This week the Bill Akman led investment firm Pershing Square made an unsolicited $64.4 billion takeover bid for Universal Music Group. We'll leave the merits of the deal to the analysts and accountants. But if it happens it would result in a nearly $900 million windfall for artists.
A core part of Pershing's "value creation plan" for UMG involves the major label group's "underutilized" $3.1 billion stake in Spotify. All three major labels received given Spotify stock early in the streamer's rise. In 2018, Sony sold 50% of their Spotify stake for $750M and WMG sold all of their shares for $518M.
UMG held on as Spotify stock increased in value and now Pershing wants to cash out pitching it as a "pro-artist" move.
$879 Million for Artists
The takeover proposal explicitly states that after taxes and the "artists' share," the sale would net the company about $1.75 billion depending on the stock price.
Of that roughly $879 million would go directly to artists.
But, Who Gets the Money?
As established in previous negotiations and reinforced by the "Taylor Swift clause" in UMG’s 2018 corporate policy, the windfall would be shared with artists based on their contribution to UMG’s historical success.
- Top Earners: Global stars like Taylor Swift, Drake, and Billie Eilish would each see multi-million dollar checks based on their high streaming volumes.
- Legacy Acts: Catalog artists like The Beatles, Elton John, Queen would receive significant portions because their music continues to dominate streaming charts.
- Unrecouped Artists: Unlike standard royalties, this money is widely expected to be "non-recoupable." This means artists who still "owe" the label money for past advances would likely receive their cash directly rather than having it vanish into their debt balance.
What's Next?
This deal is far from done.
Industry pundit Bob Lefsetz calls the deal "financial engineering" that feeds on two current industry concerns: "AI and the fear that Spotify, et al, are running out of potential subscribers."
UMG’s response unsurprisingly expressed "complete confidence in UMG’s strategy and the leadership of Sir Lucian Grainge and the Company’s management team."
The company will now “review the proposal in accordance with its fiduciary duties and analyze its implications for shareholders, employees, artists, songwriters and other stakeholders”. Until then, they "will have no further comment on the proposal until the Board of Directors completes its review."
Hypebot will follow this story as it develops.
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