Vincent Bolloré is about to personal $7bn-plus of Common shares… and different issues we discovered from UMG’s new prospectus

The MBW Assessment is the place we intention our microscope in direction of among the music biz’s greatest current goings-on. This time, we trawl via Common Music Group‘s new prospectus. The MBW Assessment is supported by Instrumental.

Subsequent week is gearing as much as be a giant one for Common Music Group.

UMG’s dad or mum firm Vivendi is making ready to spin off 60% of Common on the Amsterdam inventory alternate subsequent Tuesday (September 21), a public itemizing that might give the world’s greatest music firm a market cap price €30 billion, €40 billion… and even increased.

At the moment (September 14), Common Music Group revealed its pre-listing prospectus, which affords potential traders an perception into what makes the Common wheels flip.

Vivendi lately revealed that Pershing Sq. Holdings (PSH), run by billionaire Invoice Ackman, will management 10% of UMG’s share capital post-listing, having dedicated in August – by way of an affiliate – to purchase a further 2.9% of UMG at a €35 billion firm enterprise valuation.

Previous to the Pershing deal, Vivendi additionally bought 20% of UMG to a consortium led by China’s Tencent, at a €30 billion firm valuation for UMG.

Following the Amsterdam itemizing, which can see 60% of UMG initially distributed in shares to Vivendi shareholders – who could then maintain or commerce their belongings – Vivendi itself will personal simply 10% of UMG.

The highlights from right this moment’s prospectus embrace particulars of Common’s new post-IPO board, enterprise dangers, government rewards, plus historic monetary data and revenue forecasts.

You possibly can learn all 306 pages of it for your self in full via right here, however right here’s 5 significantly attention-grabbing issues we noticed…

1) Vincent Bolloré will personal $7bn+ price of Common shares after it lists

If anybody has purpose to rejoice the start of Common Music Group’s new chapter as a publicly-traded firm, it’s ex-Vivendi Chairman Vincent Bolloré.

Following the itemizing, the French businessman’s ‘Bolloré Entities’ is about to obtain 326,507,033 shares, or 18.01% of UMG’s whole shares, which at a €33 billion valuation could be price €5.9 billion (approx $7bn).

(UMG’s prospectus notes “for illustrative functions” that the current 10% acquisition of the corporate by Pershing Sq. means that Common will carry an approximate market cap of €33 billion on its first buying and selling date.)

Bolloré, whose household holding firm Bolloré Group owns a controlling 27% stake of Vivendi’s share capital, stepped down as Chairman the UMG dad or mum firm in April 2018, succeeded by his son Yannick Bolloré.

Then in 2019, Vincent Bolloré stepped down from the board of Vivendi, and was changed by his son Cyrille Bolloré.

Following the Amsterdam itemizing, Bolloré would be the second greatest UMG shareholder along with his 18%.

The Tencent-led Consortium will personal 20%, whereas Vivendi and Pershing Sq. Holdings Ltd will every personal 10% respectively.

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2. The highest 50 artists at common solely accounted for 23% of UMG’s recorded music income in 2020.

In line with UMG’s prospectus, the corporate’s has “such a broad array of frontline labels, label enterprise companions and label companies”, that it says it’s not reliant on anyone artist, or any small variety of artists, to generate income “in any given 12 months”.

In actual fact, says UMG, no single artist accounted for greater than 1% of the corporate’s recorded music income in 2020, whereas the corporate’s Prime 50 artists cumulatively accounted for 23%.

Which means in fact, as illustrated beneath, that 77% of UMG’s recorded music revenues in 2020 have been generated by Common Music-signed acts that fell outdoors of the corporate’s Prime 50 artists.

Common’s recorded music division generated annual revenues of €5.97bn ($6.74bn) in 2020, up 6.7% YoY.

3. Catalog accounted for 54% of recorded music digital and bodily income in 2020

UMG notes that its monetary success “has depended, and can sooner or later rely, on its means to signal and break new artists” along with “shopper acceptance of latest music content material from each new and established artists”.

Nevertheless, new music, launched by both breaking artists, or by established acts, was not the corporate’s greatest income driver in 2020.

UMG cites “sturdy and dependable income flows” from its catalog (outlined as content material older than three years), as being a major driver of revenue for the corporate.

