SESAC Sale to Blackstone Seen Unlikely to Shift PRO's Priorities
The Society of European Stage Authors and Composers’ pending sale to private equity firm Blackstone is unlikely to affect the performing rights organization’s priorities but does renew questions about the PRO’s future placement within the music industry hierarchy, industry lawyers said in interviews. Private equity firm Rizvi Traverse Management said Wednesday it’s selling its majority stake in SESAC but didn’t disclose the financial terms. The sale is expected to close in Q1, Blackstone said. Rizvi bought a controlling 75 percent interest in SESAC in 2013 for $600 million.
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Blackstone “is acquiring our company with the specific intent of backing the existing management team, and shares our long-term vision for the company," said SESAC CEO John Josephson in a Blackstone news release. Blackstone’s 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.” Blackstone managers 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,” said Senior Managing Director Robert Reid in the release.
Blackstone’s decision to back SESAC’s existing leaders and vision is a good sign that the private equity firm won’t move to fundamentally shift the PRO’s unique model of consolidated rights administration, industry lawyers said. SESAC has been “doing very well within the business” based on that model, which the PRO strengthened with its 2015 purchase of the Harry Fox Agency from the National Music Publishers Association, said Jay Rosenthal, a Mitchell Silberberg lawyer who represents music industry content owners. Rosenthal was NMPA general counsel before the Harry Fox deal. The SESAC deal bears all the signs of a “move of pieces around the game board” rather than signaling any shift in priorities, said music industry lawyer Chris Castle.
The transaction is Blackstone’s first foray into investing in the music industry, which indicates the firm may view SESAC’s ability to follow a wide range of music licensing rights as the PRO’s biggest asset, Castle said. SESAC’s “ability to track those rights is increasingly important” in the content management business, he said. SESAC’s core asset is ultimately its repertoire of music catalogs from established songwriters like Mariah Carey, Neil Diamond and Bob Dylan, but “Blackstone isn’t in the entertainment business,” Castle said. Rizvi, which has also invested in Snapchat, Twitter and Playboy, also viewed SESAC’s rights tracking ability as a major asset, an industry executive said. Blackstone said the deal is part of a shift in business strategy aimed at retaining its investments longer than most private equity firms.
SESAC has the potential to flourish via Blackstone’s new ownership, particularly since the PRO isn’t “embroiled” in consent decree issues with the DOJ like the American Society of Composers, Authors and Publishers and Broadcast Music Inc. are, Rosenthal said. SESAC is still “small enough” that it’s not subject to a DOJ consent decree, though that could change if the PRO expands, he said. Castle said he doesn't believe SESAC will want to significantly expand its share of the PRO market since it has “such a different business model” than the scale-oriented ASCAP and BMI. SESAC has focused on attracting major songwriter artists and their lucrative catalogs rather than seeking to scale up via lesser-known songwriters, Castle said.