After lots of rumbles and rumors, a seismic change could be on the horizon for the major labels. Vivendi appears to be moving ahead with plans to sell up to a 50% stake in Universal Music Group by the end of 2019. UMG was valued at €29 billion ($33.25 billion) by Deutsche Bank at the start of the year, while Morgan Stanley said the label could be worthy between $29 billion and $42 billion.
If this sale does happen, it will cause a ripple effect across the music industry. First, especially if UMG fetches a high valuation, it could set off a chain of other deals for labels. Music has been commanding lots of market attention, and for the biggest of the big three to go on sale might mean additional shakeups within the industry.
Second is the question of who might have deep enough pockets to acquire ownership of UMG. Tencent Music Entertainment recently moved west with an IPO, and its previous parent company Tencent might be interested in re-entering the space. Alibaba, another Chinese conglomerate, could be a potential suitor, while any of the major U.S. tech firms like Google, Amazon, Apple, or Facebook could have reasons to bring a music business into their stables. Liberty Media will certainly be following the negotiations, as its CEO is on record expressing interest in UMG and the company already expanded its audio holdings with last year’s Sirius XM-Pandora acquisition.
The third big question will be how new ownership might impact streaming services. Companies like Spotify are mainly accessing music catalogs through direct deals. A new owner with a foot in online audio might gain a considerable royalty-cost advantage, potentially disrupting what is now a fairly level playing field. There must be some nervousness among the top players of streaming as this major label goes on the market.