Swift deal a canny busi­ness move for Univer­sal

Calgary Herald - - YOU - ALEX WEBB

There’s lit­tle bet­ter way for Vivendi’s Univer­sal Mu­sic Group to bur­nish its rep­u­ta­tion ahead of a prospec­tive stake sale than by sign­ing up Tay­lor Swift.

The French par­ent is prepar­ing for the dis­posal of up to half of the world’s big­gest mu­sic la­bel next year. Swift’s an­nounce­ment on her Tum­blr ac­count that she has signed with Univer­sal is a nice boost for the bankers run­ning the sale.

Her post was scant on de­tails — such as the length and value of the deal — ex­cept for one cu­ri­ous el­e­ment. Vivendi still owns a stake of about four per cent in Spo­tify Tech­nol­ogy, the mu­sic streamer.

Va­ri­ety has re­ported that Vivendi has promised the pop star it will share the pro­ceeds of any fu­ture sale of that hold­ing with the artists on its la­bels. Warner Mu­sic Group and Sony Corp., the two big­gest record com­pa­nies after UMG, have done sim­i­larly. Swift has long been an ag­i­ta­tor for bet­ter rev­enue-shar­ing from stream­ing.

De­spite the prece­dents, this seems an un­char­ac­ter­is­ti­cally gen­er­ous of­fer from Vin­cent Bol­lore, the French bil­lion­aire who con­trols Vivendi. While shar­ing the gains might look great from the artists’ per­spec­tive, it’s less at­trac­tive for UMG’s own­ers.

When Sony sold $768 mil­lion worth of Spo­tify shares at the time of Spo­tify’s list­ing in April, it passed on about a third of the pro­ceeds to artists and la­bels, re­tain­ing some $504 mil­lion. (All fig­ures in U.S. dol­lars.) Vivendi’s stake is es­ti­mated to be worth about $900 mil­lion cur­rently, so a sim­i­lar ra­tio would mean hand­ing $300 mil­lion to the mu­si­cians.

If Swift makes — for ar­gu­ment’s sake — three al­bums with UMG, the com­pany might op­ti­misti­cally ex­pect a cu­mu­la­tive earn­ings boost of, say, $75 mil­lion. So at first glance this looks like a pretty ex­pen­sive prom­ise to get the su­per­star on its ros­ter.

But the French con­glom­er­ate made no com­mit­ment to Swift on when it would re­duce the stake.

Vivendi CEO Ar­naud de Puy­fontaine in­di­cated back in May that he had no plans to sell the shares any­time soon.

Be­sides, the com­pany said at the same time that it ex­pected a UMG val­u­a­tion of more than $28 bil­lion. That makes it pretty easy to swal­low a po­ten­tial $300-mil­lion hit.

Be­ing able to show po­ten­tial stake-buy­ers that you’ve signed one of the world’s 10 best­selling artists should eas­ily out­weigh that. As Deutsche Bank points out, only six al­bums in the past decade have ex­ceeded one mil­lion tra­di­tional U.S. sales in their first week. Four were from Swift.

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