MUMBAI: Bertelsmann AG and Kohlberg Kravis Roberts & Co. L.P. have agreed to create a joint venture to develop a global music rights management business to which Bertelsmann AG will contribute its BMG Rights Management music rights unit.
Upon funding of the transaction, Bertelsmann will own 49% in the joint venture and KKR will own 51%. Bertelsmann AG’s Hartwig Masuch, currently BMG Rights Management CEO, will continue as CEO of the new company.
The new company will benefit from BMG Rights Management’s know-how in licensing and administrating music rights, its large number of music catalogues and artists, the established BMG brand and its experienced management team. KKR will significantly enhance BMG Right Management’s financial position and create new growth potential by providing access to its global network. The partners envisage building a major music rights management business over the medium term through organic growth and acquisitions. KKR expects to contribute to BMG’s development by providing substantial equity investments through its European private equity funds.
"KKR shares our views on future business models for the music industry. I am excited to work with such a partner. With many high-visibility contracts and the foundation of an international organisation in six European countries, it has taken BMG Rights Management only nine months to position itself successfully in the market. Songwriters and performers respond very well to our service oriented approach," said BMG Rights Management CEO and the joint venture CEO Hartwig Masuch.
When BMG Rights Management started its business in October 2008, its rights catalogue consisted of about 200 artists; since then, another 100 contracts with songwriters and other rights owners have been signed.
"With access to meaningful investment capital, we expect the partnership with KKR to contribute significantly to accelerating the development of the business. We complement each other perfectly for this venture. We both want to broaden BMG’s global reach faster than originally anticipated. In this way we will be able to actively participate in the expected market consolidation," said Bertelsmann CFO Thomas Rabe, who will also be the chairman of the joint venture.
With the music industry at an important turning point, the market for licensing and administration of music rights presents attractive growth opportunities. Among other things, it is driven by the increasing importance of music in the licensing of other areas beyond the recording business, such as broadcast and live performances as well as the synchronization of broadcasting, commercial and movie productions.
"The music rights sector offers opportunities for significant growth across the globe. BMG has proven leadership and a strong track record of organic growth. Our financial strength combined with BMG’s sector expertise will create a unique platform for building up a global music rights management business," said KKR European head Johannes Huth.
In the context of this transaction, BMG Rights Management will be integrated into the equity fund Bertelsmann set up two years ago. The company will be developed from this platform. KKR’s funds will invest into a new holding company of BMG Rights Management. The foundation of the new joint venture is subject to approval under applicable competition laws. The parties expect to complete the transaction within a few months.
