Want to know what an industry is really worth? Look at what private capital will pay for it when public markets won’t.
In music, right now, that gap is wide.
Warner Music Group, the world’s third-largest music major, has a market cap of approximately USD $14.9 billion on the NASDAQ right now – despite posting $6.71 billion of revenue and $1.44 billion in adjusted OIBDA for FY 2025.
Meanwhile…over in Germany.
Bertelsmann and Great Mountain Partners (GMP) today (April 28) confirmed a merger of BMG and Concord that — per MBW sources — values the combined entity in the region of USD $15 billion.
That’s the same headline number Wall Street currently affords WMG, for a business roughly a third of Warner’s size by revenue, and which projects to generate around half of WMG’s annual profit this year.
BMG and Concord’s investors, however — not to mention each company’s leadership — have no doubt about the future growth potential of what is now comfortably the world’s fourth-largest music company.
For starters, they announced today that they expect to nearly double the combined company’s annual EBITDA, from $730 million in 2026 to $1.2 billion in the “mid-term”.
Why such confidence? Partly because of a belief in what new technologies – yes, including the artificially intelligent ones – are about to mean for the owners of premium catalog.
That belief is apparent in the words of Bob Valentine, currently Concord’s boss, who will become CEO of the newly merged entity, and Thomas Coesfeld, currently BMG’s CEO (and soon to be Bertelsmann’s), who will become its Chairman.
Here, MBW catches up with Coesfeld and Valentine on the day that their respective companies bet big, both on themselves – and music’s journey ahead…
LET’S START WITH THE STRATEGIC RATIONALE. WHY IS THIS THE RIGHT DEAL FOR BOTH BMG AND CONCORD — AND WHY NOW?
Thomas Coesfeld: We’re looking at a fundamentally attractive market — driven by streaming and with AI as the next frontier, which has a lot to offer in terms of services, in terms of improvements for artists’ rights, and most importantly, in terms of growth.
This is something that both Bertelsmann and, evidently, GMP deeply believe in. We’re fundamentally committed to this market.
We’ve developed this value-creation hypothesis [for the merger], based on significant synergies, creating value through technology and operating on one platform, and on a clear proposition to artists, songwriters, and creators – the leading independent platform in the market.
Bob Valentine: I was struck by a lot of the same themes that BMG and Concord had built our respective businesses around: catalog-focused music companies with complementary, important frontline businesses; seeking operational excellence for our recording artists and songwriters; and global scale.
Our respective shareholders see music as a place for long-term investment and growth, and as we continued the conversations, we found many similarities in how we view the business and how to build a new version of a global music company.
ONE OF THE THINGS THAT JUMPS OUT ABOUT THIS DEAL IS THE MARGIN PROFILE. BMG IS ALREADY AT AN EBITDA MARGIN OF 32%, AND I HEAR CONCORD IS SIMILARLY SIZED AND SIMILARLY PROFITABLE.
Thomas Coesfeld: This company will lead [the industry] in terms of relative profitability and absolute profitability.
With a very compelling cash profile, we have the means and the intent to invest into creative talent and into technology for years to come.
“We have the means and the intent to invest into creative talent and into technology for years to come.”
Thomas Coesfeld
Bob Valentine: A focus on margin has been a driver of strategic decision-making for as long as I’ve been at Concord – how to maintain healthy margins, healthy cash flow generation, and to grow the business at the same time.
Thomas has done a phenomenal job getting BMG’s margin to that competitive level.
The most important takeaway here is what these [combined] margins enable: more cash flow for investment in new creative talent, in new technologies, and in opportunities for our songwriters and recording artists.
This merger should super-size our ability to make investments, not to mention take advantage of accretive M&A opportunities when they come up.
On the subject of M&A, does the newly-combined entity have the firepower to compete with sovereign wealth funds and the big catalog buyers of today? AND IS THERE STILL ENOUGH OPPORTUNITY IN THE CATALOG SPACE FOR BIG SWINGS?
