Universal Music (NL:UMG) has finally come to the market, an event long-awaited by many and by this analyst for almost exactly five years – it was in September 2016, when I attended a teach-in on the European media sector at a bulge-bracket firm, that I spotted an investment opportunity.
A rated media analyst walked through the various industries and stocks in his sector. I was intrigued by his explanation of the music-streaming business, which was then considered a positive for Vivendi, the French mass-media conglomerate. Music-streaming apps, such as Spotify (US:SPOT), charge their customers $10 or £10 per month. Their economics then were, and likely still are, broadly:
- 60 per cent of revenues goes to the record company
- 10 per cent goes to the publisher
- the remaining 30 per cent is their gross margin
- they then have to advertise, acquire customers, administer and develop the service.