For Sale: 10% of Universal Music Group. Price: $3.3 Billion O.B.O.

• Save

• Save

Universal Music Group headquarters in Santa Monica, CA.

Universal Music Group is having a very good year, and it might just get better.

For those warning of an industry slowdown, Universal Music Group would beg to differ.   The mega-label just released its year-to-date earnings for the first 9 months of 2019, and the numbers are indeed impressive. The label group earned more than 5 billion euros ($5.6 billion), which represents a 17.5% increase over the same period in 2018.

Now, UMG is striking the iron while it’s hot by closing one equity deal, and opening the door to others.

Driving the sharp increase in earnings was streaming and subscription revenue, which rose by more than 23%. Physical unit sales were also strong, rising nearly 15%. Both revenue streams more than offset the decline in download revenue, which fell by more than 20%.

Many of the company’s artists, which include Taylor Swift, Post Malone, Ariana Grande, Billie Eilish, and King & Prince, have had big years. Swift, in particular, has done well with her album Lover, which has sold more than one million copies. Post Malone’s Hollywood’s Bleeding has done well, too. In one week alone, it received over 365 million streams.

Another factor driving Universal’s revenue surge has been merchandising and other revenue.  Those ancillary reserves increased by more than 82% over the same period last year.  This was tied to touring revenue and rapid growth in direct-to-consumer sales as well as retail sales.

In August, Vivendi — which is the parent of Universal Music Group — announced that it was negotiating with Chinese digital music conglomerate Tencent to sell a 10% share of Universal for 3 billion euros ($3.3 billion), with a one-year option to buy another 10% of the company for the same price.

Vivendi now says that the “due diligence process and the finalization of the legal documentation” for this should be completed soon.

Vivendi is also indicating that it might sell additional minority interests in the company to other parties. While they did not indicate who these other parties are, they did say that these entities were interested in buying interests “at a similar price level” as what Tencent is going to pay.