Thomas Coesfeld: There are broadly three strategic positioning options in the music industry: You have distribution plays; you have pure investment plays; and then you have integrated music companies.
This ‘new BMG’ is committed to being an integrated music company that combines rights ownership with monetization capabilities — increasingly so.
We have learned how important access to primary data and metadata is for informing everyday decisions – including marketing decisions and investment decisions.
“Both Concord and BMG have proven we can generate incremental revenue and cash flow from what we’ve acquired. That continues — and then some — with this combination.”
Bob Valentine
Bob Valentine: We’re not seeing any shortage [in M&A] opportunities. If anything, the number of opportunities is growing.
Artists are getting reversions of their rights back in greater numbers — a combination of US copyright law, plus contracts from 15-30 years ago that allowed artists to get their rights back.
We’re now in a window where more and more of those rights are coming back into [play]. So I don’t see any slowdown in availability.
I also believe an operating platform [in music] has a distinct advantage as an acquirer over third-party funds or sovereign wealth funds. When you’re putting your own money to work to buy rights you’ll operate and monetize yourself, it just means more than having someone else operate them.
Both Concord and BMG have proven we can generate incremental revenue and cash flow from what we’ve acquired. That continues — and then some — with this combination.
IS IT AN OVERSIMPLIFICATION TO SAY CONCORD BRINGS A STRONGer US business, and BMG BRINGS A STRONGer INTERNATIONAL BUSINESS?
Thomas Coesfeld: These businesses are very complementary. There are, of course, opportunities in [removing] duplicate structure, but there are also opportunities in tech spend, which I think is much more exciting.
If you combine the two companies’ tech spend volumes today, it’s quite impressive — and it allows us to build a platform that is quite unique.
“jointly investing in new technologies requires scale, conviction, and a mindset for innovation.”
Thomas Coesfeld
Think of rights management and the role of AI in its [future]. Rights protection [against AI platform infringement] obviously comes first and foremost.
But jointly investing in new technologies requires scale, conviction, and a mindset for innovation. Both companies have that.
That is the biggest synergy – it’s additive. And that’s reflected in our very ambitious financial plan.
ONE SPECIFIC AREA WHERE YOU’VE TALKED ABOUT DRIVING MARGINS, THOMAS, IS YOUR DECISION to GO DIRECT WITH SPOTIFY AND other services on digital distribution. IS THAT SOMETHING YOU INTEND TO LEVERAGE NOW CONCORD IS IN THE BUILDING?
Thomas Coesfeld: We’ve had very good experiences on our side in building this commercial infrastructure, and it works.
YOU’RE TARGETING $1.2 BILLION IN ANNUAL EBITDA, WHICH ISN’T FAR FROM DOUBLE WHAT YOU’RE PROJECTING IN 2026. HOW DO YOU BRIDGE THAT GAP?
Bob Valentine: It’s a combination of three things.
The first is organic growth. The industry is still growing very healthily. We’re not in the double-digit growth rates of three, four, or five years ago, but we’re still seeing very healthy growth, especially in streaming and emerging markets.
“A meaningful component of that [forecast] EBITDA jump will be driven by acquisitions.”
Bob Valentine
The second is M&A. We’ll continue to be aggressive and nimble in our M&A growth strategy. A meaningful component of that [forecast] EBITDA jump will be driven by acquisitions.
The third — and this is an inevitability of a transaction this size — is cost savings and synergies. It’s not a simple task, but it’s one we’ve set ourselves to, and I think it’s achievable in the mid-term.
PICKING UP ON SOMETHING YOU SAID EARLIER, BOB, ABOUT THE PUBLIC MARKETS AND AI: THIS DEAL IS ONE OF THE BIGGEST IN LIVING MEMORY IN MUSIC. WHAT GIVES BOTH COMPANIES THE CONFIDENCE IN THE VALUE OF MUSIC RIGHTS AT A MOMENT WHEN PUBLIC MARKET INVESTORS HAVE BEEN SO SPOOKED, PARTICULARLY BY AI?
Bob Valentine: I think the public [markets] have got it wrong; they’re afraid for the wrong reasons.
