Hey! This is the last Trapital Update of the year. I’ll be back on January 6.
This update covers Tencent’s struggles to acquire a stake in Universal Music Group, the role of biopics in music streaming, and the rappers performing at NBA and NFL halftime show festivities.
Tencent’s struggles to find investors for Universal Music Group deal
Tencent Holdings Ltd has turned to Singapore’s state investor GIC and other sovereign funds to help rescue a deal to buy a stake in Vivendi’s Universal Music after major buyout funds quit the negotiating table, sources said.
Vivendi, controlled by billionaire Vincent Bollore, had initially revealed talks with Tencent in August to sell part of Universal Music Group (UMG), the music label of artists such as Lady Gaga, the Beatles, Taylor Swift, Drake and Kendrick Lamar…
But for the past six months Tencent has struggled to find the money to complete the transaction, raising concerns that negotiations with Vivendi could fall through, the sources said, requesting anonymity as discussions are confidential.
U.S. private equity funds KKR and Hellman & Friedman walked away from negotiations last month, the sources said, forcing Singapore’s GIC to tap a series of sovereign wealth funds to rescue the transaction…
“It was a relentless search,” one of the sources said. “Most investors were not comfortable with the 30 billion euro valuation demanded by Vivendi.”
Tencent, led by Chinese tycoon Pony Ma, pinned its hopes on U.S. buyout funds KKR and Hellman & Friedman but both funds wanted a bigger stake of around 30% and more governance control over the music label, which Vivendi was reluctant to concede, the sources said.
UMG’s revenue has hit record highs on the back of streaming subscriptions. But investors likely fear that they are “buying high.” A 10% stake at €3 billion is no chump change. It’s essentially a bet on Spotify and the other DSPs to continue their high revenue growth.
With a 30% stake and more control, Tencent and its PE investors would have more influence on negotiations between UMG and DSPs, and more say in how content is monetized elsewhere. For Tencent, that includes licensing content for its own services too.
Music content will always hold value. American culture still thrives on its musicians, and their popularity across the world has increased. But the monetization of that asset had ebbed and flowed in the past few decades. No one wants to buy at the wrong time.
Frankly, the music industry relies on a business model designed to prioritize growth over profitability. This strategy made sense. Spotify and its competitors would never have grown fast enough otherwise. But monetization continues to be a challenge in some regions. In 2019, the average monthly cost for Spotify was $5.50, and that number has gotten smaller, not larger (much to the frustration of the labels). The DSPs have pushed for more profitable revenue elsewhere, such as podcasting, live events, and pop-ups. But where does that leave the musical content itself?
The major labels are the owners of a product that’s sold as a loss leader—similar to movies at theaters or gas at gas stations. Over time, Spotify wants to be less reliant on streaming revenue. It will likely have more bargaining power for future negotiations.
To be clear, owning a loss leader isn’t necessarily bad. Loss leaders can often be cash cows with steady returns. But it’s hard to call music content a cash cow when the industry’s revenue has looked like this for the past few decades.
The industry’s revenue is heavily dependent on the medium. Streaming is promising, but it’s unknown whether we are at the peak now, or if there is more ground to cover from a content monetization perspective.
It’s understandable for a potential buyer to want more control if it shells out billions of dollars for UMG’s content. But until someone decides to join, Tencent might be looking for additional investors for quite some time.
Biopics and documentaries boost streams
Streaming catalogs have also benefited from feature films on the big and small screen.
In the six months following the release of Bohemian Rhapsody, Queen’s on-demand music streams tripled, from 588 million to 1.9 billion. Sales, too, had a 483% increase from the previous year…
At the same time, Elton John’s hits collection Diamonds occupied the No. 4 slot thanks to a biopic boost from the 2019 musical Rocketman. In June, the set also catapulted to No. 7 on the Billboard 200, making it John’s 20th top 10 album…
Even Netflix’s 2019 Mötley Crüe flick, The Dirt, boosted the band’s streams by 329%, despite poor reviews…
It has a positive impact on the catalogs of disgraced artists too:
Surviving R. Kelly actually spurred a 116% increase in Kelly’s streams on the last day (Jan. 5) of its three-day release…
During the 31-week period after the documentary aired, on-demand streams of Jackson’s catalog increased by 22.1%, outpacing the industry’s 21.8% growth.
