On Aug. 6, Universal Music Group chairman/CEO Lucian Grainge sent a memo to staff saying parent company Vivendi had entered talks with China's Tencent to buy a 10% stake in UMG, valuing the world's biggest record company at $33 billion, at the low end of many Wall Street analysts' rosy estimations.
Such a deal would be good news for other label and catalog owners, especially those looking to cash out or leverage their balance sheet: Billboard estimates UMG's 2018 earnings before interest, taxes, depreciation and amortization at $1.165 billion, making the valuation 29.5 times multiple. But the sale could affect the industry in other ways.
Other labels would likely be suspicious that UMG's artists and songs would gain favored-nation status with Tencent Music's digital services in China. At the very least, with Tencent's streaming services claiming 81% of the country's monthly active users, according to a Barclays report, it would likely help establish UMG as the dominant outside music provider there.
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