August 6, 2021

Universal Music Group goes solo

It’s official. Universal Music Group (UMG) announced that he will become a soloist and will leave the French giant Vivendi. On Tuesday, June 22, investors from the telecommunications conglomerate appeared online – as if it had been a virtual concert – and applauded the separation of the record company to embark on a new solo adventure. The exit of the band implies that UMG, one of the three main record companies in the world, will debut on the stock market Euronext from Amsterdam next September with an initial valuation of $ 42 billion. The news passed without much noise and somewhat unnoticed in the music press; it was the business press that reported the details of the operation.

Universal Music is, along with Sony Music Y Warner Music, one of the three largest record companies in the world. It owns the signatures Def Jam Recordings, Decca, Island, Motown, Deutsche Grammophon, Interscope, Geffen, A&M Records, Polydor, EMI, Capitol, Fiction, Verve. It has names like Taylor Swift, Elton John, Kendrick Lamar, Abba, Metallica, Bob Dylan, The Beatles, Nirvana, Ariana Great, Prince, Iggy Pop, Pearl Jam, Andrea Boccelli, Billie Eillish, The Rolling Stones, Jay-Z, Cher, Madonna and a long list more. It has operations in more than 60 countries around the planet.

The debut of Universal Music Group in the stock market it also implies that there will be a reorganization of the structure within the record company that participates with 30% of all music sales in the world. In December 2020, the Chinese telecommunications giant Tencent agreed with UMG to increase its stake to 20% in the group in an operation of about 34,000 million dollars. At the same time, the Pershing Square fund began a negotiation to also enter the business. And last February the record company confirmed that it would begin to study its IPO in Amsterdam since it has been one of its historic homes.

Bill Ackman, the investor behind the fund Pershing Square Tontine Holdings (PSTH), who acquired his stake for about $ 4 billion and will own 10% of the company, has emotional ties with Universal Music because of a Sting record he bought and because the record company oversees his grandfather’s catalog, composer Herman Ackman. “You need food and water to live, but music comes later,” Ackman said during his presentation of why he was looking to acquire a stake in an industry that has seen a difficult couple of decades.

Universal Music’s operations recorded revenues of $ 7.432 million in 2020 and even with the pandemic, the record company recorded an increase in its first-quarter revenue. We cannot forget that last year he acquired the entire catalog of 600 songs by Bob Dylan for about $ 300 million, one of the most lucrative deals in recent years in the industry. The bleak outlook has forced artists to seek these deals with record labels to try to survive the lack of concerts and the terrible royalties that streaming platforms offer. The trend seems to indicate that the major record companies will continue to seek to bet on the already established artist catalogs, also following in the footsteps of the fund Hipgnosis which has established itself in this field to manage these precious golden eggs.

The launch of Universal Music Group the market indicates that, just like when they release a solo artist, investors are betting that there will be a good deal with results for almost everyone involved. And although historically artists always lose out, here it is not clear where the strength of this great label will be in the coming years. In the future, the bet is that the machine continues to be successful for many years.

Operations coordinator of El Economista online