Blackstone music deal hits right digital note

3 minute read

Shakira performs during the Super Bowl LIV Halftime Show at Hard Rock Stadium, Miami, Florida, February 2, 2020. REUTERS/Shannon Stapleton

NEW YORK, Oct 12 (Reuters Breakingviews) - Blackstone (BX.N) is adding music to its digital-content playlist. The private equity firm is investing $1 billion with Hipgnosis Song Management to acquire music rights and manage catalogs from stars like Shakira. Streaming music is growing and there are opportunities for tunes to be used elsewhere. Steve Schwarzman's firm looks to be hitting the right note.

The global digital music streaming market will more than double from 2020 to nearly $46 billion in 2025, analysts at Morgan Stanley estimate. Meanwhile, music-rights payments made by emerging digital platforms are expected to increase fourfold during the same period to $3.5 billion. That’s because the market for streaming music is expanding in other ways. Wildly popular social media and games platforms such as TikTok and Roblox (RBLX.N), as well as at-home fitness phenom Peloton Interactive (PTON.O) and the like, use tunes that require licenses.

Hipgnosis, founded by former Elton John manager Merck Mercuriadis, advises UK-listed Hipgnosis Songs Fund (SONG.L), which lets investors get a piece of the action in music royalties. The listed group reckons that, in the year to March, its investors made a total return – comprising appreciation in the market value of its right portfolio plus dividends – of nearly 16% in dollar terms. That's more than enough to appeal to a buyout baron.

Other private equity shops are planting flags in the music market, too. KKR earlier this year bought a majority stake in a catalog from OneRepublic artist Ryan Tedder valued at $200 million, according to Reuters read more . But for Blackstone, the deal with Hipgnosis, in which it will also take a stake, reflects a broader push into digital content across the board. In August it struck a deal to buy most of Hollywood actress Reese Witherspoon’s media company, Hello Sunshine, as part of a larger initiative spearheaded by former Walt Disney executives Tom Staggs and Kevin Mayer.

It’s a way to tap into the buoyant market for original content, exemplified by ongoing heavy investment at Netflix (NFLX.O) and its rivals. Getting in on streaming music as well is another upbeat ditty.

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- Blackstone and Hipgnosis Song Management on Oct. 12 announced a partnership in which Blackstone will provide $1 billion to acquire music rights and manage catalogs. As part of the deal, Blackstone is also taking an undisclosed ownership stake in Hipgnosis, owned by music executive Merck Mercuriadis.

- Hipgnosis is an investment adviser to the UK-listed Hipgnosis Songs Fund, which has around $2 billion in gross assets.

Editing by Richard Beales and Amanda Gomez

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