March 6, 2013 8:19 am

Billionaires back Beats’ music service

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A group that includes the billionaires Len Blavatnik and James Packer has invested in a new music subscription service being developed by Beats Electronics, the headphones company founded by Jimmy Iovine and Dr Dre, the hip-hop star.

Beats said it would spin out the subscription service – which has the working title “Daisy” – as a separate company following the $60m funding round, which brings together some of the biggest figures in music and finance.

The group includes Mr Blavatnik, who paid $3.3bn for Warner Music in 2011 and recently won an auction for Parlophone, the former EMI label; Mr Packer, son of the late Australian investor Kerry Packer; Marc Rowan, a co-founder of Apollo Global Management, the private equity firm; and Lee Bass, a Texan billionaire.

The funding round came as a Reuters report said that senior Apple executives had also held talks with Beats about a possible partnership involving the Daisy service. It is unclear if these talks will end in a deal. Beats declined to comment on the Apple meeting but a spokesperson told the Financial Times that Mr Iovine, who is also the chairman of Interscope Geffen A&M, a division of Universal Music, had a long relationship with the company.

Beats’ plans for Daisy are being followed closely in the music industry, which is banking on a new generation of subscription services boosting revenues and consumer interest in new titles. The emergence of popular services such as Spotify follows a decade of decline in the music industry, exacerbated by piracy and the shift from sales of CDs to digital distribution.

Beats recently acquired MOG, a digital music service, and hired Ian Rogers – the founder of Topspin Media, which helps acts and artists sell music and build audiences online – as chief executive of its new subscription service. Trent Reznor, the composer and Nine Inch Nails frontman, has been hired as chief creative officer.

Beats intends to launch the service later this year. “Beats has the vision, the brand, the management team and now the investor group to effectively change the expectations and experiences of a music subscription service,” said Mr Blavatnik in a statement.

Daisy represents a new direction for Beats, which has focused solely on hardware following its launch four years ago. Since then, premium-branded headphones have become a mass-market proposition, coveted by music and sports stars and generating billions of dollars in annual sales.

“Now that we are well along the way to addressing the quality of audio playback with Beats headphones and speakers, Daisy allows us to reintroduce the same magic into the process of music discovery and consumption,” said Mr Iovine in a statement.

Beats is the market leader, with 40 per cent of all premium headphone sales and close to 70 per cent of premium priced headphone sales over the Christmas period. The overall headphone market in the US rose from $1.8bn in 2011 to $2.4bn in 2012, according to NPD, the market research firm.

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