A surge in streaming of songs by artists such as Drake and Taylor Swift has helped to boost the value of Universal Music Group to $33.3 billion. This is according to a report by Deutsche Bank that has raised the stakes for the sale of Universal, also known as UMG. While Drakeand Taylor Swift lead streams, its stars also include Ariana Grande, The Beatles, Guns N’ Roses, Jay-Z, Pink Floyd, Queen and U2.
Frankfurt-based Deutsche’s valuation for California-based UMG is technically put at 29 billion euros before exchange rate. This figure is almost half as much again as Deutsche’s previous estimate of 20 billion euros. It is also slightly more than the current 28.3 billion-euro market capitalization of Universal’s parent Vivendi, which last year said that is selling about half of UMG.
The figures are all less than Vivendi’s assertion in 2017 that UMG was worth $40 billion, something dismissed by analysts at the time based on its profits and price-earnings ratio.
“With the hype around UMG stake sale having subsided, there is now scope for valuation to surprise to the upside in the second half of 2019,” Deutsche analysts declared in their report. They forecast that at the present rate of growth streaming revenue may hit $21 billion in four years, an increase from the $7 billion last year.
This may be shaping up for a very rich payday for Swift and her fellow stars. UMG agreed in Swift’s record deal last November that it would give its artists, on a non-recoupable basis, some of the profits from the sale of Spotify shares. What’s more, Spotify is listed by Deutsche Bank as one of the tech-giants that would be possible buyers for UMG, along with Alibaba, Amazon, Apple, Facebook, Google’s holding company Alphabet and Tencent.
Some of these would doubtless raise regulatory concerns that competition was being damaged. One of the most obvious front-runners is Liberty Media, which is known for SiriusXM and the Formula One Group, and said it would “absolutely” look into such a buy. Liberty Media would then become the largest music-entertainment company, ahead of Sony and Warner.
One thing for sure is that this completely eclipses Sony’s chart-topping $2.3 billion purchase of EMI which in itself changed the face of music.