As Vivendi lists Universal Music, the streaming boom’s end is near

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As subscriptions approach saturation level, label-owners decide it’s time to sell


FROM “GOLD DIGGER” to “Money, Money, Money”, Vivendi’s shareholders have lots of tunes to whistle as they stroll to the bank. On February 13th the French conglomerate announced plans to spin off Universal Music Group, its most valuable asset and the world’s largest record label. Vivendi and Tencent, Universal’s Chinese co-owner, will each retain a 20% stake, with the rest distributed among Vivendi’s shareholders.

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Universal, which owns the rights to those Kanye and ABBA classics, among other discographies, will be the second big label to go public. Warner Music Group did so last June. Its value has since risen by 28%, to $20bn. Vivendi expects Universal’s to exceed €30bn ($36bn).

Eight years ago, when Vivendi turned down €7bn for Universal from SoftBank, a Japanese group, the offer looked generous. The recorded-music industry was on its knees, revenues cut almost in half by online piracy. Now the internet is powering a revival, as streamers like Spotify bring in subscribers. Universal posted a 5% rise in revenues, year on year, in the first nine months of 2020. Industry sales should surpass their peak in 1999 within three years.

By going solo Universal will shed the “conglomerate discount” that weighs down Vivendi’s shares, as would-be investors in the music business are put off by its parent’s TV, advertising, telecoms and other interests. The music business is thirsty for capital. An executive at another label reports bidding wars in which artists offered $200,000 to sign in the morning command $500,000 by day’s end. Vivendi, for its part, is looking at new media acquisitions, many of which are going cheap.

Yet the listing also hints that recorded music’s comeback may be nearing a crescendo. Double-digit revenue growth in recent years will drop to about 3% a year by 2024, forecasts Bernstein, a broker. Three in five American homes now have a music-streaming subscription, up from one in five in 2016. The share won’t go much higher. Artists, as well as platforms like TikTok, are pressing labels for a better deal on royalties. “There’s a phrase in French: ‘The trees don’t grow right up to the sky’,” says Simon Gillham, who sits on Vivendi’s management board. “There’s a right time to cash in on the value you’ve created.”

This article appeared in the Business section of the print edition under the headline “Musical shares”

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