A certain phrase in the record industry needs to be retired: “Major label.” In 2020 and even as far back as the 1980s the term obscures the real corporate structures of the industry after years of consolidation, stock swaps, and partnerships. Last week, I argued
that the contemporary streaming era began in 2014, which was the nadir of the record industry’s revenues post-CD bubble. This week is a different lens to understand records labels and how they’re situated among larger multinational firms. Instead of being relegated to national telecommunications companies (CBS Records), they’re intermeshed with global media, telecommunications, and tech firms.
Earlier this year, I wrote about Tencent
and highlighted a number of deals that the company made in late 2014:
Tencent Holding Limited (not Tencent Music) and Warner Music Group signing a distribution deal further signaled China’s openness to the global record industry. Still, I’d like to recontextualize this deal from a slightly higher corporate level.
In May 2011, Access Industries bought Warner Music Group from a gaggle of private equity companies including Bain Capital. Yet, that wasn’t Access Industries’ only music play. The company sank $100 million into Deezer
, a French music streaming platform that was partly owned by Orange, France’s largest telecommunications company. Orange, while majority-owned by public investors, has France (the country) as its primary minority owner. Thus, Deezer’s main stakeholders are Access Industries, the French state, and the investment arms of Saudi Arabian firms
. But initially, Tencent’s deal was an agreement with one of the world largest record labels and a rising European streaming platform. That’s a fairly strong entry point into the global
The second Tencent deal was with YG Entertainment, which was founded in 1996 by Yang Hyun-suk, a former member of the highly popular Korean rap group Seo Taiji and Boys. Over the decades, the company grew to be one of South Korea’s most successful record labels, signing artists like 2NE1, BlackPink, and Psy of “Gangnam Style” fame. Tencent, along with the ticketing company Weiying, invested tens of millions
into YG Entertainment back in 2016, which netted Tencent 4.5% of the company. That was still less than the “investment arm” of LVMH, but enough to connect Tencent to one of South Korea’s most successful labels. If Tencent made inroads into the American, European, and South Korean record industries, there was still one major country untapped: Japan.
Tencent’s last 2014 deal signing was with Sony. Even though the company’s undergone a number of internal shifts (as Rolling Stone covered earlier this summer
), its position within the record industry holds steady. Sony’s publishing divisions are certainly ambitious as they bought out Michael Jackson estate’s share
of Sony/ATV and picked up EMI Publishing
for over a couple billion dollars in November 2018. And that’s actually what now provides a thread of connection between Sony and Tencent. Sony isn’t owned by any other larger firm and Sony’s investments in other music firms appear to be knock-on effects of industry consolidation rather than a concerted effort to be further connected among these firms.
Sony, like Warner and Universal, were early investors in Spotify but sold off half of that back in 2018
. Sony’s minority stake in Tencent Music is from Sony / ATV’s investment in the Chinese Music Corp, which was Kuwo and Kugou, prior to Tencent’s merger of those platforms
with its own QQ Music. This gives Sony an additional way within these markets but also doesn’t portend that the company is interested in further inter-tangling with this web. This leads us to the only company that didn’t ink a Tencent deal in 2014: Universal Music Group.
The company owned by Lucian Grainge certainly is one of the more discussed parts of the Vivendi portfolio. That’s for a decent reason. UMG, the world’s largest record label, still holds investments in Spotify, and Tencent bought 10% of the company this year. Vivendi is still looking to take the record label public in 2022
, so there is a prime opportunity to get in now.
I shouldn’t exclude Liberty Media, which holds stakes in JioSaavn, SiriusXM, Pandora, Live Nation, etc. I wrote about them earlier this year
and believe that they should face the same scrutiny of antitrust, but they portend a different vision of music consolidation than what is seen in the above. Also, Reliance Jio, the owner of JioSaavn, got a $5.7 billion investment from Facebook
, so in a way, this operates as another wing of interlocked global media firms.
This year, a major theme of the newsletter has been trying to chronicle music firm consolidation, the rise of private equity in music, and how the “record” part of the “record industry” is of increasingly-diminished importance. Earlier this year, Grace Blakeley in Novara Media wrote about how the trajectory of the coronavirus back then was going to only lead to further concentration of major companies
. Months later, the continued mega purchases of Salesforce acquiring Slack, Penguin picking up Simon & Schuster, and within music, the hundreds of millions being spent on purchasing music catalogs from financially stressed musicians, shows us that the acceleration of consolidation hasn’t stopped.
This is why I started off this week with a critique of the term “major label”. The shared ownership of Deezer, Tencent Music, Spotify, UMG, Sony Music, and Warner Music Group didn’t exist in the early 80s or even during the CD-induced heights of the late 90s. Over forty years ago major labels existed but they weren’t all caught up in an ever more complicated system of cross-ownership. Rather, eyes should be set on Access Industries (Warner), Vivendi (UMG), Sony (Sony Music Group), Tencent Holding Limited (Tencent), and Liberty Media (SiriusXM, Pandora, Live Nation). It’s at this level where music’s role is better contextualized as one part of an extensive portfolio that is looking to see massive returns in the coming years. Revenues are tied to further connecting record labels with tech firms, like TikTok, and signing deals with Facebook to help offset a looming slow down in streaming growth. The future of the record industry is on path for more global interweaving and if artists wonder why their voices aren’t heard this would be a good place to start looking.