BMG CEO Hartwig Masuch On Buying Out KKR: 'We No Longer Need The Old Label System'

 

On the day that Bertelsmann announced it had bought out Kohlberg Krvis Roberts & Co. (KKR),its partner in BMG Rights Management, at a price-tag estimated at well-over a quarter billion dollars, Billboard.biz caught up with one of the deal's key architects, BMG Rights Management’s Hartwig Masuch. Here Masuch details the rationale behind the buy-out, plans for expansion and whether to get into the label game.Rights Management’s Hartwig Masuch who has a new five year contract. Here Masuch details the rationale behind the buy-out, plans for expansion and whether to get into the label game.

Billboard.biz: From the outset you underlined how good the partnership between KKR and Bertelsmann was. What induced Bertelsmann to take over KKR’s shares?
Hartwig Masuch:
It's a completely normal process for a private equity company to sell its portfolio after a few years and move on to other investment-areas. We have worked together very well with KKR since the first deal in October 2009 and had some major successes together, as a result of which we are now established as the number four music publishing business. Let’s not forget that BMG now has more than a million titles.  

 
Do you see your strategy of buying up music rights as confirmed?
I am proud that BMG with its committed team managed to be successful with new concepts on a music market that is otherwise not exactly in a positive mood. Initially, of course, we had to find arguments for why Bertelsmann wanted to buy in again after pulling out in 2008. Our new business model with a high level of fairness and transparency was very positively received by authors because they were looking for an alternative from the traditional music business where large companies had often lost the confidence of the artists by acting like moguls. These creative artists were looking for new systems to enable them to have a say in their own careers. We were able to do this and that’s why we found so many partners.

Does this takeover mean that Bertelsmann might want to establish itself again on the music market as a recording company with its own label?
This is not our approach. We already make 15 percent of our revenues with master deals and this figure is set to increase considerably. So we no longer need the old label system. We want to show our authors and artists the best way to go and offer the best marketing to ensure that their works are successful. All this is done in close coordination with the partners.

How important is the double-digit growth of digital business for your acquisition?
Of course, the digital business will become stronger and much more important. You only have to see how the initiatives taken by the major digital companies like iTunes and Google plan to use music as a key part of their expansion plans. We will make sure that our partners do not lose out and are not sacrificed on the altar of technology.

Will BMG now be expanding globally under the aegis of Bertelsmann? Are there specific plans for this?
It goes without saying that we are thinking of further expanding our international business. We are already represented in eight countries. But we are now also considering being represented in other key markets, for example South America or Australia. But that decision will depend on the partners we work with.

Can the music sector expect major catalogue deals by BMG this year too?
Our pipeline of new deals is big. Deals at the right time and at the right price – this is the philosophy we will continue to follow in the future.

 

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