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Dimensional Buys DreamWorks’ Music –

Dimensional Associates LLC, the private equity arm of New York-based JDS Capital Management Inc., earlier this month acquired the assets of DreamWorks Music Publishing, a unit of Glendale, Calif.-based film producer DreamWorks SKG. A purchase price of between $40 million and $50 million has been reported, but no financial terms of the transaction were disclosed.

Through the deal, Dimensional acquired the DreamWorks music catalogue, which holds the copyrights to works by older groups and songwriters such as The Byrds, John Denver, Stevie Ray Vaughan and Ricki Lee Jones as well as newer acts including Jimmy Eat World, Lifehouse, Alien Ant Farm and Papa Roach. Music created for motion pictures and television programs that were produced by DreamWorks’ affiliated companies was not included in the sale.

Following this divestiture, Dreamworks SKG-which was founded 11 years ago by film giant Steven Spielberg, former Walt Disney Co. film chief Jeffrey Katzenberg and music executive David Geffen-is now completely out of the music business. Last month, the company sold its recorded music business, DreamWorks Records, to Universal Music Group for $100 million. The slimmed-down DreamWorks plans to refocus on its commitment to the film industry.

JDS is holding discussions with DreamWorks to decide whether the music catalogue’s current management will stay aboard or not.

Betting on a major resurgence in the music industry in the coming years, the private equity group’s acquisition of the DreamWorks unit-now called Dimensional Music Publishing-is but the latest in its year-long spree of purchases in the music space. Other companies that recently fell into Dimensional’s portfolio include The Orchard, a digital distributor of independent music that spans more than 50 countries; eMusic, an online MP3 music retailer; and eMusicLive, a unit of eMusic that records and distributes live concerts in CD and MP3 formats.

“We’re very bullish on the music industry as a whole,” said JDS President Danny Stein. “Right now there is a lot of confusion in the music market and we see it as opportunity to take advantage and buy at relatively low valuations.”

The confusion, Stein said, is the result of a significant decline in the music industry’s revenue over a short period of time. “The music industry has shrunk from being approximately $40 billion large just four years ago to a present value of about $28 billion. Any time an industry loses almost one-third of its value in four years, people are going to be confused, but we think that the panic is a bit overblown. We believe it’s just bunch of people who don’t know which direction the industry is going.”

JDS is betting that the industry is about to blow up in online and digital sales.

With the DreamWorks catalogue of approximately 7,000 copyrighted songs, Dimensional is under the impression that once the industry-wide lull shakes itself out, the royalties will come showering in from avenues that-just a couple of years ago-were little known by the music industry. “We think there are going to be lots of new sale channels that will open up such as ring tones and video games and international opportunities,” Stein said.

Dimensional also earns royalties anytime the catalogue’s songs are used in commercials, films and television programs; or are covered by another band, appear in an album or are sold as a part of an album such as in compellations, soundtracks, and greatest hits releases.

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