By Adedamola Agboola
- Vivendi is selling 50% of Universal Music Group
- 2018 revenues for UMG have amounted to more then $3B
Universal Music Group’s (UMG) parent company Vivendi (VIV.PA -0.41%) is putting half of it up for sale. The music division’s value has soared recently on booming streaming revenues. Could this be an acquisition target for struggling music streaming services like Jay-Z’s Tidal company?
Why This Matters: In 2015, Jay Z made a business move into the music streaming industry with the $56 million acquisition of Tidal from parent company Aspiro. The company burned through three CEO’s in its first year and has been plagued with lingering questions about its subscriber numbers. However, this didn’t stop Sprint (S +9.96%) from paying $200 million for a third of the company, at a valuation of $600 million.
With cash to spend, and the backing of a telecommunications company, the time could be right for Jay-Z to finally take ownership of hip hop culture with the purchase of a part of Universal Music Group. Their roster is pretty deep including heavy hitters like Rihanna, Kendrick Lamar, Drake and Migos.
The UMG family of labels include Capitol Music Group, Island Records, and Def Jam just to name a few. Revenues for UMG during the first half of 2018 amounted to more than $3 billion, led by a 34.3% spike in streaming revenues.
The success of streaming has attracted lots of new investment, and longtime owners have seen an opportunity to cash out. Earlier this year, in one of the biggest music deals ever Sony (SNE -0.91%) bumped up its ownership to nearly 90% of the EMI Music Publishing catalog, the sale was valued at $4.75B.
Since the music streaming industry first launched with Napster/Rhapsody, profits have been hard to come by for many platforms, mostly because of royalties that has to be paid to music publishers who ensure artists are paid when they are used commercially. The world’s largest music publisher happens to be Universal Music Group, which has just put half of itself on the market.
Situational Awareness: It is worth noting that while the music industry’s annual global recorded revenues between 1999 and 2014 declined from an estimated $27 billion, music publishers, specifically Universal Music Group, thrived. By the end of 2015, the music group was getting over half of its digital revenues from streaming with payments from the likes of Pandora, YouTube and you guessed it, Tidal.
CBx Vibe: “Run it Up” Jay Lifted