For a company built on success, Universal Music Group’s debut as a public company this week will be its biggest release.
With UMG’s share price surging 39% on the first day of trading on Euronext Amsterdam, the music giant was valued at US $ 53 billion, a blockbuster that makes the music industry appear as a professional setup, at best. and pandemic-proof, with a bright future. And with it, some people get really, really rich.
Perception is important. Good timing is essential. And history can tell us.
The Universal IPO cannot be properly valued without understanding what came before it and how the worst-case scenario engulfed one of its rivals.
Cast your mind back 10 years, and where you have been in life. Maybe a little lighter (in body and richness). Maybe partying a little more, happier, lost, wide-eyed, confused. Naive.
Now, consider the music industry 10 years ago.
Yes, the industry was celebrating more. It was certainly lighter. Lost, confused. Naive.
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Although digital is gaining traction, mainly in the form of the now almost extinct download format, the total global market continued to decline for several years in 2011, at a rate of 3% year-on-year, according to IFPI.
Ten years ago, a small single-digit drop was seen as a near accident and almost cause for celebration.
Last week, the US recorded music industry, by far the largest market on the planet, recorded 27% year-over-year gains, thanks to streaming.
The recorded music industry 10 years ago was sick. Some thought it was terminal, except for a miracle.
Cast your mind 10 years back, and the death of NDE. Depending on who you spoke to, the former great British music major was the smallest of the music majors, or the biggest indie on the planet, with a roster that might make you cry.
Despite controlling the catalogs of The Beatles, Queen, Rolling Stones, Pink Floyd, Radiohead, Robbie Williams and so many others, EMI was not too big to go bankrupt.
In 2007, private equity specialist Guy Hands spearheaded the takeover of EMI, taking the music giant into private hands for around $ 4.7 billion.
At the time, it seemed like a princely sum. Today, it is eclipsed by the value of UMG.
Hands had turned around other stalling things. EMI had its issues, but with the touch of Hands, he believed, the music company and all of its prestigious recordings and rights would flourish.
What Hands didn’t bet on was the GFC. The artists left the ship, the lenders wanted their money back.
When EMI was sold and cut 10 years ago, streaming was not an option. These streams of income were not on the horizon.
UMG CEO Lucian Grainge orchestrated this week’s IPO, and it was Grainge who was the architect of EMI’s dissection, with Universal retaining some, but not all, of its greatest. strengths, a decision that would ensure the necessary approval of regulators.
With UMG’s massive IPO, the music industry has taken a health check off the charts. The company wouldn’t be what it is today without these pieces of EMI, a once powerful company that suffered a sad and miserable death several years before streaming brought the business back to life.
What would Guy Hands think of all this?