March 01, 2010

By By Glenn Peoples, L.A.

Terra Firma?s troubled investment in EMI receives most of the headlines, but there has been much more to music investments over the last two-plus years and the state of music-related deals will be discussed at the Music & Money Symposium on March 4 in New York. Two discussions - "Purse Stringers: Inside the Minds of the Money Mavens? and ?Who's Next? The M&A panel? - will bring together leaders in venture capital and top media investments.

Billboard has tracked 148 music-related deals from the beginning of 208 through late February 2010. The deals of known value total $3.1 billion. Nearly two-thirds of that amount comes from a handful of deals: Sony Music?s acquisition of Bertelsmann?s 50% stake in Sony BMG for $1.2 billion; Sony?s acquisition of Gracenote for $260 million; Ticketmaster?s $265 million purchase of TicketsNow; and the music publishing joint venture created by Bertelsmann and KKR, which invested $347 million. The remaining one-third of investments comes from 107 mostly small venture capital deals that account for 74% the total deals in the period:

VC continues in music download sites and streaming services
In spite of many previous failures, music download sites and streaming services have continued to land venture funding. Swedish startup Spotify and California-based MOG are two of the most promising startups to offer music streaming services. Compared to earlier incarnations such as iTunes, Rhapsody and Napster, the latest generation of music services do not face the same interoperability issues. As a result, they have greater potential to reach the mainstream. Spotify has iPhone and Android apps. Slacker has given up its hardware ambitions to focus on device-agnostic software. Free, ad-supported download sites Guvera and Free All Music are completely browser-based.

Some of the most exciting startups have not had the financial burden involved with licensing music to sell or stream. Companies that offer services, not own or license content, have received most of the deals. Shazam, a music identification tool, has been downloaded to over 50 million handsets worldwide. Companies that provide web sites and digital tools for artists have also flourished. Ourstage, SliceThePie, Soundcloud, Hello Music, Topspin Media and Nimbit help artists seeking to further their careers, market to fans or collaborate with other musicians.

Look for more investments to be made in primary ticketing
Ticketing has been an active segment over the last two years, accounting for nine deals worth about $330 million. Eight of the nine were for companies that deal in the secondary ticketing market. Only one deal, a venture capital round landed by Showclix, was for a company that offers primary ticketing solutions. Outside of Ticketmaster?s acquisition of TicketsNow, the eight deals ? seven venture capital, one debt ? averaged $8.9 million.

Look for more investments to be made in primary ticketing as the Live Nation-Ticketmaster merger may mark the beginning of a new era for the secondary market. Ticketmaster is already seeking to diminish the spending captured by secondary ticketing sites and brokers. At the same time, the merger is likely to increase competition in the primary marketplace. Just last week, Ticketfly signed an online ticketing and marketing deal with the Merriweather Post Pavilion in Columbia, Md . (Ticketfly counts Social Leverage among its investors.)

The cool-off on publishing
Music publishing has been a hot investment in recent years, so expect the topic to come up during the panel. The market is cooling off, however, as expectations subside and investors become more aware of publishing?s inexorable link to the fortunes of recorded music. Bertelsmann created a joint venture with U.S. financial investor Kohlberg Kravis Roberts (KKR) in 2009 in which KKR invested $348 million.


For more info on this year's Music & Money Symposium (#MMBiz2010), presented in association with Loeb & Loeb, visit Billboardevents.com. For more Better Know A Panelist Q&As click here.

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