Len Blavatnik’s Tuesday announcement of his $60 million investment in Beats Electronics’ forthcoming music service Daisy is just the latest in a string of deals that are starting to fill in a bigger picture around the billionaire’s broader ambitions.
In looking at Blavatnik’s holdings, one sees the seeds of a media empire not unlike Vivendi. Under Jean-Marie Messier, Vivendi transformed from a water supplier that happened to own a French pay TV channel into a media powerhouse with stakes in telecommunications, publishing and a wide gamut of entertainment properties.
Similarly, Blavatnik’s New York holding company, Access Industries is amassing interest in companies that, if put together, add up to a media giant with investment in content creators, services that give consumers access to that content and, potentially, even the technology pipes that can deliver those services.
Access is a holding company that spans natural resources and chemicals, real estate, music, TV and telecommunications. At first, its investments might seem unrelated. They're not.
Think five years into the future. Mobile broadband access is readily available in Western countries and is becoming affordable and accessible in large, developing markets like India. Music subscription services are growing rapidly and are poised to overtake digital downloads as the largest source of revenue for the record industry. Consumers are connected, they are mobile and they want to access to entertainment.
Access could be the company that delivers that on a global basis. Blavatnik’s holdings are sprinkled into three categories that would have the pieces needed for a media empire: content, access and distribution.
First is content. Through its varied holdings, Access foresees a future of the mobile, connected consumer that accesses licensed entertainment content. Acquired in May 2011, Warner Music Group is its biggest piece of this vision. The world's third-largest music company includes a record label and music publisher as well as artist management and promotion companies (and not insignificantly, Warner Music yesterday became the first major label to license its music to Google’s new music streaming platforms).
Access also owns a substantial stake in Perform, a company traded on the London stock exchange that monetizes sports online, and has stakes in film and TV companies.
The second is access. It’s not enough to have content available – consumers demand access models that are compelling, convenient and complete. That’s where the Beats investment comes in. Blavatnik has bet that on-demand subscription music services will win big in the global marketplace. But digital marketplaces are unpredictable. There may be one or possibly two big winners out of the slew of services already on the market. "It's hard to pick winners in the segment, as history shows," says one executive involved with one of Blavatnik's companies. Blavatnik has increased his odds of picking a winner by spreading his bets across three services rather than focus on just one -- in addition to Beats, Access also has stakes in Deezer and, through Warner, Spotify as well.
Finally, these services need to be connected to consumers. Through its AINMT Holdings, Access provides 3G broadband mobile Internet access in Norway, Sweden and Denmark. Deezer and Spotify are already available in all three markets. Access is also a significant shareholder in O-Zone, a WiFi provider in India that plans to build a network of more than 50,000 Wi-Fi hotspots by 2015. Deezer and Spotify are not available in India but the large market and growing middle class present a good opportunity for subscription services that can fit locally.
If this tune sounds familiar, it’s because Messier whistled a similar melody in the late 1990s and early 2000s as he snapped up Universal Studios, Activision, Maroc Telecom, British Sky Broadcasting Group, MP3.com and others.
But here’s where Blavatnik and Messier differ. Unlike Vivendi, which quickly ran into financial trouble, Blavatnik is steeped in money. His net worth is estimated by Forbes to be $16 billion, making him the world’s 44th richest person. His deals have been financed with either cash or low-cost debt, thanks to historically low interest rates. And his spending so far have been on the modest side -- $762 million for EMI’s Parlophone business is a lot less than what it would have cost to buy the whole of EMI.
Secondly, Blavatnik may not need to fully integrate all of his holdings into one company in order to get the benefits of having them work together. Media giants sometimes stumble when they try to force “synergistic” changes among their various divisions. Instead, as a holding company, Access can nudge its companies to cut good deals with each other, avoiding all the operational headaches of merging companies.
Thirdly, Access has the luxury of being privately owned whereas Vivendi was publicly owned. Access can be patient, pursue its own timetable and work toward its long-term vision. A publicly owned company is more worried about short-term results and pleasing investors and analysts.
Could this be what the billionaire has in mind? The media-shy media mogul declined to comment for this story. But his investments in Beats, Deezer, Spotify and Warner, as well as his previous interest in buying Metro-Goldwyn-Mayer, may speak for themselves.