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Vivendi boss cites $40 billion valuation of Universal Music

By | Published on Monday 20 November 2017

Universal Music

The possible valuation of Universal Music was a talking point once again on Friday as the boss of its parent company Vivendi – Arnaud de Puyfontaine – fielded questions at a conference in Barcelona. He told his audience that he’d recently seen one estimate top $40 billion.

According to Reuters, de Puyfontaine conceded that that number is “higher than the highest one that is currently expressed by the markets” but, when asked if he reckoned the Universal Music Group was worth such a high figure, he – perhaps unsurprisingly – answered “yes”.

That figure is definitely considerably higher than a valuation that was doing the rounds earlier this year, when the Universal Music business was valued at 20 billion euros, or about $23.5 billion. Some analysts reckon that even that figure is slightly higher than the actual worth of Vivendi’s music assets, which includes the Universal labels, publishing catalogues, the Bravado merch enterprise, and an assortment of other music-related interests.

There has been speculation at various points that Vivendi might float a slice of Universal Music, hence the repeated interest in its possible value. The top guard at the French conglom insist that a Universal Music IPO is not currently on the agenda, though usually accompany that with a “never say never” get out, admitting a share sale is always an option.

Of course, it’s not really in Vivendi’s interest to rush any IPO, given the renewed optimism in the recorded music business fuelled by the streaming boom, optimism that you could arguably see as being confirmed by rising revenues and profits at Universal. To that end, perhaps the only way is up in terms of the music major’s valuation, meaning Vivendi could make much more from any share sale in a few years time.

Though, of course, opinion is divided on quite how optimistic you should be about Universal Music’s future. In two ways. First, how optimistic are you about the future of the streaming market? Will current growth levels be sustained for the foreseeable future, ensuring ever bigger royalty cheques for big rights owners like Universal, and eventually allowing the key streaming services, mainly Spotify and Apple Music, to go into profit?

Secondly, even if you are optimistic about the future of streaming, will Universal continue to reap the rewards at its current level? As the record companies’ monthly cheques from the streaming services continue to increase, pressure will only mount on the labels to allow a bigger share of digital income to go to artists, songwriters and publishers. And while Universal is a major music publisher too, publishing deals always skew in the songwriter’s favour, whereas major label deals usually provide the bigger share to the record company.

For new music, the rise of the label services sector offers artists more options, which might ultimately put pressure on the more conventional labels to agree to deals that are more favourable to talent. While on catalogue, an increasingly organised artist community may yet achieve copyright reform that forces heritage deals that are so totally skewed in the favour of the old labels to be reviewed. Plus the potential impact of the reversion right under American copyright law is yet to be fully realised.

So, plenty of variables. Which is presumably why valuations vary so significantly. Though, in the short term at least, there should be enough optimism in the future of Universal Music to keep Vivendi shareholders happy whenever other areas of the group don’t perform as well as investors would like.