Catalog accounted for 54% of recorded music income (from digital and bodily) at UMG in 2020, whereas frontline product (content material lower than three years previous) accounted for 46% of recorded music income (see beneath).

UMG’s catalog consists of artists similar to ABBA, Louis Armstrong, The Beatles, The Seaside Boys, The Bee Gees, Andrea Bocelli, James Brown, Bon Jovi, Neil Diamond, Marvin Gaye, Weapons N’ Roses, Elton John, Bob Marley, Paul McCartney, Nirvana, Luciano Pavarotti, Queen, The Rolling Stones, Frank Sinatra, U2, Amy Winehouse and Stevie Surprise.

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4. UMG’s recorded music enterprise is “geographically various”

With UMG’s recorded music enterprise working workplaces in 60-plus territories and with a presence throughout practically 200 markets, the corporate has good purpose to assert that its “recorded music enterprise operates in additional international locations and markets than some other recorded music firm”.

In July final 12 months, MBW reported, as per Vivendi’s annual report for 2019, that native artists (i.e. artists from a sure territory, promoting / being streamed in that territory) accounted for 61% of UMG’s revenues in 2019.

In 2020, in accordance with UMG’s prospectus, 60% of UMG’s whole revenues got here from “native  repertoires in their very own international locations”.

UMG says that its enlargement technique in Africa, Asia, Europe and MENA is “already bearing fruit”.

“In 2020, UMG’s worldwide labels within the US, UK, France, Germany and throughout different main markets, partnered with and concurrently launched music from artists in Nigeria, South Africa, Turkey, India, China, Thailand, Japan and Korea amongst others,” states UMG.

“UMG’s income profile is geographically various and turning into extra so with the emergence of professional monetization alternatives in lots of new music markets world wide.”

Elsewhere, UMG notes that its “recorded music enterprise can be geographically various”. North America accounted for 49% of UMG’s recorded music income in 2020, whereas Europe accounted for 30%, in accordance with the prospectus.

Asia and Latin America accounted for 14% and three% , respectively, whereas the remainder of the world accounted for 4%.

UMG additionally says that its general income profile – throughout all revenue streams together with publishing – is “geographically various” and is “turning into extra so with the emergence of professional monetization alternatives in lots of new music markets world wide”.

In 2020, revenues from the trade’s Prime 5 international music markets (US, Japan, UK, Germany and France) accounted for 75% of UMG income (each publishing and recorded) , whereas different international markets represented 25% of whole firm’s income.

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5. UMG’s reliance on DSPs makes some huge cash – but in addition carries threat

UMG lists its reliance on digital service suppliers for the distribution and advertising of its music as a threat consider its prospectus.

The music firm notes that it “derives an rising portion of its revenues from the distribution of music via digital distribution channels and companions with a number of hundred music companies world wide”.

In 2020, in accordance with UMG, the world’s Prime 50 music companies accounted for 95% of its digital income for 2020, whereas 65% of UMG’s general income was derived from digital channels.

“UMG presently enters into comparatively short-term agreements with digital music streaming companies,” explains the corporate within the prospectus.

“There will be no assurance that UMG will have the ability to renew or enter into new agreements with any digital music service.”

“Whereas streaming and subscription income is usually checked out as the primary driver of music trade efficiency, these income streams account for under 59% of UMG’s whole firm income in 2020”.

As a result of UMG’s music can be promoted by DSPs on playlists “curated by such companies or generated from their algorithms” (or  each), the corporate means that “any unfavorable adjustments made by such service suppliers to their algorithms or to the phrases on which they market or promote UMG’s music might adversely have an effect on UMG’s enterprise”.

UMG notes within the prospectus that revenues from subscription music companies “are necessary to UMG as a result of they offset declines in downloads and bodily gross sales”, however provides afterward within the doc that UMG’s income is “various from a enterprise mannequin standpoint”.

Provides UMG: “Whereas streaming and subscription income is usually checked out as the primary driver of music trade efficiency, these income streams account for under 59% of UMG’s whole firm income in 2020”.

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The MBW Assessment is supported by Instrumental, one of many music trade’s main progress groups for impartial artists. Instrumental makes use of information science to determine the quickest rising impartial artists on the planet after which supply funding, premium distribution and advertising help to take them to the following degree, with out taking their rights.Music Enterprise Worldwide

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