[UMG‘s] Michael Nash has been quoted in the press saying that the notion that AI is a negative overall for the music ecosystem is incorrect, and I agree.
Our shareholders and Bertelsmann are essentially saying the same thing: AI is, in the long run, accretive to the value of music rights, not detrimental.
It’s also going to improve our operational efficiency. Our industry has never been great at maximizing technology, but AI tools — for identifying ISRCs, royalties, collections across the world — can help us with all of that.
Protecting our rights is essential. We’re in the middle of multiple lawsuits doing exactly that — and we’re willing to fight for an ecosystem I believe can be created, where we get paid for training, and for the use of our rights in new consumer technologies.
The most important point is: we serve our songwriters and our artists, and they cannot be left behind in this.
I’ve seen firsthand that AI gives consumers the ability to interact with music in new and interesting ways, and it has the potential to create a massive amount of incremental income for existing rights – especially for owners of catalog – that doesn’t exist today.
It’s the same pattern we saw with streaming: a bit of fear, then a step-change in the value of music.
“I think the public [markets] have got it wrong on music and AI; they’re afraid for the wrong reasons.
Bob Valentine
Thomas Coesfeld: AI is, without doubt, changing the value chain. The question becomes: are you best positioned for that change?
If you scale up the business [like BMG is with this merger], you are. That’s why this step is so consequential for both companies and shareholders.
There are already concrete changes to the value chain happening at BMG, through AI. Agentic workflows for sync music are already a reality at BMG. So is fully automated marketing of catalog on certain channels, with AI-generated marketing assets and ad-buying.
AI is already a reality, and we already see the benefits. That’s why we’re convinced AI — done right — provides opportunity, and can be a net positive for this industry.
MOST OF THE VALUE OF THIS DEAL SEEMS WRAPPED UP IN A STOCK SWAP, WITH BERTELSMANN EFFECTIVELY INVITING ANOTHER SHAREHOLDER INTO ITS MUSIC BUSINESS. What gave Bertelsmann the comfort to do that?
Thomas Coesfeld: When you enter a long-term partnership of this size, what really matters is how you value each other — not just on a deal-by-deal basis, but on where you are headed.
Bertelsmann has multiple examples of long-term partnerships that have stood the test of time. Think of Penguin/Random House in the books business, for example.
In GMP and their investors, we have found phenomenal partners with a similar long-term conviction, patient capital, and a prudent approach. Most importantly: strategic alignment and a shared vision of what this new BMG will become.
THERE’S A LOT OF TALK IN THIS MARKET ABOUT WHO’S THIRD, WHO’S FOURTH, AND THE COMMERCIAL GAP BETWEEN THE ‘MAJORS’ AND THE ‘INDIES’. WITH $1.2 BILLION OF EBITDA ON THE HORIZON, DO YOU HAVE ANY EXPLICIT AMBITION OF EVER BECOMING THE THIRD-BIGGEST MUSIC COMPANY IN THE MARKETPLACE?
Bob Valentine: Our goal is to become the best leading independent music company in the world — and everything that entails.
By various different metrics, we’ll be the fourth-largest music company in the world [via this deal]. But I just want to be the best; I want to win; I want artists and songwriters to want to be with us for all the reasons we’ve mentioned in this conversation.
And I want it to be the most profitable music company in the world, which is not the same as saying the biggest.
I think we can create something different from other companies. Whether that makes us the third, fourth or whatever, I want it to be a place people look at and think, ‘That’s where I want to work. That’s where I want my career supported.’
“This is a modern, fully-integrated, global-first platform – without legacy systems, without fragmented structures.”
Thomas Coesfeld
Thomas Coesfeld: It’s about building a modern, fully-integrated, global-first platform — designed for how music is created and distributed today.
Music has always come in different forms and shapes, and it always will. This new BMG is ready for that, without legacy systems, without fragmented structures. Embracing technology and AI in the artists’ and songwriters’ best interests. That’s here to stay.Music Business Worldwide