Universal fool's game

Last week, it was announced that the Universal Music Group, the world's largest major, would dissociate from parent company Vivendi and go public. Although that involved more personal gain than global strategy...

The Universal Music Group (UMG) has an interesting history. Originally an American company born in the early 20th century from a Decca Records spin-off, it got taken over by MCA in the 1960’s on its way to becoming one of the leading labels in the world. In the 1990’s, it got acquired by Japanese then Canadian conglomerates before being sold to French group Vivendi (a former utilities company) which quickly cut out its movie branch — that would be Universal Studios — but sensibly kept its music-related assets. As the music market kept on concentrating around 3 global players with the advent of streaming, UMG kept growing to eventually become the largest of them all, amounting to half the music market in the world. Indeed, it is home to artists including Taylor Swift, Kanye West, Lady Gaga, Lil Wayne, Rihanna, Jay-Z, Adele… you get the picture.

Last year, we found out that Vivendi had sold 10%, then another 10% of Universal Music to Chinese giant Tencent. A smart move for Tencent, whose core business encompasses far reaching social networking apps, and which had already started diversifying in entertainment companies for content, preferably of the Western variety. Now this: Vivendi is to give away 60% of the company (out of the 80% it still owns) for it to be redistributed to stakeholders… But why do that, you might ask, given how successful UMG is, and stands to be in the future?

The answer, interestingly, is less related to the global strategic masterplan of some Zuckerberg-like entertainment genius and more about shorter term financial gains for the individual who most stands to win from this operation: French businessman Vincent Bolloré. A well known figure in France (perhaps less so elsewhere), Bolloré currently controls 27% of Vivendi, the aforementioned majority owner of Universal Music. With UMG currently valued at around $36 billion, the Tencent sales already amounted to roughly $2 billion in personal gains for the man; this IPO would mathematically generate 3 times that.

In a time when we tend to hear more about artists struggling to maintain any sort of decent revenue stream, with touring and festivals effectively out of the question and the debate around streaming profit sharing still very much alive, it is important to note that the music market as a whole has rarely generated that much revenue. The thing is — not everyone benefits from that…