Here are facts about Universal and its flotation:
FROM THE BEATLES TO BILLIE EILISH
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 (NYSE: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.
A SHIFTING MUSIC INDUSTRY
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 (NYSE:SPOT).
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.
Universal still faces competition from independent labels and start-ups looking to release music in a purely digital fashion. The company said in its listing prospectus that it expected to grow its streaming business in markets such as South Korea, Brazil, India and Russia.
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.
The company is aiming for a market capitalisation of 33 billion euros ($39 billion). No new shares are being issued.
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%.
Bollore and Tencent have agreed to consult each other on matters such as dividend policy and some aspects of the board ahead of general meetings, Universal said in its prospectus.
REVENUES AND COVID-19 IMPACT
Universal reported earnings before interest, taxes, depreciation and amortization (EBITDA) of 1.49 billion euros on sales of 7.43 billion euros in 2020. The company has 2 billion euros of net debt.
For the mid-term, Universal forecasts sales growth in the high single digits, with an EBITDA margin in the mid 20% range.
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 normalised and picked up again, with sales of merchandising that are often done at concerts the main pain point.
($1 = 0.8465 euros)