Market Share of the Major Record Labels and a Takeover Analysis
July 24, 2008 12:53 pm
AudioMicro located a fabulous breakdown of the market shares of the major music industry record labels. We’ve input the information below this post. The breakdown is helpful when analyzing the present state of the music industry and where it may be headed. It seems the Universal Music Group (UMG) has the dominant presence in this space with nearly 1/3 of all major label music revenues.
The only individually publically traded music company, Warner Music Group, traded on the NYSE under the ticker WMG, has a present market capitalization of around $1.32 billion at the time of this post, with FY 2007 revenues of $3.4 billion and a 12.31.07 cash balance of a mere $160 million. Extrapolating WMG as 18% of the market in 2006 from the source cited above, and assuming that 18% has remained steady into 2008, the overall music market, in terms of the dollars it would cost to embark on a total corporate takeover of the entire market and all of the assets contained therein, would be in the neighborhood of $7.3 billion.
Now let’s give it a 20% takeover premium that we know the shareholders would eventually agree to in a Microsoft / Yahoo / Microhoo style proxy battle, and that’s still only $8.8 billion to own every major record label in the world. This analysis assumes (and of course exist in a vacuum / perfect world) that the labels were all public companies, which is certainly not the case (nor will it ever be the case). If anything, WMG will go private in the near future. Nevertheless, let’s just imagine the possibilty of taking over the entire music industry (or at least the majority of the industry) for a mere $8.8 billion. Now $8.8 billion is a heck of a lot of money to most people, but to a corporate giant like Google, Microsoft, or a large media comglomerate like Rupert Murdoch’s News Corporation (with over $3 billion in cash) it really would not be difficult to put this deal together either through either an all cash purchase or a cash / stock combo.
It’s interesting to see how the music industry pales in comparison to the larger media / tech world, though it’s certainly much sexier than all the rest. Here is the market share break down cited at the beginning of this post:
| Mkt Share | 2006 | 2005 | ||
| UMG | 32% | 32% | ||
| SONY/BMG | 27% | 27% | ||
| WMG | 18% | 17% | ||
| EMI | 10% | 10% | ||
| OTHERS | 13% | 13% |
