Tencent Purchases a Stake in the Universal Music Group
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On December 31st, a consortium led by Tencent, the large Chinese digital empire, announced it was acquiring 10% of Universal Music Group, a subsidiary of Vivendi, a French business, for €3 bilionn ($ 3.4 bn).
The offer provides Tencent a stake in the multimedia giant, Universal.
Universal’s catalog includes music from such top-tier artists as ABBA, Bob Marley, Jay-Z and Taylor Swift.
What Makes Tencent’s Purchase Distinct?
Tencent’s acquisition values Universal at around EUR30bn. That is fascinating for two reasons.
The primary factor is that Vivendi’s complete market capitalization is just €31.5 bn.
However, Universal is merely the largest component of a corporation that additionally consists of Canal+, a French pay-TV channel, and Havas, a PR-and-advertising firm.
Both companies generate earnings of thousands of countless euros, and also Vivendi is just lightly indebted.
The second factor is that it exhibits the recording industry’s impressive recovery over the past few years.
The International Federation of the Phonographic Industry, a trade body, believes that sales of recorded music were $23.9 bn in 2001.
By 2014, that figure dramatically decreased 40%, to $14.3 bn. The industry laid much of the blame on piracy fueled by the internet.
Streaming has led to a recording industry comeback
Today, however, the internet has developed to become an ally to the music sector.
Music-streaming platforms like Spotify, a Swedish business, and also Deezer, a French company, have actually outcompeted the pirates with a “on-demand” go-anywhere flexibility.
This led rise to access such platforms via smartphones as well as the companies offering subscription-based pricing.
For $9.99 a month, Spotify users obtain accessibility to more than 50 million tracks (true hoarders can pay nothing, if they are prepared to bear with adverts).
High quantities of users are offset by low cost.
Spotify boasts over 100 million paid subscribers, which assisted them accomplishing an assessment of $27bn in April.
It has additionally assisted to turn around the decrease in music-industry income, which is up 34% from the 2014 nadir.
Streaming Competition
The streaming market is extremely concentrated.
Spotify and Apple Music account for over fifty percent of the streaming market share.
However, a lot of companies are attempting their luck, including Google, Amazon and also Tencent itself, whose music-streaming subsidiary has around 35 million paying customers in China.
The most up to date participant is ByteDance, best-known for developing TikTok, a trendy social-media application.
Resso, its streaming solution, was released in India and also Indonesia last month.
Tencent increases its market share
That thrill of brand-new entrants will certainly bring new clients, assisting the market expand.
It will also increase firms, like Universal, that regulate the music that streaming companies have to certify.
Universal’s profits expanded by 24% in 2015. Tencent’s acquisition for that reason resembles an effort to profit from both sides of the industry.
It additionally fits with Tencent’s preference for purchasing various other companies, as well as with its expanding visibility in the Western entertainment industry.
The firm is best recognized for WeChat, a multi-purpose chat, settlement and social media sites app with over a billion individuals.
Tencent also has a significant stake in gaming and film
But it has stakes in hundreds of smaller sized firms. It is the world’s most significant video-game business.
Profits from gaming represented around two-fifths of its 2018 overall of 313bn Yen ($47bn).
It has Riot Games, the manufacturers of “League of Legends”, an e-sports title whose greatest matches attract 10s of millions of customers.
It also has a 40% share in Epic Games, an American firm whose offerings consist of “Fortnite”, a popular on the internet shooter.
Epic Games was valued at virtually $15bn in 2018.
Tencent Music Entertainment Group, the company’s streaming subsidiary, was listed on New York’s stock market in 2018.
Its film-production firm was associted with movies such as “Wonder Woman” and also “Terminator: Dark Fate”, the 6th installment in the “Terminator” franchise.
The Universal offer may furthermore not be the end of the story.
Vivendi has actually given Tencent the option to double its risk at the very same rate, as well as has actually hinted that it may sell a lot more of Universal to the Chinese titan in future.
Will Tencent be back?
THE FIRST ICON AGENCY LLC is a multimedia entertainment company that produces and publishes content in the music, sports and fitness industries. First Icon provides services in artist bookings, representation, music administration, digital marketing and promotions and playlist curation/placement. Based in New York City, The First Icon Agency takes a global approach in producing our content and representing our talent. It's where we developed the motto, "This is the place where innovation speaks for itself". #innovationspeaks