Universal music: The world's largest record company could be spun-off later this year
After years in the wilderness, the music industry has returned to growth — and the record companies are cashing in.
This week French conglomerate Vivendi, which owns Universal Music Group, announced their intention to spin-off UMG into its own listed entity this year — reportedly shooting for a preliminary valuation of €30bn ($36bn) for the largest record company in the world.
You spin me right round
As the largest recording company in the world, UMG's roster of labels and artists is second to none and includes Kanye West, Ariana Grande, ABBA, Elton John, Snoop Dogg, U2, Kendrick Lamar and many, many more. You can't run a successful streaming service such as Apple Music or Spotify without those, and so UMG — and the other major record companies such as Sony and Warner Music Group — are increasingly in a position to squeeze more in royalty payments from the big streaming players.
For Vivendi the timing to spin-off UMG makes a lot of sense. Record companies are enjoying a return to growth, and investors are much more likely to value UMG generously when they can buy shares directly in it, instead of as part of a conglomerate that has sprawling business interests that they might not want to invest in.
