Peter Kafka

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Sean Parker, Music Mogul? Facebook Billionaire Mulling Warner Music Bid

Sean Parker helped create Napster, which kicked off the long and steep decline of the big music labels. Soon he might own part of one.

The digital entrepreneur is considering putting his money into a consortium bidding on Warner Music Group, which put itself on the block earlier this year. Sources tell me that Parker isn’t part of the formal bid, but is aligned with a group led by investors Ron Burkle and Doug Teitelbaum.

Given that Warner’s owners are expecting to fetch $2.5 billion or more for the company, Parker’s own capital wouldn’t be material to the Burkle-Teitelbaum bid. (Burkle, a billionaire who made his first fortune in the supermarket business, invests via his Yucaipa holding company; Teitelbaum helps run hedge fund Bay Harbour Management.)

But Parker’s interest in the music company, expressed in a letter Burkle’s deal team submitted to Warner’s bankers at the beginning of the bidding process, is still very interesting. Here’s a wonderkid who made his money and reputation via bits and bytes, putting his cash — and, presumably, some of his insight — in a media business that still makes most of its money selling analog goods.

Parker famously helped found Napster in 1999, moved onto address book startup Plaxo and helped guide Facebook in its early days. That move gave him an equity stake in the company, and enough money to do whatever he wants (Forbes pegs his net worth at $1.6 billion, and that estimate may be low). Most recently he’s been working, as an adviser and investor, with Spotify, the streaming music service.

Spotify is a big deal in Europe, where it has a million paying subscribers and 7 million active users. But it has yet to land in the U.S., because it hasn’t come to term with two of the big music labels — Universal Music Group and Warner.

I’ve heard a couple people suggest that Parker is trying to buy the label in order to get that deal done. But that theory doesn’t make much sense, because there are much cheaper ways to get Warner to license its music.

Easier conclusion: Parker believes that intellectual property — in this case, Warner’s catalog — is undervalued, in part because of the digital revolution he helped usher in more than a decade ago.

In any case, Parker’s interest may end up being academic. Burkle and Teitlebaum are one of at least five bidders trying to buy all or part of Warner. The music label, which is controlled by a consortium of private equity investors, expects to make a decision on its sale in the next few weeks.

[Image via Wikipedia]