Wednesday, September 15, 2021

Universal To List As Music Streaming Picks Up

Vivendi, the French media conglomerate, is spinning off Universal Music Group, the largest part of its business and the label behind singers such as Taylor Swift, in a listing on the Euronext stock exchange in Amsterdam, reports Reuters.

Here are facts about Universal and its flotation:

  • By revenue, Universal Music Group or UMG is the largest of the "big three" record labels. It represents a huge range of musicians and song catalogs, from Billie Eilish to The Rolling Stones and Bob Dylan.
  • Major competitors include Sony Music, part of Sony, and Warner Music Group. The "big three" are estimated to account for just under 60% of global sales generated by music rights from their catalogs.

Universal started out in the early 1930s when British label Decca Records set up a U.S. branch, which later merged with other music companies. In 2011 Universal swooped on EMI's recorded music business for $1.9 billion, giving it access to catalogs for The Beatles, Radiohead and Pink Floyd.

Universal is benefiting from a boom in streaming revenues, with young music fans in particular relying on their smartphones to listen to songs. It makes money from subscription services through deals with the likes of Spotify.

It also has deals in place with ad-based social media companies such as TikTok and YouTube to compensate artists for the use of their songs in "user-generated content" on those platforms - though the terms of those deals are not public.

While digital piracy cut into music sales in the first decade of the century, it is now pushing into areas such as social media platforms which use its music, such as TikTok, as well as fitness applications and video games.

Vivendi's investors, including its controlling shareholder Vincent Bollore, are due to receive 60% of the shares of the company once Universal lists in Amsterdam, with trading due to start on Sept. 21.

Vivendi will continue to hold 10% of Universal after the transaction. A consortium led by China's Tencent will have 20% and billionaire hedge fund investor William Ackman's Pershing Square Holdings will hold 10%.

Universal said in its prospectus that the COVID-19 pandemic initially hit some streaming revenues, including when people told to stay at home stopped listening to music at the gym or on long commutes. Universal said this had now normalized and picked up again, with sales of merchandising that are often done at concerts the main pain point.

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