Warner Music WMG -1.43% Group Corp. is close to agreeing to buy a minority stake in Saudi billionaire Prince al-Waleed bin Talal’s Rotana Music, in a deal that would value the Mideast music company at close to $200 million, according to people familiar with the matter.
While a relatively small deal for the global music business in terms of financial consideration, an agreement would pair up one of the West’s biggest music forces with one of the Mideast’s, at a time when recorded music sales are booming. It would also give Warner more direct access to the Middle East, which promises a relatively young, affluent and internet-savvy audience.
The deal talks are in late stages and could result in board approval as early as this week, the people familiar said. A final agreement hasn’t been reached, however, and the deal could still fall apart.
The two companies plan to pool their respective artists for online distribution, according to people involved in the discussion. Warner Music is home to international stars including Ed Sheeran, Cardi B and Madonna. It owns labels including Atlantic, Elektra and its flagship Warner Records, as well as Warner Chappell Music, the world’s third-largest music publisher.
Rotana Music, meanwhile, is the Arab world’s largest record label with regional stars such as Syrian singer George Wassouf. The two companies plan to produce cross-cultural content, as well, if a deal is consummated, people familiar with the plans said.
Global recorded-music revenue has been growing strongly in recent years, boosted by the popularity of streaming services like Spotify and Apple Music. Streaming rescued the industry from more than a decade of decline at the hands of online piracy and a collapse in CD sales.
Rotana Music is a subsidiary of Rotana Media Group, the entertainment conglomerate owned by Prince al-Waleed, a longtime investor in major Western companies, like the Four Seasons hotel chain and Twitter Inc. In recent years, his standing inside Saudi Arabia appeared to wane for a time, threatening his investment empire, including his conglomerate Kingdom Holding Co. He was detained in 2017 as part of what Saudi officials described as a crackdown on alleged corruption. About two months later, he was released after reaching an undisclosed settlement with authorities, and he then won back favor inside the Saudi royal court, The Wall Street Journal previously reported.
A deal with Warner Music would be his highest profile transaction since that rehabilitation. The Journal previously reported Prince al-Waleed had held preliminary talks as early as 2018 about a possible Warner investment in Rotana Media Group, the parent of Rotana Music. Those talks narrowed to Rotana Music, the Journal subsequently reported.
Warner Music listed on the Nasdaq stock exchange last year, but billionaire Len Blavatnik’s Access Industries Inc. holds voting control.
The Middle East, and Saudi Arabia in particular, brings a potentially large, untapped revenue base for growth for content providers like Warner Music. The oil rich market of Saudi Arabia is home to almost 35 million, a demographic skewing young and relatively affluent.
The region is also highly connected. About 72% of Saudis are social media users—on par with the U.S., at 71%, according to German online database Statista.
Corrections & Amplifications
An earlier version of this article incorrectly spelled billionaire Len Blavatnik’s last name as Blavatnick in one instance.
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Appeared in the January 27, 2021, print edition as ‘Warner and al-Waleed Close In on Music Deal.’
