Private-Equity Behemoth Blackstone Group Acquires Music Licensing Firm SESAC

Posted On: 1/19/2017

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TAGS: music licensing, jukebox, performing rights organization, music rights organization, SESAC bought, SESAC Holdings, Blackstone Group, Rizvi Traverse Management LLC, Society of European Stage Authors and Composers, Harry Fox Agency, John Josephson, Robert Reid

NEW YORK CITY -- Music rights organization SESAC Holdings said that private-equity funds affiliated with Blackstone Group have entered into an agreement to acquire SESAC from Rizvi Traverse Management LLC. The purchase is expected to close in the first quarter of this year. Financial terms were not disclosed.

Blackstone said that the transaction is its first investment as part of its core private-equity strategy, which is designed to hold private-equity investments for much longer periods of time than traditional private-equity funds.

SESAC -- originally the Society of European Stage Authors and Composers -- was founded in New York City in 1930 by German immigrant Paul Heinecke to assist European publishers with their American performance royalties. With an established cornerstone repertory of European classical music, SESAC turned its attention to American music. Also in the '30s, the organization helped broadcasters meet Federal Communications Commission requirements and supplied them with high-quality recordings of SESAC's substantial gospel-music catalogue. In the process, it formed durable relationships with broadcasters across the country.

The acquisition of the Harry Fox Agency in 2015 catalyzed SESAC's transition to a multi-rights organization (performance, mechanical and sync) that offers licensing, administration and royalty services related to the use of musical compositions in broadcasts, online and in recorded media. Rizvi Traverse purchased a majority interest in SESAC four years ago for $591 million. Blackstone's deal is for a full stake in SESAC, which reportedly generates about $248 million in gross annual revenue, according to the most recent data available.

SESAC chairman and chief executive John Josephson said, "The long-term investment horizon of their core private-equity platform was especially attractive to us as we seek to execute our company's growth strategy in our primary performance rights business, as well as mechanical rights, administrative services, multi-rights and multi-territory licensing." He added that Blackstone intends to back the existing management team.

Blackstone is one of the world's leading investment firms with more than $360 billion in assets under management. Blackstone senior managing director Robert Reid said, "Music is fundamental to our society and is consumed both actively and passively by users worldwide, across increasingly diverse methods of distribution. We expect music listenership to continue to grow over the long-term and are excited to invest in SESAC, one of the key facilitators of the music market and related copyright management infrastructure."

SESAC is the only U.S.-based music rights organization that administers public performance, mechanical, synchronization and other rights within one company. It offers singular licenses for the works of its affiliated writers and publishers that aggregate not only performance, but also mechanical rights, thereby providing greater licensing efficiency to music users and enhancing value to music creators and publishers.

The organization currently licenses the public performances of more than 400,000 songs on behalf of its 30,000 affiliated songwriters, composers and music publishers, who include Bob Dylan, Neil Diamond, Rush and Zac Brown, along with Lady Antebellum, the Avett Brothers, Shirley Caesar, Paul Shaffer and Thompson Square. SESAC's music is covered in the Jukebox Licensing Agreement, which authorized the blanket fee to cover all public performance of copyrighted music on vinyl and CD jukeboxes. The agreement also covers music protected by ASCAP and BMI.

SESAC recently expanded its activities into the international market through Mint Digital Licensing, a joint venture with Swiss collection society SUISA (Cooperative Society of Music Authors and Publishers in Switzerland), which will license and administer music rights to digital music platforms throughout Europe.

SESAC, along with BMI and GMR, is preparing to fight the U.S. Radio Music License Committee for higher composer royalties.