It’s in the DSP and record labels interest for these movies to reach as many people as possible. The success of Bohemian Rhapsody might be unrealistic for most to attain, but even the success of Rocketman’s $195 million at the box office can make a noticeable impact. I expect that a documentary like Netflix’s Look Mom I Can Fly led to a spike in the rapper’s catalog.
There’s more biopics coming too. From Gucci Mane to Bob Marley to Teddy Pendergrass. And while record labels may willingly support major studios in their creation, it will be pretty easy for consumers to tell which ones deserve our attention and which don’t.
The growing number of OTT media services will likely push for the release of their own documentaries. I could imagine this puts a lot of artists in a precarious situation:
- Should I say yes to this documentary deal with Hulu?
- Hold out to see if Netflix is interested?
- Or should I turn it down in lieu of a potential (but unconfirmed) deal with Lions Gate?
- What is Scorsese calls me?!
It’s a classic two in hand, one in the bush situation. And if Gucci Mane is getting his life story told on the big screen, I bet that a number of other rappers equally and more popular than him have gotten hit up about the opportunity too.
Megan Thee Stallion, Meek Mill, DJ Khaled land Super Bowl weekend gigs
EA Sports announced the lineup additions Wednesday, more than a week after it confirmed performances by DaBaby, DJ Khaled and Friends, Guns N’ Roses, and Maroon 5, who headlined the 2019 Super Bowl Halftime Show alongside Travis Scott and Big Boi.
“We have put together an incredible three nights of music with our partners at On Location Experiences and EA SPORTS for Bud Light Super Bowl Music Fest,” said Shana Barry, Bud Light Director of Experiential Marketing. “Adding two incredible artists like Megan Thee Stallion and Meek Mill to Thursday night’s lineup makes this festival lineup even stronger. We can’t wait to bring another unforgettable music experience and of course plenty of Bud Light to the Super Bowl this year.”
This is the second year of this event, and it’s a pretty strong showing for team Roc Nation. Megan Thee Stallion, Meek Mill, and DJ Khaled are all signed to Roc Nation management deals. It’s also interesting to see the expansion of “official” events leading up to the big game.
In January 2016, Super Bowl City was here in San Francisco for the Denver Broncos-Carolina Panthers game. My wife (then girlfriend) and I went to check out the festivities. There was a free Alicia Keys concert, an expo center where fans can participate in punt, pass, and kick activities, but everything else was private parties. I always felt like there was a sizeable gap between the big game itself and the smaller events. Alicia Keys was cool, but there were likely other artists like her who weren’t Super Bowl halftime show superstar level, but could draw a crowd.
In August’s NFL-Roc Nation press conference, he spoke about the limited number of true superstars in the music industry.
“Here, you take four artists, and everyone thinks they’re performing in the Super Bowl. Almost like this interview process… If I pick [so and so], the other three people are upset. That’s not even good math. After 3 years, nine people are upset, and three people play. There aren’t that many superstars in the world, you’re gonna run out of people that wanna play.
The process could have been more definite. If this person doesn’t wanna play or their schedule conflicts or doesn’t align, then we move on to the next person. You pick someone, speak to them, let them have it, then move on.”
Beyonce’s done it twice. Rihanna won’t do it. Cardi B won’t do it. Travis Scott did it already. I could go on, but you get the point.
This Bud Light event was a great opportunity for the B-level stars or the rising artists who aren’t quite there yet. Meek, Meg, DaBaby, and Khaled all fall in that category. It’s a wise move for Bud Light, Roc Nation, and everyone else involved.
In similar-ish news, Chance the Rapper will headline the 2020 NBA All-Star Game halftime show.
The artist announced the gig on Thursday evening during the third annual Night at the Museum event, hosted by his nonprofit organization Social Works. The NBA confirmed his involvement Thursday night, as well as additional All-Star Weekend performances by Common and Chance’s little brother, Taylor Bennett.
Chano will take the stage during the All-Star game halftime show Feb. 16 at the United Center in Chicago. According to the NBA, Chance will be joined by a special guest, and deliver a medley of some of his biggest hits, including cuts from his 2019 debut studio album, The Big Day.
That’s a pretty good consolation prize after his tour cancellation. Like J. Cole last year in Charlotte, the NBA taps the local talent to headline the show. It’s a great opportunity for Chance to regain the level of exposure that was once commonplace for him back in 2016.