Blavatnik leads $60M investment in Daisy

Daisy, Beats Electronics LLC's recently acquired and renamed digital music service, has garnered $60 million in new capital, a move that reflects both the upheaval among musical streams and their continued seductiveness.

With the investment, Daisy has been spun out as a separate company, the company said Wednesday, March 6, announcing the deal. A relaunch is scheduled late this year.
Fast-evolving music mogul Len Blavatnik, though his Access Industries Inc. industrial and investment group, is leading the funding. Other investors include Marc Rowen, senior managing director of alternative investment stalwart Apollo Global Management LLC; James Packer, the Australian businessman and budding casino companies player; and what are described as "affiliates" of Lee M. Bass, the Texas oil and gas billionaire.
Access's lead is especially noteworthy. Blavatnik, born in the Soviet Union and now an American citizen, made his fortune in chemicals and minerals, but is rapidly changing focus to music. He is best known in the music world for his $3.3 billion acquisition through Access of Warner Music Group Corp. in 2011. Last year, he also led a €100 million ($129.9 million) funding round of the French digital music service Deezer, which operates in most of the world except the United States. So now, Blavatnik's financial fingers have global reach when it comes to digital music services.
In Wednesday's announcement, there is not even a hint that Santa Monica, Calif.-based Daisy and Deezer could mate. However, even a combination at the funding level could pose added difficulties for Spotify Ltd., which now leads the pack among such services. It could also prove another headache for the Internet radio services that also compete for the ears of listeners, notably Pandora Media Inc.
Add to this persistent buzz that both Apple Inc. and Google Inc., through its YouTube division, will launch their own digital streaming services.
The problem for all these services is the basic theme in the music industry this past decade: How to make money? Spotify, for example, in 2011, notched revenue of $245 million, but lost $59 million. It claims 20 million subscribers, but only 5 million of these actually pay anything for the service and even then, it's difficult to ascertain just how much.
Spotify hasn't revealed 2012 figures, but analysts believe revenue doubled, as did losses.
Known for making and marketing brightly colored headsets, Beats was co-founded by rapper/producer Dr. Dre and Jimmy Iovine, the hip-hop impresario and chairman of record company Interscope-Geffen-A&M. Last July, Beats announced it had bought Mog, one of many struggling music services. While Beats didn't disclose financial terms, several industry insiders said the price tag was substantially less than the $25 million venture capital had invested.
In January, Beats announced with great fanfare that it was bringing on two big names for the service it was rechristening under the "internal code name" Daisy. Ian Rogers, the CEO of digital music marketer Topspin Media LLC and former head of Yahoo! Inc.'s music division, now heads up Daisy. Its creative director is Indie musician Trent Reznor, the leader of Nine Inch Nails and, more recently, a successful film composer.
"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," Blavatnik said in the statement.
Investment bank Moelis & Co. served as exclusive financial adviser and placement agent. Los Angeles-based bankers Navid Mahmoodzadegan and Carlos Jimenez led the team.
Kevin Masuda and David Thompson, Los Angeles-based partners at Munger Tolles & Olson LLP, represented Daisy for the investment.