The debut of Universal Music, the world’s first record company, on the Amsterdam Stock Exchange has placed the markets in the spotlight on a sector that the rise of streaming has allowed it to rise from its ashes and get closer to the income it recorded two decades ago. Its owner, Vivendi, has made gold with the signature that brings together Lady Gaga, Taylor Swift, Rihanna o Kanye West, among other artists. What is already the largest stock market exit in Europe so far this year has allowed its great rival, the American Warner Music, reach new historical highs on the stock market (it already exceeds 18,942 million euros in capitalization, slightly less than half of the more than 42,200 million that Universal has reached after having spent its first days on the market).
The Covid-19 crisis has given a boost to the business of these companies. Worldwide revenue from recorded music totaled $ 21 billion last year, of which streaming accounted for 62%, according to the International Federation of the Phonographic Industry (IFPI). Industry revenue grew rapidly by 7.4% and streaming by 18.5%. The growth of this niche “comes more and more from emerging markets, at a lower price, while the sources of income are extended to video games, fitness applications and social networks”, they point out from eToro.
Last year, in full global confinement, Universal managed to invoice 7,432 million euros, 3.8% more than the previous year, which allowed it to shoot its net profit by 40.5% to 1,366 million euros. In the case of the North American Warner, your income stagnated in the fiscal year that ended on September 30 of that same year at 4,460 million dollars (around 3,801 million euros). The company is currently owned by the group Access Industries, founded by the millionaire investor of Ukrainian origin Leonard Blavatnik, who acquired it for $ 3 billion in 2011 and has since seen its value multiply by more than six. Currently, it has among its labels artists such as Madonna, Coldplay, Itzy, Ed Sheeran or Luis Miguel, among others.
After having placed 60% of Universal’s capital among its shareholders with the IPO, Vivendi still owns just over 10% of the label that, until the operation became effective, represented 46% of its income. Previously, the company that has the French magnate Vicent Bolloré behind it had last year sold another 10% of the record company to the technology giant Tencent for 3,000 million euros, in an operation that allowed it to collect liquidity to continue with its plan to reorganize the map of the media at the European level.
Thus, the Chinese company owns a total of 20% of the capital of the record company, which also has the hedge fund in its shareholding Pershing Square Holdings, of the billionaire William Ackman, who holds another 10%. It so happens that Tencent itself also acquired in the midst of a pandemic a 10.4% stake in Class A shares of Warner Music Group for a value of 200 million dollars or 170.44 million euros at the current exchange rate.
The giant led by Ma Huateng is the leading online music entertainment platform in China (where it controls, among others, the listed company Kuaishou, TikTok’s rival ByteDance). The technology company currently operates a total of three streaming services, an independent karaoke service and some other music companies, in addition to representing the global catalogs of Universal, Warner and Sony in the Asian giant. In reality, Universal’s leadership in the recording landscape is evident, since it controls about 40% of the music industry.
Now, analysts agree that the more optimistic outlook for the record industry also gives wings to other internet giants such as Spotify (capitalizes at $ 45.04 billion), which together with Apple Music pays two-thirds of sales to record labels. At the same time, they boost the business of other players in the sector such as the concert promoter and owner of Ticketmaster, Live Nation ($ 20.13 billion market value), among other companies.
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