Recent news reports that media giant Vivendi rejected an
$8.5 Billion offer for Universal Music from Japanese telecom group SoftBank has
many music writers scratching their heads.
At face value, Vivendi have foregone an once-in-a-lifetime
opportunity to sell the asset at a significant premium; Bank of America Merrill
Lynch valued Universal Music at $5.8 Billion in June. Simple numbers aside, the
intricacies of the offer warrant comment.
SoftBank have acquired US telecom firm Sprint Nextel, with
a vision of providing music via its wireless services in the huge North
American market and their homeland. There are many observers who state that
SoftBank have a viable strategy, as market research firm Nielsen SoundScan have
released figures to suggest that digital albums now account for more than 40%
of all recorded music sales and music streaming subscription services have
increased almost 25 % in the past 12 months.
On the flipside, Vivendi are placed in an awkward position
because asset sales are urgently required. The European corporate owns global
media assets however attempts to sell telecom assets in Brazil and Morocco have failed to reach
closure.
Notwithstanding the very tempting offer from SoftBank,
Vivendi can’t afford to sell Universal Music. The music imprint is the pivotal
asset, without Universal Music it is feared that Vivendi’s market value would
suffer a substantial decline as the balance of assets have minimal synergistic
worth.
And who said you don’t need a record label in modern
society?
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