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U.K. digital rights firm nets $80 million investment

Magex, a software start-up that provides secure distribution of digital media, wants to work its magic in the United States.

A U.K. software start-up that provides secure distribution of digital media wants to work its magic in the United States.

Magex, a digital rights management (DRM) company that also provides secure payment services, said today that it closed $80 million in a private equity deal, one of the largest of its kind in Europe to date. Backers included Seagram-owned entertainment heavyweight Universal Music Group.

DRM is a hot niche for start-ups as major media companies begin setting aside piracy fears to take advantage of new distribution channels.

But according to Magex CEO Peter Beverley, media companies have been more aggressive in exploring online opportunities in the United States than in Europe.

Magex executives said the company is poised to dramatically increase its presence in the United States with the help of today's funding.

"We are one of the largest companies in this space in Europe, but the market is strongly U.S.-biased," Beverley said in an interview. "Fifty percent of the world's online population is in the U.S."

Magex manages digital commerce for Universal and RioPort, both of which are now investors. Also investing in the company today was InterTrust, which provides the DRM software employed by Magex.

According to Beverley, Magex plans to open an office on the West Coast and is staffing its New York City office in a bid to raise its profile.

Competition for DRM companies is heating up.

Last month, "Big Five" record label EMI Recorded Music signed Supertracks to manage digital distribution of its catalog--a contract that could become even more lucrative in the wake of Time Warner's pending acquisition of the company.

Sony Music has a licensing deal with Digital On-Demand (DOD) to deliver much of its content to retailers via DOD's proprietary, high-speed "Red Dot Network," which is accessed through retail store kiosks.

Supertracks chief operating officer Pete O'Dell said he welcomed today's Magex investment as a further sign of strength in the industry. He added that he believes both Europe and the United States offer compelling markets for DRM.

"You could argue the bandwidth is rolling out faster in the U.S.," he said. "But Europe is sort of ahead of the U.S. in terms of cultural acceptance of DRM."