The CEO of Universal Music said the highly anticipated € 40 billion IPO of the world’s largest record company this week did not mark the peak of the music industry’s recovery through streaming , with billions of dollars in growth coming from a new wave of digital listening on devices like smart speakers, connected cars, and services like TikTok.
Sir Lucian Grainge, who is expected to pay a deal bonus of at least $ 170 million when the label behind artists such as Taylor Swift and Justin Bieber goes public in Amsterdam on Tuesday, said the list offered the opportunity to make Universal’s “new generation music business”.
“For Universal Music Group and the industry, there is so much more to come, so many opportunities,” he told The Guardian. “Digital service penetration rates in some of the larger countries have yet to reach those of more mature markets, so there is a lot of room in these key markets.
“And then when you add the growing fan listening through voice-activated speakers, connected cars, social media, games, fitness, etc., you realize why we think we’re just one. at the start of a new wave of music consumption. This wave is taking place on a variety of platforms – some of which weren’t even on the radar just a few years ago. “
Mark Mulligan, analyst at Midia Research, said about 10% of the nearly $ 22 billion in global streaming revenue in 2020 came from licensing revenue from listening on platforms such as Facebook, Instagram, TikTok, via smart speakers like Amazon’s Alexa, in games like Fortnite and Peloton, the cycling business.
“Music goes everywhere,” Mulligan said. “TV shows, games, commercials, TikTok, Peloton, there is a lot of growth on Instagram. Streaming has been like the stepping stone at the heart of the industry. He started it up and keeps the lights on. But that’s not the whole story anymore. Investors are buying music catalogs, emerging markets are showing strong growth. All of this makes the music industry attractive to investors. The industry appears to be growing.
In a note to investors last month, optimistic analysts at JP Morgan Cazenove described Universal Music as an “extraordinary and must-have asset”, adding that its high valuation of 54 billion euros would prove to be prudent. The most recent sale of a 10% stake in Universal in July to Bill Ackman’s hedge fund Pershing Square valued the company at 40 billion euros.
Universal’s performance has exploded in recent years due to the boom in digital listening. Ten years ago, as record sales continued to drop but streaming was not yet producing significant revenue, Universal made $ 4.2 billion in revenue and made a profit of $ 507 million. . This year, the company is on track to achieve nearly 8 billion euros in sales and potential profits of 1.5 billion euros.
Vivendi, the French media group controlled by Vincent Bolloré, is splitting up with 60% of Universal’s shares initially distributed to its shareholders, who can then hold or sell them. After the IPO, Vivendi, which has owned Universal since 2000, will control 10% of the company. Tencent, the Chinese technology and entertainment conglomerate, owns 20% of Universal.