GEMA gets a foothold in digital distribution by acquiring a majority stake in Zebralution

By Emmanuel Legrand

 

In what represents a major shift in strategy, Germany's performance rights organisation GEMA has acquired a majority stake in Berlin-based digital distribution and rights management company Zebralution. GEMA said the acquisition will allow the PRO to "expand its performance portfolio and continue to develop its digital services and technologies."

  Zebralution will continue to operate as an independent business under the GEMA umbrella. It is understood that the investment in Zebralution, the details of which have not been disclosed, has been made through a bank loan and not by using the cash reserves of the society.

  Founded in 2004, Zebralution claims to be the first digital distributor for independent labels in Europe with a portfolio of more than 1,000 labels and audio book publishers from all over the world. Zebralution co-founders Kurt Thielen, Christof Ellinghaus, Sascha Lazimbat and Konrad von Löhneysen, will remain shareholders. Thielen and Lazimbat will continue to lead the company as managing directors.

 

Support creators

 

  “By taking a stake in Zebralution, GEMA has made a targeted investment that secures its future viability,” says GEMA CEO Harald Heker. “Through Zebralution, we will also be able to support our members in the digital distribution of their musical works. GEMA’s relevance in the digital music market will thus be significantly increased.”

 

  Heker explained that the new development is part of GEMA's international development strategy which includes the joint-venture ICE with the UK's PRS for Music and Sweden's STIM. With Zebralution, GEMA expands its range of digital services, and also has a new platform for growth. “In Zebralution, we have the right partner at our side to expand GEMA’s digital reach and unlock new income sources for our members over the long term,” said Heker. “In future, musicians will be able to release their music to a wide range of digital music providers through GEMA and Zebralution.”

  This is not the first investment of a music rights society in the digital world. Canada's SOCAN for example has acquired rights management tools MediaNet and Audiam in recent years. However, it is the first time a rights society partners with a digital distribution company. 

 

Raising questions

 

  A German music publisher and former GEMA board member, told Creative Industries Newsletter that the deal has been negotiated in secrecy with little communication between GEMA's management and its members. "We were not aware GEMA was going to do a deal," said the source. "They did it because they see it becoming part of their future activities. Obviously, in the past, GEMA was always very defensive with digital issues, but they are moving forward through ICE and now this deal.

  "Zebralution is the next step in becoming an active partner in this game. They are aggreagtors, they do not own rights, so GEMA's intention is to look at possibilities for their members to distribute music directly in the digital world by using that channel. In addition, they will have access to monitoring technology and accounting technologies."

 

  The music publisher added that the acquisition also gives GEMA access to "a wider range of data sets and get into neighbouring rights," but GEMA's new entrepreneurial raises a few questions nonetheless: "By becoming owner of a commercial company that needs to make profit you are in the for-profit business, yet CMOs cannot make profits. So what happens with the profits, and how do you finance all this expansion?"