There aren’t many things in the music business that Sir Lucian Grainge hasn’t experienced. But selling half of the world’s biggest music company is one of them.
Vivendi’s decision to dial back on an IPO for Universal Music Group in favour of selling a 50% stake – as predicted by this column back in May – is unlikely to dampen the frenzy surrounding music investments at the moment.
Indeed, it will spark a whole new forest fire of speculation about who might come on board. Given Vivendi’s preference for a strategic partner who will be “compatible with UMG’s current strategy”, a crucial phrase in the announcement, it’s probably easier to say who it won’t be.
As we’ve noted before, Universal and the rest of the music business finally has the streaming giants right where it wants them: at each other’s throats. Even if regulators would allow it, it seems unlikely that Universal has gone to all the trouble of making sure there's a competitive streaming environment with no one dominant player, just to chuck its lot in with one of those non-dominant players. Of course, it's possible that they have so much money even Vivendi might have to listen, but if Google, Apple, Amazon or Spotify really are harbouring dreams of becoming rights-holders the easy way, they might want to read that "compatible" statement again. If Vivendi means what it says, the digital giants are likely to be disappointed.
If Vivendi means what it says, the digital giants are likely to be disappointed
Similarly, the bottomless pockets of private equity will serve little purpose here. Universal is already generating huge profits and it wants to grow its markets, not just its bank balance.
That means geography will play its part, and could bring, say, an Alibaba into the frame. With investment as likely to come from Asia or Europe as it is America, telecoms or media companies look the best bet. Both sectors have cash and challenges in almost equal measure, and are being reshaped on an almost daily basis, leaving Universal looking like a sure thing in a world of outside bets. Especially as its digital innovation track record could have all sorts of transferrable applications for interested parties in other sectors. While Universal would benefit from synergies across its talent stable and from access to all sorts of new revenue opportunities.
By all accounts, no one at UMG or Vivendi is in a rush over this, so we may not know who’s involved in the stake purchase until 2020. But, while for most at UMG it’ll be business as usual until then, you can expect Sir Lucian to be closely involved with Vivendi's decision-making process.
As the highly effective EMI deal showed, he already knows how to buy big. We’re about to find out if he can sell even bigger…