently put itself on the block with help from Goldman Sachs, has received ten offers so far including bids on its publishing division Warner/Chappell Music by Sony/ATV Music and KKR-backed BMG Rights Management, while Russian billionaire Len Blavatnik is seeking to acquire most of the company. UMG did not submit an offer, reportedly due to anti-trust concerns – though they may be interested in acquiring parts of the recorded music business… In what could be seen as a preemptive move as Spotify appears to be gearing up for a U.S. launch (including reportedly making hires), Rhapsody is offering a 60 day free trial for its streaming service… Ringtone company Thumbplay, who transitioned into the music subscription arena earlier than most current players, has been bought by Clear Channel. It appears that the new owners of the service intend to transition the service into online radio, utilizing the Thumbplay technology and talent and integrating it into Clear Channel’s current free iheartradio service… Elsewhere, Live Nation California prexy Rick Mueller is reportedly leaving and heading to rival AEG… MTV and Sony/ATV’s Extreme Music are launching Hype Production Music as the result of a new licensing partnership that will focus on emerging and independent artists… And despite continued turmoil in the digital music landscape, investors are once again starting to dump big cash in the chaotic space.
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Bits & Pieces: BMG Reveals UK Structure, UMPG Inks More Hollywood Heavyweights & Will Sony Music Have a New CEO Next Month?
BMG unfolds plan for UK Pubco
The new structure of the BMG Rights Management operation in the UK, now known as BMG Chrysalis UK, has been tipped with the placing of Alexi Cory-Smith in a role overseeing creative, marketing and business affairs, along with COO John Dobinson taking over operations. Cory-Smith was named SVP of legal and corporate development at BMG back in January, leaving her previous position at the firm Lee & Thompson, where her clients included finalists from multiple seasons of the X Factor. The new arrangement also sees the exit of longtime head of creative in the UK, Alison Donald, a highly respected A&R veteran, who those in the know share had been hotly courted by rival publishers and labels throughout her tenure. Music Week’s report mentions that no indication has been made as to how group CEO Jeremy Lascelles will fit into the new company structure, though insiders share that Lascelles will likely be leaving the pubco as well. A&R executives Ben Bodie and Alan Pell will remain in key creative positions. Observers are wondering if the moves by BMG indicate a larger overall shift away from the new artist business, and how it fits into the KKR-backed venture’s plans moving forward. Questions also remain about how the structure of the U.S. operation will shake out. Stay tuned… In more rights management news, Songtrust, a new division of Downtown Music, has announced a new partnership with MySpace Music, which will see the company offering its music publishing management services to the large number of unsigned and DIY artists among the social network… Universal Music Publishing Group has bolstered its standing in the film & TV music publishing arena by announcing new deals with HBO, DreamWorks and James Newton Howard. The deal sees UMPG getting administration rights to current and future projects for the three heavyweight Hollywood companies… And time is running out on Sony Music CEO Rolf Schmidt Holtz’s contract, which ends March 31st, and there’s still no word yet of a replacement. Doug Morris is widely believed to be the one Sony Corp. brass wants to takeover, but his current contract with Universal Music Group owner Vivendi runs until January of next year, with an early release rumored to be unlikely before the summer.
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Happening: Warner Music Preparing for Bids, EMI Close Behind & Spotify Back in the $$ Mix
BMG RM's Hartwig Masuch; Who will they take first?
It’s being reported the Warner Music Group is preparing to receive offers this week from a list of up to 20 bidders, the latest entry on the list of suitors is Russian businessman Len Blavatnik, who already owns a minority stake in Warner/Chappell Music. The KKR-backed BMG Rights Management venture is expected to be among bidders for WMG’s publishing division, having apparently tapped multiple banks to advise and provide financing. Though the move could also be to prepare bidding for the Citigroup-owned EMI Music, the other major music group currently on the block. Or maybe it’s both… EMI group CEO Roger Faxon continues his media tour, with a piece this week in The Guardian where he explains the pitfalls of splitting up the company’s recording and publishing divisions. Meanwhile, former owner Guy Hands expresses disappointment over losing EMI, his highest profile investment, to Citigroup… Details coming out over the weekend have Spotify getting a large amount of new financing in the range of $100million from Digital Sky Technologies (also backers of Facebook, Groupon and others), which would give the company a new valuation of around $1billion. If it seems like all that new money will just end up going to the labels in the U.S. in order to get off the ground (Spotify now has both Sony Music And EMI onboard), MediaMemo’s Peter Kafka says think again… And how would the new Apple content subscription service fees hinder music services like Spotify? A cryptic email from Steve Jobs this week has many questioning if Apple is changing its tune on fees applying to music services.
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