Vivendi on acquisition hunt to bolster UMG – with $7bn in the bank

Arnaud de Puyfontaine, CEO, Vivendi

Almost three years to the day that Universal Music Group completed its much-contested acquisition of EMI Music, Vivendi is on the hunt for more.

The French media giant, which has €6.3bn (US $7.1bn) of cash available in the bank, says it’s looking to acquire companies that complement UMG in the fields of ‘content creation and distribution’.

Vivendi subsidiary UMG snapped up EMI for £1.2bn ($1.9bn) in September 2012.

However, under instruction from the EC, Parlophone Label Group was offloaded for £487m ($760m) to Warner Music Group the following summer.

Since then, UMG has only made one major acquisition: in April 2014, it snapped up music programming producer and distributor Eagle Rock Entertainment for an undisclosed fee.

This year, however, a culture of major label acquisitions could be bubbling away once again. Last month, Sony acquired metal label Century Media for what MBW understands to be a $17m pricetag.

And now, Vivendi CEO Arnaud de Puyfontaine (pictured) has hinted that there could be more headline-grabbing purchases on the way from Universal’s corner.

Speaking to investors, the French exec pointed out that Vivendi now owns a 90% stake in YouTube rival DailyMotion, which brings “added visibility for high-quality musical and audiovisual content around the world”.

“Of course, Dailymotion is small in comparisons to YouTube, but it is a safe bet that it will grow rapidly in the future, given the attractiveness of exclusive and distinctive content that Vivendi owns and will be producing, he said, adding: “The numerous opportunities for collaborations between Dailymotion and Vivendi assets, such as UMG and Canal+ Group, can be deployed rapidly in a way that will accelerate and reinforce Vivendi’s worldwide presence.”

During discussion of UMG’s impressive H1 2015 performance – in which he said it claimed eight of the Top 10-selling artists in the US – de Puyfontaine commented: “While strengthening our main businesses, we’re considering bolt-on acquisition in content creation and distribution.”

Those acquisition targets won’t necessarily have anything to do with music directly, then, but may involve channels that open UMG’s artists up to new audiences.

“While strengthening our main business, we’re considering bolt-on acquisition in content creation and distribution.”

Arnaud de puyfontaine, Vivendi

In addition to Dailymotion, Vivendi owns French TV giant Canal+. In turn, Canal+ owns movie producer StudioCanal, which just gave returning UMG artist Duffy a key musical turn within its key UK-based cinema release Legend (more on that through here).

During Vivendi’s investor call, de Puyfontaine and Vivendi CFO Herve Phillipe also discussed topics including Lucian Grainge‘s new contract, Apple Music and freemium’s future.

Phillipe said that he was pleased with UMG’s half-year performance, adding: “For the second part of the year, clearly it will depend on the launch and the sales of Apple Music.

“As we can see, the beginning is quite satisfactory, but it’s clearly too early to take any comments on what we have. We have not yet the result of the summer, so it’s very difficult to give more precise comments on the beginning of the second part of the year for UMG.”

He added that Grainge’s new five-year contract was “very, very good news for UMG and all Vivendi”, and was looking forward to seeing the exec help steer Universal through the growth of streaming.

He also said that Grainge would help drive “the development of much more live events”. So far this year, Universal has launched a Latin-themed festival in Los Angeles and has just purchased a 50% stake in Indian festival the Enchanted Valley Carnival.

Phillipe nodded to synergies across Vivendi, and predicted that UMG would “work together with the movie industry or the TV industry… with Canal+ making more films and music”.

Arnaud de Puyfontaine was put on the spot by Nomura analyst Matthew Walker over Apple Music – and whether UMG had signed licensing contracts before the Cupertino firm agreed to pay royalties to artists and labels for streams conducted during Apple Music’s free trial.

“As you can imagine, it’s quite sensitive information, so I can’t comment on that,” he replied.

However, de Puyfontaine did add a bit of grist to the ‘free vs. premium’ mill, making a comparison between those services who don’t charge a subscription and Apple Music – which despite a three-month free trial offer, has no permanent free tier.

“We see Apple in the streaming [market] as a positive move,” he said. “We’re happy to see every proposition that makes an offer worth a consumer moving from free consumption to a paid-for experience… in terms of economics, this is clearly a more profitable model.”Music Business Worldwide

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