text | Akagi Binzi
After 15 years, Warner Music, one of the world's three major record companies, has fought with US stock again, completing the largest US stock IPO since the beginning of 2020.
On the evening of June 3, New York time, Warner Music was listed on Nasdaq (stock code WMG), selling 77 million shares at $25 per share, raising approximately $1.93 billion. The opening price was US$27 per share, up 8%. It closed at US$30.12 per share, an increase of more than 20%, and an intraday increase of more than 23%, with a market value of US$15.361 billion.
As one of the three largest record companies in the world, Warner Music, which has crossed the record industry and the era of "records are dead" to the digital music era, completed a "magnificent turn" after nine years of separation from Wall Street.
Prospectus shows that Warner Music's revenue in fiscal 2017, fiscal 2018 and fiscal 2019 was US$3.576 billion, US$4.005 billion and US$4.475 billion, respectively, while Warner Music's revenue in the six-year ended March 31, 2020 was US$2.327 billion, compared with US$2.293 billion in the same period last year.
Warner Music's "re-listing" has been brewing for a long time. The other "two majors" in the world have not stopped entering the Chinese capital market.
In 2019, Tencent acquired 10% of Universal Music's shares for 3 billion euros, and Tencent Music can acquire a minority stake in UMG's Greater China business within two years. Before that, Universal Music's market value was once close to US$34 billion, about twice that of Warner Music. Another big thing - Sony Music Entertainment officially reached a strategic cooperation with Bilibili in April this year, and users were able to watch the music library MV of Sony Music Entertainment on Bilibili.
Under the synergistic effect of leading capital, the three major record companies are moving forward one after another. In the era of digital music, what are the new opportunities for record companies represented by Warner Music?
streaming media is advancing, how can Warner Music log in to Wall Street first?
Among the three major record companies in the world, including Global, , Sony , and Warner, Warner Music has a relatively small market share, but it is the first to officially enter the open market.
(the "three major" revenues in fiscal year 2016-2018)
On the one hand, the listing of Warner Music seems to have become a symbol of the industry's belief that record companies are welcomed by spring. On the other hand, it has also promoted the public entry of global record companies into the capital market . In February this year, Universal Music's parent company Vivendi revealed in its profit report released that Universal Music will also launch a Wall Street IPO in the next three years, and will hold its initial public offering at the latest in early 2023.
covers Warner Music with Atlantic Records, Parlophone Records, Warner Classic Records, Reprise Records, Sire Records and other brands. It includes LINKIN PARK, Ed Sheeran, Bruno Mars, Dua Lipa, Kelly Clarkson, Coldplay; JJ Lin, Jolin Tsai, Stefanie Sun, F.I.R. Feier Orchestra, Fang Datong , and Xiao Jingteng.
htmlFor more than 0 years, Warner Music has gone around in the capital market. In 1929, in order to use cheap music in movies, Warner Bros. founded "Music Publishing Co., Ltd." (MPHC), the predecessor of Warner Music. The next year, after purchasing Brunswick Records, officially entered the record industry. In 2004, Warner Music was sold to Bronfman Investment Group for a price of US$2.6 billion after the acquisition of Times Warner .In 2005, Warner Music was listed on on on the New York Stock Exchange for the first time. After the listing of , Warner Music ushered in the decline of the traditional record industry. Seven years after its first listing, Warner Music was privatized by American industrial group Access Industries at a price of US$8.25 per share for US$3.3 billion.
After saying goodbye to the capital market, the impact of the digital music era on the traditional record industry continues. In 2014, the global music industry revenue was only US$14.3 billion. Cassette machines, Walkman, and CD disc factories have successively completed their missions. When the changes in music communication media are irreversible, and with the united front between record companies and streaming media, the era of traditional record companies is ushering in a turning point.
According to data from IFPI and "GLOBAL MUSIC REPORT 2018", Since 2015, the global music industry revenue has ended a 15-year decline, and has achieved three consecutive years of growth by 2017. The main driving force comes from the increase in digital music revenue, accounting for more than 50%.
The emergence of streaming music platforms such as Spotify, Pandora and Apple music has turned record companies into danger. Since 2016, digital music and streaming media have gradually replaced physical records and become an important source of revenue for record companies. Taking Sony music as an example, Sony music’s streaming revenue in 2016 has exceeded physical revenue, and streaming media has become the “contribution overlord” of record companies.
