Streaming has become the primary source of entertainment worldwide, with a projected 700 million new people paying for music streaming services this decade. This steady influx of global consumers has created a bull market for the music industry, meaning that the market is rising and economically steady. However, the music industry as we know it could face drastic, unprecedented changes in the next few years.
Vivendi, a French mass media conglomerate and majority owner of Universal Music Group (UMG), has recently announced plans to sell up to 50% of the group in an initial public offering (IPO) by 2023. Another multinational conglomerate, Tencent Holdings Ltd., has already signed a $3.3 billion deal with Vivendi for a 10% stake in UMG. This deal with the Chinese holding company has increased UMG’s valuation to a staggering $33.6 billion.
UMG, the current world leader in music-based entertainment, celebrated a 40% share in the U.S. streaming market in 2019. The company’s subsidiaries represent international superstars such as Andrea Bocelli, Luis Fonsi, and Elton John.
The company has also been exploring emerging markets in Africa, Latin America, and Asia. UMG has become the first music company to form a distribution partnership with Africa’s premier music streaming and download service, Boomplay. As a result, U.S. music consumers have gained access to genres like Afrobeat and Afropop, while millions of music consumers in Africa now have access to music from UMG’s various labels.
The recent UMG-Tencent deal has bridged China’s music market to the U.S. Through Tencent’s knowledge and resources, UMG can increase profitability in Asia, while Tencent’s various digital streaming services, such as TME, are now accessible in the U.S.
In light of a possible extra 10% securement of UMG by Tencent in 2021, the collective music business faces a positive future. Investment in the global music industry is proving to be rewarding and increasingly so. Competitors of UMG, Sony Music Group (Sony Music) and Warner Music Group (WMG), have seen their valuations and investment potentials grow with Tencent’s validation of the record label’s value. Sony Music and WMG could likewise develop their own place in the Asian music market by partnering with investors like Bytedance—owner of TikTok—or Alibaba.
There are, however, other key players posing interesting, unprecedented legal dilemmas. For instance, Google, has expressed interest in acquiring a 50% stake in UMG. The American multinational technology company is a parent company of YouTube, the world’s largest music streaming service, which has faced backlash from the music industry for its exceedingly low pay-outs to artists compared to Spotify and Apple Music. YouTube has also become a fast-growing hub for digital piracy. In response, European legislators have drawn up and approved legislation that allows major labels like UMG, Sony Music, and WMG to have more say over how YouTube publishes music, negotiates royalties, and faces copyright infringement. Known as Article 13, this legislation is not set to come into effect until 2021. If Google were to purchase UMG before this, the company could try to keep music licensing costs down on YouTube and preserve the subsidiary’s “free” music tier for years to come. Other companies expressing interest in UMG include Apple, Liberty Media, Verizon, and Tencent.
As the global music industry has become progressively profitable and stable, many investors are craving a piece of the action. Music has never been more accessible to consumers, due to multinational conglomerate deals, along with the rise of digital streaming and distribution services. The future of the industry, as bright as it appears, is still uncertain. Into whose hands will the fate of music fall? How will consumers, artists, and record labels be affected? What new changes and challenges will be faced? These questions will be answered in due time, in a new decade, and in a new musical era.
Valerie Hanna is a freshman in the College of Arts and Sciences intending to study International Relations. Her interests include changing political landscapes in Latin America and multilingualism. She is from Lititz, Pennsylvania and enjoys writing poetry, watching classic films, performing community service, and traveling.