Vivendi puts additional minority stake in UMG up for sale

Vivendi puts additional minority stake in UMG up for sale

Vivendi has revealed plans to potentially sell an additional minority stake in Universal Music Group.

The major’s parent company is already in talks to sell 10% to Chinese company Tencent Holdings. In Vivendi’s Q3 results, the company announced that the due diligence process and finalisation of the legal documentation is ongoing and should be completed in the coming weeks.

It said other partners have already expressed an interest at investing at a similar level to the Tencent deal, which values UMG at €30 billion (£33.4bn) Tencent also has an option on a further 10% stake.

Vivendi CEO Arnaud De Puyfontaine said the Chinese authorities' investigation into Tencent Music’s exclusive label deals was a “separate matter to the transaction”.

“I would say that it was widely known in the industry that the Chinese government was unlikely to allow the exclusive deal next time around,” he said. 

De Puyfontaine also noted the “great opportunity” for UMG in China.

Universal Music Group revenues reached €5.06bn (£4.38bn) for the first nine months, up 17.5% at constant currency compared to the first nine months of 2018. 

For the first nine months of 2019, recorded music revenues grew by 15.6% at constant currency, as a result of strong growth in subscription and streaming revenues, which hit €2.404bn (£2.08bn) – an increase of 23.4%. There were also robust physical sales (up 14.9%), which more than offset the continued decline in download sales (down 20.4%).

The 2019 Q3 streaming year-on-year increase of 19.7% compared to a 38.6% in Q3 last year.

“Last year we had a very big rate of growth in the quarter,” said CFO Herve Philippe. “This year we have had a very good performance, but the comparison basis was tough.”

Philippe said the reduction in the rate of growth was down to “simple mathematics” as streaming becomes more dominant.

“It’s logical that we will have some slowdown in the rate of growth,” he added. “It’s still a very high rate of growth.”

We do believe in the continued growth of Spotify and the overall streaming market

Arnaud De Puyfontaine

De Puyfontaine declined to comment on streaming licensing deals.

“We do believe in the continued growth of Spotify and the overall streaming market,” he said. “It’s about working together to accelerate growth in the streaming market.”

For Q3, UMG revenues increased by 18% at constant currency to €1.8bn (£1.6bn).

Recorded music best sellers for the first nine months of 2019 included new releases from Billie Eilish, Ariana Grande, Taylor Swift, Post Malone and the Japanese band King & Prince, as well as continued sales of the soundtracks such as A Star Is Born and multiple albums from Queen.

During the third quarter of 2019, Taylor Swift’s Lover had the biggest sales week for any album in the United States since the release of her last album Reputation in 2017, selling nearly 700,000 copies in traditional album sales and surpassing 1 million in total consumption.

“This year we’ve seen an increase in physical sales in each quarter of the year thanks to very good releases,” said Philippe.

He noted strong physical sales for The Beatles’ Abbey Road, though added that strong 2018 Q4 physical sales will have a bearing on 2019 Q4 results.

Post Malone’s Hollywood’s Bleeding had the biggest streaming week for an album in the United States in 2019, with over 365 million on-demand audio streams. UMG has had the five biggest US debut sales weeks for albums this year with Taylor Swift, Post Malone, Jonas Brothers’ Happiness Begins, Ariana Grande’s Thank U, Next and Billie Eilish’s When We All Fall Asleep Where Do We Go?

Music publishing revenues grew by 9.7% at constant currency compared to the first nine months of 2018, also driven by increased subscription and streaming revenues.

Merchandising and other revenues increased by 82.4% compared to the first nine months of 2018, thanks to increased touring activity and growth in retail and D2C (direct-to- consumer) revenues.

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