Warner and Universal are looking to capitalize on the music industry's growth, which has been fueled by streaming services like Spotify and Apple Music
Those are the kind of numbers that might give investors pause. The last time the public had the chance to take a risk on music, things didn’t turn out so well: WMG, after it separated from parent Time Warner, went public in 2004 at $17 a share. When billionaire Len Blavatnik took the business private through his Access Industries in 2011, heBut times have changed.
“The reality is that people get more of a premium in the public markets, and more liquidity,” says Robb McDaniels, who now runs Beatport after stints including one at the helm of Universal-backed distributor INGrooves. “In the music business, you had this lumpiness around whether something was going to be a hit or not. Now you’ve got this steady cash flow from streaming, and even if it slows down, you’ve got predictable growth. That’s what Wall Street and Main Street like.
UMG, now the largest music group with a 31% global market share, had revenue of more than 8 billion euros in the first three quarters of 2019, a 14% increase over 2018. WMG had revenue of $4.5 billion in 2019. Both companies, having scooped up assets of the companies that failed in the downturn, have more revenue than they did at the industry’s peak.
Just days after WMG announced its plans, UMG parent Vivendi, a French media conglomerate, told investors it’s negotiating the sale of another 10% stake in Universal, with plans for an initial stock offering by 2023. Five years ago, Vivendi rejected calls from the American hedge fund P. Schoenfeld Asset Management’s to sell off the music company and use the proceeds to boost cash returns. It similarly spurned an $8.5 billion offer from SoftBank in 2013.
WMG, the half-century-old company that discovered such artists as Led Zeppelin and Aretha Franklin, and now boasts such acts as Ed Sheeran, Bruno Mars and Lizzo, is now the industry’s third-largest company and has seen 12% annual growth since 2017. It will head into its IPO delivering profits, a scarce commodity the first time around. Last year WMG reported net income of $258 million in 2019. In 2010, it was deep in the red.
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