Among them, record companies are gradually playing the role of beneficiaries. Goldman Sachs recently stated in a research report that record companies including Universal Music, Sony Music, etc. will be the "main beneficiaries" of streaming media growth and payment of music content. It is expected that global music revenue will reach US$142 billion in 2030, an increase of 84% from US$77 billion in 2019; and the number of streaming paid users will increase to 1.2 billion, nearly 4 times the number of 341 million paid users in 2019.
In fact, Warner Music, which has revived its strength, has been constantly looking for incisions in streaming services.
strategic level, in 2018 alone, Warner Music acquired two streaming media Uproxx and Sodatone, and cooperated with Born Bred Talent to develop a video distribution network JV.
is the first large music entertainment company to reach cooperation with well-known giants such as Apple, YouTube and Tencent Music . Warner Music’s records are distributed electronically to streaming service providers including Amazon, Apple, Deezer, SoundCloud, Spotify, Tencent Music , YouTube, and broadcast service providers such as iHeart radio, SiriusXM.
Warner Music said that in the company's total revenue, the proportion of revenue generated through authorized digital music distribution channels is increasing. In fiscal 2019, the company generated revenue by licensing digital music to Apple and Spotify accounted for 27% of its total revenue.
, and the driving role of streaming media is more obvious in revenue composition. According to the prospectus, streaming media accounted for 47.2%, 50.4% and 52.4% of Warner Music's fiscal years 2017 to 2019, respectively. Streaming revenue has become the fastest-growing sector in Warner's revenue.
embraces the Chinese market, is the top capital synergy "recreate" the spring?
In terms of the domestic music industry, at the beginning of 2020, several online music platforms have been making continuous copyright moves.
In order to consolidate its monopoly position in Chinese streaming media, Tencent Music and NetEase Cloud Music signed exclusive music copyright licensing agreements with three major international record companies such as Global, Warner, and Sony respectively.
5 In May, NetEase Cloud Music announced that it would reach a strategic cooperation with Warner Copyright (WCM) and acquire 1.3 million music lyrics and music copyright resources for Warner Music, which triggered various speculations in the industry. Not only that, there are recent news that Tencent plans to invest US$200 million in Warner Music, and the current transaction is in negotiation stage. The development of leading record companies of global nature in China's capital market has become "natural".
In Warner Music's prospectus, it also mentioned the Chinese music market and domestic online music and short video platforms such as Tencent Music and TikTok. Warner Music also mentioned in its prospectus that China is a market with huge potential for the record industry.
First of all, music streaming relies on mining paid users, and under the huge population base, China's paid music market has broad prospects. According to data from the International Recording Industry Association (IFPI): The paid music model is still in a very early stage in China, with about 33 million paid users in 2018, accounting for only 2% of China's total population of 1.4 billion. From 2017 to 2019, China jumped from the top ten music markets in the world to seventh place.
In the "save operation" of streaming for record companies, the importance of paid users is even more self-evident. According to a report by the American Recording Industry Association, U.S. record retail sales revenue increased by 13% in 2019, from $9.8 billion to $11.1 billion, mainly due to the continued growth of paid subscription services.
Warner Music said that in the company's total revenue, the proportion of revenue generated through authorized digital music distribution channels is increasing. In fiscal 2019, the company generated revenue by licensing digital music to Apple and Spotify accounted for 27% of its total revenue. In 2019, total streaming music revenue increased by 19.9% to $8.8 billion, accounting for 79.5% of total record revenue.
From the perspective of record companies, in the process of measuring online music platforms, one standard for is the market size of paid users, and the other standard is the ability of online music platforms to gradually replace traditional record companies including artist brokerage, promotional and distribution channels, etc. has the leading record company with experience advantages in singer packaging and promotion channels, supplemented by the online music platform's keenness to online student content and the young audience attributes represented by the Z generation on the platform are the "non-dual rule" for promotion and distribution in the digital music era.
Although the complementary prospects of record companies and online music platforms in the digital music era are broad, at the moment, it remains to be seen how the global record industry will usher in the long-awaited spring under the impact of the epidemic on new record sales.
