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February 19, 2008
Securitization on hold; licensing moving forward
Speaking, as we have been over the past few weeks & months, of turmoil in the financial markets, here is an example of why we need efforts to calm the jittery markets. While the monetization of an intangible asset may have boosted a presidential candidate (see earlier posting), at least one intangible securitization deal is on hold. Last year, when the private equity group Terra Firma bought out the record company EMI everyone expected that the EMI music catalogue would be securitized. Terra Firma would sell bonds backed by the future royalty rights in order to pay for the acquisition of EMI. Earlier this year, however, the Time of London reported that this plan is on hold (see Trouble at EMI - Times Online). The reason: a frozen market.
However, last week EMI announced it is going ahead with another monetization option: licensing. As reporting in the Telegraph
EMI has struck a deal with London-based Ricall, which is poised to launch several EMI websites around the world allowing music-hunters to license its music much more easily.This is a consumer not buying a song; this is selling the rights to use a song to advertisers, TV producers and computer games makers. It is exactly the type of revenues which would have been used to back the bonds used in the securitization.
No, I am not advocating that we need to get the securitization market back on track in order to finance more leveraged buy outs. I am advocating that we need to get the securitization market back on track to open up a whole new way of financing innovation and economic transformation.
In large part, we also have to set new standards (see the Buffett posting earlier today) so that ordinary investors feel safe to get back into the water. Until we do that, intangible securitization will be a high-end investor’s game with the vast majority of investors (and companies seeking funds) locked out.
More on this later when we release our next Athena working paper: Monetization of Intangible Assets.
Posted by Ken Jarboe at February 19, 2008 1:33 PM
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