ANTE UP: I.B. BAD
ON VALUATION

Valuations of music properties are at an all-time high, rising higher than at any time since Edgar Bronfman Jr., bought Polygram for 10.4 billion in 1998—just before the post-Napster/MP3.com toothpaste left the tube and sent values crashing to earth.

Over the ensuing years, they sank to a irresistibly low ebb, and Len Blavatnik ($3.3b for WMG in 2011) and Sir Lucian Grainge ($1.9b for EMI in 2012) made their moves. A few years later, streaming became the golden goose and drove values up to record highs.

The sale of the Mubadala consortium’s 60% of Marty Bandier’s baby, EMI Music Publishing, to Sony for $2.3b (based on a valuation of $4.75b) just seven years after Sony, the consortium and the Michael Jackson Estate paid $2.2b for the whole shebang, rang the bell for big money to look at music through a whole new lens; juicy fees on deals in the $10-20 billion vicinity look appealing.

That’s quite a comeback. Thus far, judging by Amazon, Spotify, YouTube, Netflix and Hulu, the biggest valuations are in distribution. But after circling the drain for about a decade, the content community is enjoying a very strong run.

More recently, Chinese behemoth Tencent spread the word that it was planning a U.S. IPO for its enormous music division. It boasts some 600m users—which in China is referred to as “an intimate gathering.” The music wing is thought to be worth around $30b, or roughly 6.5% of the parent company’s value and roughly on par with Spotify ($33.4b and trading at an all-time high of $188 three months after its non-IPO).

Vivendi Chairman Vincent Bolloré has been exploring floating a sizable chunk of UMG. The music group has had an estimated valuation as high as $40b, per Vivendi CEO Arnaud de Puyfontaine (and 2/3 of the French parent’s entire value, according to one investor source quoted by Reuters). Sir Lucian’s 2012 acquisition of EMI for $1.9b, of course, was instrumental in that value explosion.

Sony has thus far shown little interest in selling any of its entertainment properties since it bought CBS Records in 1988 and Columbia Pictures the following year. The Tokyo-based giant still looks like a buyer, not a seller. Would a $20b+ valuation for music alone prompt some fresh meditation on the subject? You bet.

Would Blavatnik—one smart, super-wealthy, bigtime player—be interested in another score, or does the all-Access pass to the exclusive, sexy world that music ownership has offered mean more to him than gold? It sure beats shaking hands with the leading lights of bauxite mining. From a balance-sheet perspective, though, the $3.3b bet he placed on WMG in 2011 has likely tripled in value.

Wonderers wonder if BMG—always one to buy low and sell high—hopes to sell its music division yet again to some big-money players, and Concord and its Chairman, Steve Smith, are said to be looking to cash out.

Can Kobalt spin its new smoke-and-mirrors model into a big play? The company still looks to be a buyer (its Capital division raised an estimated $600m war chest for acquisitions), although chief Willard Ahdritz’s enigmatic, non-biz vibe gives many music folks the willies.

On the live side, Irving Azoff is building a beast of a company with MSG (in tandem with James Dolan), the Tim Leiweke partnership Oak View Group, (recently capitalized to the tune of $100m by private equity house Silver Lake Partners), Full Stop Management and the PRO Global Music Rights. Silver Lake is also closely aligned with Ari Emanuel’s WME/Endeavor, which it put together with sports giant IMG about five years ago.

The Silver Lake-Irving connection is interesting, given that The Swirv has been a huge supporter of Rob Light’s CAA Music division and periodically at odds with WME’s music team.

And then there’s Michael Rapino’s 900-lb. gorilla, Live Nation, which he’s transformed into a massive company with close to 9k employees. He continues adding entrepreneur-driven businesses left and right to the LN portfolio; the stock is now hovering around the $50 mark from a low of around $9 in late 2012.

There’s some talk of Liberty Media—rumored to be up against Silver Lake in circling iHeartMedia—wanting Rapino to run some of their other businesses in addition to Live Nation. Could there be some pooling of Liberty assets by Malone, Maffei and company? SiriusXM has been a particular focus of attention in this regard.