On Aug. 6, Universal Music Group chairman/CEO Lucian Grainge sent a memo to staff saying parent company Vivendi had entered talks with China's Tencent to buy a 10% stake in UMG, valuing the world's biggest record company at $33 billion, at the low end of many Wall Street analysts' rosy estimations.
Such a deal would be good news for other label and catalog owners, especially those looking to cash out or leverage their balance sheet: Billboard estimates UMG's 2018 earnings before interest, taxes, depreciation and amortization at $1.165 billion, making the valuation 29.5 times multiple. But the sale could affect the industry in other ways.
If completed, Vivendi's deal with Tencent — which owns three music streaming services in China as well as a 10% stake in Spotify through its Tencent Music division — would reverse the current dynamics between the digital services and the major labels from which they license music. While it has long been speculated that a company like Apple, YouTube or Amazon might one day buy a major, this deal would mark the first time a digital service dipped a toe in that water.